US embassy cable - 05TAIPEI2732

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002732 
 
SIPDIS 
 
DEPT FOR EAP/TC 
COMMERCE FOR 4400/ITA/MAC/M-BMORGAN 
PLEASE PASS AIT/W 
 
E.O. 12958: DECL: 06/22/2015 
TAGS: ECON, ETRD, EAIR, PREL, CH, TW, Cross Strait Politics, Cross Strait Economics 
SUBJECT: CROSS-STRAIT CONTACTS - INDUSTRY ORGANIZATIONS 
STANDING BY 
 
REF: A. TAIPEI 1091 
     B. TAIPEI 2243 
     C. TAIPEI 2565 
     D. BEIJING 9506 
     E. TAIPEI 2595 
     F. TAIPEI 2596 
     G. TAIPEI 2654 
 
Classified By: AIT Director Douglas H. Paal, Reason 1.5 d 
 
Summary 
------- 
 
1. (C) On June 13, Taiwan Premier Frank Hsieh announced 
that the Taipei Airlines Association (TAA) and the Taiwan 
External Trade Development Council (TaiTRA) could lead 
delegations on behalf of the Taiwan government in cross- 
Strait negotiations on direct charter flights and fruit 
trade, respectively.  Taiwan has not yet identified an 
organization to discuss tourism issues, but media 
speculation has identified the Taiwan Visitors Association 
(TVA) as a possible candidate.  In discussions with AIT/T 
the leaders of these three organizations indicated that 
they have not yet been given specific instructions to 
initiate discussions.  However, each is prepared to act 
when instructed.  Despite some discouraging comments from 
TAA's chairman, the two sides seem closest to negotiations 
on charter flights.  End Summary 
 
Taipei Airlines Association 
--------------------------- 
 
2. (C) Premier Frank Hsieh on June 13 designated the Taipei 
Airlines Association as the Taiwan organization authorized 
to lead discussions with the PRC on cross-Strait charter 
flights.  On June 20, TAA Chairman Tony C.C. Fan told AIT/T 
that TAA was prepared to lead such discussions, but the 
Taiwan government had not yet given TAA any instructions. 
In addition, Fan had to cancel a previously scheduled 
trip to the Mainland the same week, because, as Fan put it 
"the timing was too sensitive."  He said that to date, 
TAA had not been contacted by PRC counterparts to arrange 
discussions, nor had it been engaged in any sort of 
informal contacts with PRC aviation authorities.  Fan also 
informed us that he had signed a non-disclosure agreement 
regarding matters related cross-Strait charter negotiations 
at the request of Taiwan's Mainland Affairs Council (MAC). 
 
3. (SBU) As in an earlier discussion with AIT/T (reported 
ref A), Fan is relatively pessimistic about prospects for 
cross-Strait charter flights because of different 
priorities on the two sides.  He emphasized that cargo 
flights are clearly the first priority of the Taiwan 
government, which has indicated that it has not yet 
received a clear enough response from the PRC on its 
willingness to proceed with cargo discussions.  Fan 
reiterated that Taiwan airlines' interest in passenger 
charters is not high because their flights are already 
fully booked during holiday periods that some have proposed 
for passenger charters.  He also underscored cargo capacity 
shortages among PRC carriers that limit PRC interest in 
cargo charter flights. 
 
Taiwan External Trade Development Council 
----------------------------------------- 
 
4. (U) Premier Hsieh also designated the Taiwan External 
Trade Development Council (TaiTRA) as the Taiwan 
organization authorized to lead discussions with the PRC on 
fruit export issues.  However, according to press reports, 
the KMT-controlled Taiwan Provincial Farmers Association 
(TPFA) sent a delegation to Beijing on June 22 where it 
discussed some fruit export issues with the PRC's Cross- 
Strait Association on Trade Exchanges.  MAC officials have 
publicly warned the TPFA that its leaders could face heavy 
fines and jail sentences of up to 5 years if found guilty 
of negotiating an agreement with the PRC without proper 
authorization.  TPFA officials have indicated to the press 
that TPFA would not sign any sort of agreement with PRC 
counterparts. 
 
5. (C) On June 21, TaiTRA President Chao Yuen-chuan told 
AIT/T that his organization is also prepared to lead cross- 
Strait discussions on behalf of Taiwan.  He reported that 
PRC authorities had indicated earlier the same day to 
TaiTRA's Beijing representative that they would respond to 
the proposal of fruit trade discussions with TaiTRA within 
two weeks.  Some observers have questioned whether Beijing 
would accept TaiTRA as an interlocutor because of its 
former semi-official status.  Chao emphasized to AIT/T that 
TaiTRA was a completely non-governmental organization and 
that this issue should not prevent discussions. 
 
