US embassy cable - 05TAIPEI772

C O N F I D E N T I A L TAIPEI 000772 
 
SIPDIS 
 
STATE PASS AIT/W 
STATE FOR EAP/RSP/TC, EAP/EP ADN EB/IFD/OIA 
 
E.O. 12958: DECL: 02/23/2025 
TAGS: ETTC, ECON, ETRD, TW, CH, Cross Strait Economics 
SUBJECT: TAIWAN EXPORT CONTROL DOWNGRADE? 
 
REF: TAIPEI 710 
 
Classified By: AIT DIRECTOR DOUGLAS H. PAAL, REASON 1.5 B/D 
 
 1. (C) Summary and action request: Taiwan Board of Foreign 
Trade (BOFT) Director Peter Ho called with an &urgent8 
request for AIT to find out if there was any truth to the 
claim made by legislators on February 23 that the U.S. has 
doubts about Taiwan's ability to control exports of sensitive 
high-tech products and technology and might downgrade Taiwan 
from a &group B8 country to a &group C8 country (a more 
restrictive classification) for U.S. high-tech exports.  The 
possible downgrade has been widely reported in Taiwan media. 
AIT requests guidance on how to respond to Peter Ho and to 
media questions on the issue.  End summary. 
 
2. (C) BOFT Director Peter Ho, a key AIT contact on export 
control issues,  called on February 24 with what he described 
as an &urgent8 request for AIT to find out if there was any 
truth to the claim made by Taiwan Solidarity Union (TSU) 
Legislators David Huang (Huang Shi-zao) and Mark Ho (Ho 
Ming-hau) in the LY on February 23 that the U.S. has doubts 
about Taiwan's ability to control exports of sensitive 
high-tech products and technology.  Peter Ho said Economic 
Minister Ho Mei-yueh will address the Legislative Yuan (LY) 
on Friday, February 25 and expects to be asked if there is 
anything behind the TSU legislators statements.  The two TSU 
legislators claim the information about U.S. doubts comes 
from sources in Taiwan's National Security Council, who 
asserted that as a consequence of the doubts the U.S. might 
downgrade Taiwan from a &group B8 country to a &group C8 
country (a more restrictive classification) for U.S. 
high-tech exports. 
 
3.  (C)  The claim that the U.S. could downgrade Taiwan's 
export control ranking occurs in the context of impassioned 
debate in the LY over the advisability of liberalizing 
regulations on trade and investment with China.  The TSU 
strongly opposes liberalization, preferring to keep 
restrictions in place that prevent an &over-reliance8 on 
China.  However, the UMC case has highlighted that Taiwan 
companies are evading current restrictions and led to calls 
from business and political circles that the restrictions be 
relaxed (reftel).  The statements of TSU legislators' are 
part of their arguments against liberalization, arguing  that 
easing restrictions on trade and investment with China could 
both weaken Taiwan's economy and lead to restrictions in U.S. 
exports to Taiwan. 
 
4.  (C)  We have told Director Ho we have no information on 
the reports of a possible downgrade of Taiwan, but would 
immediately request guidance on how we think his Minister 
should respond to questions on the issue.  As a regular 
participant in export control meetings with U.S. agencies, Ho 
is clearly aware that the U.S. does have "doubts" about 
Taiwan's export control regime.  The incendiary element in 
the legislators statements is linking these doubts with the 
debate over restrictions on investment and trade with China 
and to the possibility of downgraded ties with the U.S. 
 
5.  (C) TSU Legislator (and former NSC official) Lai 
Hsin-yuan raised the same issue with AIT on February 23, but 
said her TSU colleague Mark Ho claimed his information came 
directly from a U.S. official rather than the NSC.  Lai 
expressed doubts over Ho's sources and asked for USG 
clarification.  Lai acknowledged that the TSU is fishing for 
information in order to block any liberalization of rules 
governing the transfer of sensitive technologies to China. 
Lai said the TSU is deeply concerned over the the NSC's lack 
of interest (and the Executive Yuan's lack of resolve) in 
protecting Taiwan's high-tech competitiveness.  Nevertheless, 
Lai asserted that she did not want the TSU to misconstrue USG 
policy in order to advance its agenda. 
 
PAAL