US embassy cable - 05TAIPEI1070

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001070 
 
SIPDIS 
 
STATE FOR EAP/RSP/TC AND EB/TPP/BTA, STATE PASS AIT/W AND 
USTR, USTR FOR KI AND FREEMAN, USDOC FOR 
4431/ITA/MAC/APOPB/MBMORGAN AND 
3132/USFCS/OIO/EAP/ABACHER/ADESARRAN AND USDA FOR FAS/ITP 
 
E.O. 12958: DECL: 03/08/2010 
TAGS: ETRD, EAGR, PGOV, TW 
SUBJECT: TAIWAN'S SPLIT PERSONALITY ON TRADE POLICY 
 
Classified By: AIT DIRECTOR DOUGLAS PAAL FOR REASONS 1.4 (b/d) 
 
1.  (C) SUMMARY:  Taiwan displays a split personality when it 
comes to trade policy.  Open trade is desirable for the 
manufacturing and industrial sectors, but on agriculture, 
Taiwan takes a decidedly protectionist approach.  Despite a 
dramatically improved environment in bilateral trade over the 
past year, AIT has seen growing protectionism in the 
agricultural arena.  We plan to undertake a program to 
highlight the dichotomy in its trade policies to a wide range 
of Taiwan officials and recommend inclusion of this topic in 
the working level trade talks scheduled for March 30-31 in 
Taipei.  End Summary. 
 
2.  (C) Taiwan supports an open trade policy for its 
manufacturing and industrial sector, but takes a decidedly 
different approach when it comes to agricultural trade.  Even 
as Taiwan presses for access to the US market for orchids and 
cooked poultry products, it has: dragged its feet on 
finalizing a decision to reopen its market to US beef; 
notified anti-biotech import-export regulations to the WTO; 
made heavy use of special safeguards; and taken a very slow 
route in resolving technical issues over imports of US apples 
and half a dozen other agricultural products.  US agencies 
and AIT are working closely with Taiwan agricultural 
officials on each of these issues and making incremental 
progress. 
 
Focus on Protecting Agriculture 
------------------------------- 
 
3.  (C) The larger issue is that Taiwan is fundamentally 
committed to a protectionist agricultural trade policy.  The 
farming community constitutes a substantial force in Taiwan's 
political system and has done so for decades.  All political 
parties have strong roots in the agricultural sector and 
support protectionist polices that have resulted in 
subsidization of a traditional resource/labor-based 
agricultural sector that is an inefficient producer of rice, 
chickens and hogs.  Despite agriculture constituting only two 
percent of GDP, agricultural interests are able to 
effectively compete with the water-hungry electronics 
industry to determine the allocation of 35 percent of 
Taiwan's scarce water resources. 
 
4.  (C) Aligned with the G-10, Taiwan actively opposes 
agricultural trade liberalization in the WTO Doha Round. 
While it is prepared to establish a country-specific quota 
system for public-sector rice imports, it is not willing to 
contemplate a general liberalization of its rice trade. 
These policies seem predicated on maintaining a protected 
agricultural market for the foreseeable future.  Such 
policies actually hinder efforts to shift its farmers into 
producing specialized higher-value added products that could 
effectively use the limited land space available on this 
mountainous island of 14,000 square miles.  In addition, the 
misallocation of land and other resources undermines Taiwan's 
economic efficiency. 
 
5.  (C)  AIT observed Taiwan's split personality on trade 
policy in the very recent past.  At a March 1 lunch meeting 
hosted by Franco Huang (Chih-peng), the Director General of 
the Board of Foreign Trade, Huang categorically stated that 
Taiwan would continue to ally itself with the G-10 and its 
agenda of limited agricultural trade liberalization.  In the 
prior week, on February 24, John Chen, the newly appointed 
Director General of the Ministry of Foreign Affairs 
International Organization bureau, visited the Director to 
discuss APEC and WHO issues.  Chen smoothly and confidently 
told us that Taiwan is fully supportive of US trade goals in 
APEC, viewing the proposals by the US as good for trade in 
general and for Taiwan in particular.  Chen acknowledged that 
Taiwan has some issues in agricultural trade, but said that 
Taiwan is prepared to deal with those issues. 
 
