US embassy cable - 05TAIPEI1853

C O N F I D E N T I A L SECTION 01 OF 02 TAIPEI 001853 
 
SIPDIS 
 
STATE PLEASE PASS AIT/W AND USTR 
STATE FOR EAP/RSP/TC, EAP/EP, EB/IFD/OIA AND NP/ECC/MCCELLAN 
STATE FOR INR/EC NKWG 
USTR FOR SCOTT KI 
 
E.O. 12958: DECL: 04/15/2025 
TAGS: ETTC, PARM, PINR, PREL, PTER, TW 
SUBJECT: TAIWAN'S REVISED TECH PROTECTION BILL 
 
REF: TAIPEI 1780 
 
Classified By: AIT DIRECTOR DOUGLAS PAAL, REASON 1.5 B/D 
 
1.  (C) Summary and comment: At a Cabinet meeting on April 
13, Taiwan's Executive Yuan (EY) passed a "Sensitive 
Technology Protection" bill that is a more comprehensive, 
tougher version of the "Technology Protection Bill" that has 
been stalled in the Legislative Yuan (LY) for over two years. 
 While Taiwan's export control officials believe the bill is 
a distinct improvement that addresses some of the 
deficiencies the recent EXBS training participants noted in 
the earlier draft law, there is still no indication of how 
long it will take to be passed by the LY to become law, and 
the current heated partisan atmosphere in the LY does not 
bode well for quick action.  Rather than relying on uncertain 
new legislation, AIT/T believes a quicker, more efficient way 
to protect sensitive technologies would be for the Ministry 
of Economic Affairs to add administratively a provision on 
trade in intangibles to existing export control regulations. 
End Summary and comment. 
 
2.  (SBU) Taiwan media reports that the new draft Sensitive 
Technology Protection Law would impose penalties of up to NTD 
30 million and seven years imprisonment for the unauthorized 
export of techniques and know-how.  If the unauthorized 
export of technology were done with knowledge that it would 
benefit foreign agencies or authorities, the penalties can go 
up to NTD 45 million and 10 years imprisonment.  Transfers of 
sensitive technologies would need to be reviewed by both 
Taiwan's National Security Council and the Ministry of 
Economic Affairs Investment Commission.  Although the bill 
still appears to restrict Taiwan high-tech investment in 
China, Taiwan Premier Frank Hsieh portrayed the new bill as a 
way of furthering the government's policy of active opening 
and efficient management towards cross-Strait trade and 
investment since it sets clear limits on technologies that 
can be transferred. 
 
3.  (C) BOFT Import/Export Administration Acting Director 
Wally Su told AIT on April 14 that his office had not yet 
received the full text of draft Sensitive Technology 
Protection Law, but that the summaries of it that he had seen 
indicated a significant improvement over the previous 
Technology Protection Law bill.  He said that in several ways 
the new bill broadened the scope to cover more types of 
intangible technologies, and strengthened the penalties for 
violations, probably in response to criticism made of the 
previous draft during the recent EXBS training.  He admitted 
though that the bill still focused on Taiwan investment in 
China, and that it was being pushed by the Taiwan Solidarity 
Union political party as a way of restricting investment in 
China.  Su said that within the next few days the draft would 
be circulated to relevant ministries with instructions to 
urge legislators to take action quickly.  He also noted that 
once the LY starts debating the bill, there was no telling 
how the contents might change. 
 
Behind the Technology Protection Bill 
--------------------------------------------- ----- 
4.  (SBU) The drafting of a technology protection law has 
been in process in Taiwan for about two years, with different 
version submitted to Taiwan's National Security Council by 
different political parties.  The recent cases of United 
Microelectronics Corporation illegal investment in Mainland 
semi-conductor manufacturer He Jian and efforts by the Taiwan 
government to fine Robert Chang, the Chairman of China's 
Semiconductor Manufacturing International Corporation's 
(SMIC) have amplified local concerns about the ongoing flow 
of high technology from Taiwan to China.  Taiwan's high 
technology sector has begun lobbying through various 
channels, such as a public hearing on technology protection 
hosted by TSU Legislator Chen Ying Ho on March 29, for 
minimizing the scope of any technology protection law. 
 
5.  (C)  Taiwan already has export control regulations that 
cover the export of commodities embodying sensitive 
technologies to "high risk" areas.  However, these 
regulations do not currently cover intangible technologies. 
Taiwan officials maintain that completely new legislation is 
needed to address the issue of controlling intangible items. 
Given the heated partisan debate over previous iterations of 
this bill in the LY, AIT/T believes a more predictable way 
for Taiwan to protect sensitive technologies would be to 
administratively add a provision on trade in intangibles to 
existing export control regulations. 
PAAL