6. (C) Chao said that TaiTRA had not yet received any 
formal instructions from the government on how to proceed 
with fruit export discussions.  (Note: Although Chao may 
not have received instructions, his boss TaiTRA Chairman 
Hsu Chih-jen, who is a former classmate of President Chen, 
told AIT/T Commercial Section chief that he had discussed 
TaiTRA's role in this process with senior administration 
officials.  End note.)  Nevertheless, Chao identified 
certificates of quarantine and certificates of origin as 
the two main issues that would need to be resolved by 
cross-Strait discussions on Taiwan fruit exports to the 
PRC.  As a result, he expected that a representative from 
Taiwan's Bureau of Animal and Plant Health Inspection and 
Quarantine (BAPHIQ) would need to participate in the 
negotiations.  He also speculated that a MAC representative 
would participate.  (Note: The PRC already informally 
recognizes BAPHIQ certification for Taiwan agricultural 
goods.  The PRC refused to permit MAC officials to 
participate in the negotiations that took place in Macao in 
January to discuss Lunar New Year charter flights.  End 
note.) 
 
7. (C) Chao also downplayed the importance of Taiwan fruit 
exports to the PRC.  He pointed out that Taiwan exported 
USD 3.5 billion worth of agricultural goods in 2004, but 
fruit accounted for only USD 86 million and fresh fruit 
only USD 35 million.  Although the PRC proposal could 
dramatically increase Taiwan's fruit direct exports to the 
PRC, which amounted to only USD 895,000 last year, the 
impact on Taiwan's overall agricultural trade would be 
small, according to Chao.  (Note: Chao's figures on fruit 
exports to the PRC are significantly lower than data in a 
Council of Agriculture and Ministry of Economic Affairs 
report to the Legislative Yuan, reported ref B.  However, 
both figures are small compared to Taiwan's overall 
agricultural exports.  End note.) 
 
Taiwan Visitors Association 
--------------------------- 
 
8. (SBU) The Taiwan government has not yet identified an 
industry organization that would be formally authorized to 
represent Taiwan in cross-Strait negotiations on removing 
restrictions on PRC tourist travel to Taiwan.  One MAC 
contact indicated that Taiwan was not yet ready to identify 
an organization to discuss tourism, because the issue is 
complicated by security and immigration concerns.  In 
addition to the semi-official Straits Exchange Foundation 
(SEF), which is officially responsible for consular issues 
related to Taiwan visitors to the PRC, two industry 
organizations have been named in the press as possible 
cross-Strait negotiators on tourism - the Taiwan Visitors 
Association (TVA) and the Travel Agency Association of 
Taiwan (TAAT).  (Note: Ref C reported AIT/T conversation 
with TAAT.  End note.) 
 
9. (C) In a July 16 meeting with AIT/T, TVA Chairman Chang 
Shuo-lao argued that TVA is well qualified to lead cross- 
Strait negotiations on tourism.  Unlike TAAT, TVA 
represents a broad range of tourism-related businesses, 
including hotels, amusement parks, gift shops, and 
transportation companies.  He explained that TVA is a 
private non-profit organization, but receives funding from 
the Taiwan government's Tourism Bureau in addition to 
member contributions.  He said that TVA had already 
established good relations with the PRC's China National 
Tourism Administration.  However, he indicated that TVA 
would not lobby the government to represent Taiwan. 
According to Chang, Taiwan officials have not formally 
contacted TVA to discuss this matter. 
 
10. (C) Chang also emphasized that the issues that would 
need to be addressed in cross-Strait tourism discussions 
were related to Taiwan sovereignty and security.  He noted 
that discussion of issues like identity verification, 
traveler safety, and travel agency regulations would 
require direct government involvement in the negotiations. 
Chang believes that MAC and the PRC's Taiwan Affairs Office 
will have to be directly involved in the discussions. 
 
11. (C) Chang told us that he believed increased tourist 
travel from the PRC could be a major benefit to Taiwan's 
economy.  He noted that only about half of the almost 3 
million foreign visitors to Taiwan last year were true 
tourists.  The other visitors were traveling on business or 
to visit family.  He added that although domestic tourism 
is high, it is concentrated on the weekends, leaving excess 
capacity during the week.  Chang said that he had recently 
accompanied tourism-related businesses to visit MAC Vice 
Chairman You Ying-lung and urge MAC to reduce restrictions 
on PRC travel to Taiwan.  A point they made to MAC was that 
tourism businesses could not move to the Mainland like many 
Taiwan factories had. 
 
Comment - Charter Flights Most Promising 
---------------------------------------- 
 
12. (C) Taiwan industry associations stand ready to 
negotiate with PRC counterparts on cross-Strait economic 
initiatives.  Despite some discouraging comments from TAA's 
Fan, the two sides seem closest to negotiations on charter 
flights (as reported ref G), where negotiations for Lunar 
New Year passenger charters in January, using the "Macao 
model," set a clear precedence.  Fan is also chairman of 
one of Taiwan's most successful wireless and cable modem 
manufacturers.  He expressed frustration with the airline 
industry in his meeting with AIT/T.  His own enthusiasm for 
cross-Strait charter flights may be low, but this will not 
interfere with negotiations once Taiwan and PRC authorities 
are ready.  End comment. 
PAAL