Taiwan Linking US Beef to Chicken? 
---------------------------------- 
 
6.  (C) Part of the discussion with Huang concerned the 
timetable for lifting the ban on US beef imports.  BOFT said 
that it thought that a decision "would be made soon," but 
quickly added that it will be difficult for officials to 
explain to farmers why they are lifting the ban on beef when 
it has been taking such a long time to get Taiwan cooked 
poultry approved for sale to the US.  During bilateral 
meetings held during the APEC High Level Policy Dialogue on 
Agricultural Biotechnology discussions in Seoul March 1-3, 
Council of Agriculture Vice Minister Lee Jen-chyuan suggested 
the same kind of linkage.  Further, contacts in the COA have 
suggested to us privately that the ban on beef will not be 
lifted until Taiwan sees some movement on the poultry issue. 
(Note:  The AIT/W - TECRO letter of March 7 setting the dates 
for the visit by USDA's Food Safety Inspection Service (FSIS) 
to inspect Taiwan's meat inspection and processing regime may 
be a useful tool to demonstrate US progress on Taiwan's 
interest in selling poultry to the US.  AIT ECON and AG 
sections advised COA and BOFT officials of this letter the 
morning of March 8, prior to the afternoon meeting of the 
interagency panel charged with handling the beef ban.  End 
note.) 
 
Reduced Visibility in Ag Biotech Discussions 
-------------------------------------------- 
 
7.  (C) In past APEC biotechnology discussions, Taiwan has 
been an active, contributing participant in member economies' 
discussions.  During this most recent discussion, however, 
Chinese Taipei was relatively silent.  It made no 
presentations, provided one meaningful intervention, and 
offered no substantive comments during the development of the 
Dialogue recommendations to the Senior Officials.  Part of 
the reason for the delegation's reticence may have been the 
early return to Taipei of the delegation leader, COA Vice 
Chairman Lee Jen-chyuan.  The COA chairman notified Lee on 
March 1 that he needed to return to Taipei, apparently to 
deal with issues raised by Taiwan's Legislative Assembly. 
Unfortunately, we see Taiwan's lackluster participation as a 
signal of a lack of interest on the part of Taiwan's Council 
of Agriculture in the biotechnology discussions and a lost 
opportunity for Taiwan to be an active and visible 
participant in an international trade organization.  While 
Vice Chairman Lee appears ready and willing to forge ahead on 
modernizing Taiwan's domestic agricultural policies, COA 
Chairman Lee Ching-lung appears intent on maintaining the 
status quo in agricultural policies.  Prior to AIT 
intervention, the COA Chairman was not going to allow Vice 
Chairman Lee to attend the APEC Biotech discussions. 
 
Delayed Technical Discussions 
----------------------------- 
 
8.  (SBU) There have been additional irritants in the 
agricultural trade relationship.  For over ten years the US 
and Taiwan have been alternately hosting technical-level 
discussions on agricultural trade concerns.  Despite a 
decidedly improved trade relationship evident in 2004, COA 
repeatedly delayed setting dates for the technical 
discussions and in the end reneged on its written commitment 
to host the talks in the second half of February 2005.  While 
the agencies involved have confirmed new dates in June, it is 
dismaying to have Taiwan's agricultural officials treat their 
commitments in so cavalier a fashion.  In essence, Taiwan has 
passed on the entire year when it was its turn to host the 
annual discussions.  As a result, resolution of technical 
issues impacting trade has slowed considerably. 
 
9.  (C) Comment:  We recognize that Taiwan's agricultural 
policies are the product of many years of domestic political 
pressure, protection and a protectionist attitude.  However, 
we think now could be a useful time to point out Taiwan's 
trade policy anomalies to officials across the government. 
To this end, we are setting up meetings with officials from 
the National Security Council, the Ministry of Economic 
Affairs, the Council for Economic Planning and Development 
and the Ministry of Foreign Affairs.  We would also recommend 
that this topic be included in the working level trade talks 
now set for March 30-31 in Taipei.  End comment. 
PAAL