US embassy cable - 05TAIPEI2968

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002968 
 
SIPDIS 
 
STATE PASS AIT/W 
 
E.O. 12958: DECL: 07/08/2015 
TAGS: PGOV, TW, Domestic Politics, Cross Strait Politics, Cross Strait Economics 
SUBJECT: PAN-BLUES RETURN TO BEIJING TO CONTINUE PRODUCE 
EXPORT TALKS 
 
 
Classified By: AIT Dep. Director David J. Keegan, Reason(s): 1.4 (B/D). 
 
1. (C) Summary: On July 7, a joint delegation of KMT and PFP 
representatives began a two-day trip to Beijing to continue 
talks aimed at allowing Taiwan fruit growers to export 
duty-free into the PRC market.  The PRC continues to snub the 
official Taiwan government entity responsible for negotiating 
fruit export issues, the Taiwan External Trade Development 
Council (TAITRA), choosing instead to contact Pan-Blue 
interlocutors.  On July 6, The Mainland Affairs Council (MAC) 
rejected a Pan-Blue invitation to send a government 
representative with the delegation, and reiterated that any 
trade agreements reached with the PRC would be invalid 
without explicit government approval.  KMT contacts told AIT 
that although the details of a duty-free agreement were 
reached in late June, because the PRC has not yet announced 
its terms, the KMT requested another visit in order to 
persuade Beijing to go public as soon as possible.  KMT 
leadership is hopeful that by delivering a duty-free export 
agreement to Taiwan's fruit growers, they will be able to 
weaken support for President Chen Shui-bian among Taiwan's 
central and southern agricultural communities.  DPP sources 
told AIT their candidates may suffer at the polls this 
December as a result of a KMT public-relations coup over any 
export deal, but in the long term, KMT cooperation with the 
PRC will hurt their presidential candidate in 2008. End 
Summary. 
 
Duty-Free Exports: A Means to an End 
------------------------------------- 
 
2. (C) In early May, after Lien Chan returned from the 
Mainland, PRC Taiwan Affairs Office director Chen Yun-lin 
announced that the PRC would give Taiwan a pair of pandas, 
loosen restrictions on PRC tourism to Taiwan, and allow 
Taiwan fruit to enter the Chinese market duty-free.  KMT 
Spokesman and KMT Central Committee Mainland Affairs 
Department Director Chang Jung-kung told AIT that the fruit 
export issue was very important to KMT Chairman Lien Chan, 
and that since May, the KMT sent at least two teams of 
negotiators to China to iron out the export agreement 
details.  Press reports state that by late June, during an 
unannounced visit by the Pan-Blue controlled Taiwan 
Provincial Farmers Association (TPFA), an agreement had been 
reached regarding all technical details for the export of 
Taiwan fruit to China, including quarantine and country of 
origin certification matters.  Despite this agreement, to 
date the PRC has not formally announced the terms of the 
duty-free program.  According to Chang, the PRC invited the 
TPFA delegation to return for additional talks after KMT 
leadership made it known it would like to continue 
discussions.  Chang said the goal of the July 7 trip is to 
persuade the PRC to make the terms of the duty-free 
arrangement public, which he expects Beijing to do two or 
three days after the delegation returns to Taiwan. 
 
3. (C) As originally announced on July 4, this trip would 
have been TPFA's second visit to the mainland to discuss 
fruit export issues.  Chang explained that in order to reduce 
the chance of being criticized by the Chen government for 
conducting unauthorized negotiations, KMT leadership decided 
on July 5 to have KMT and PFP representatives visit Beijing 
in their individual capacities, and not under the TFPA 
banner.  PFP legislator Vincent Chang (Hsien-yao), Director 
of the PFP Central Policy Committee, who was originally 
slated to participate in the July 7 visit, told AIT the 
reason TPFA was removed from the visit was because their 
leadership and KMT leadership both wanted to control the 
potentially lucrative duty-free export benefit. The KMT won 
this battle, and forced the TPFA out. KMT Spokesman Chang 
also noted that although PFP Deputy Legislative Speaker Chung 
Jung-chi was originally named as part of the delegation, 
after discussions with the PFP, he was later removed to avoid 
the appearance of high-level official government involvement. 
 
4. (C) The KMT's Chang said there are three reasons why the 
PRC has thus far refused to conduct trade negotiations with 
TAITRA: 1) TAITRA's full Chinese name includes the phrase 
"Republic of China," and Hu wants to avoid conducting talks 
that could be construed as "state to state" level discussions 
with the Taiwan government; 2) TAITRA's chairman is a close 
personal friend of President Chen Shui-bian, and Hu is eager 
to avoid the appearance of close contact between himself and 
Chen; and 3) Hu prefers to work with Taiwan through civil, 
non-governmental groups. 
 
5. (C) Chang, who participated in Lien's discussions with Hu 
Jintao in April, said that for the past two years, Hu was 
under enormous public pressure to "resolve the Taiwan 
problem."  Following Lien's visit, popular opinion toward 
Taiwan improved dramatically, easing that pressure.  Chang 
said that Hu again believes that Taiwan reunification is a 
real, if distant possibility, and that Hu's strategy is to 
avoid military conflict at least until the Shanghai Expo is 
held in 2010.  Chang explained the current KMT strategy is to 
avoid conflict with Beijing, while extracting as many 
economic and other benefits as possible from the PRC's 
newfound willingness to cooperate.  Chang said that if 
duty-free fruit exports do go forward, he is not afraid of 
any kind of "tit-for-tat" from Beijing; i.e. demanding access 
to Taiwan's produce or other markets.  Chang explained that 
Hu wants to deprive President Chen of any reason to criticize 
the PRC or its motives, and is far too clever to hand Chen 
such a large club. 
 
6. (C) Chang admitted that the fruit export negotiations were 
begun in hopes of weakening support for Chen Shui-bian among 
his traditional power base: agricultural communities in 
central and southern Taiwan.  If the KMT can deliver a 
duty-free agreement, Chang explained, President Chen will be 
put in the uncomfortable position of having to reject it as 
an unauthorized, extra-governmental accord, denying farmers 
potentially valuable access to Mainland markets and 
alienating the farmers in the process, or acceding to the 
agreement, thereby handing a political victory to the 
Pan-Blue camp.  Chang said the KMT hopes that the PRC will 
expedite the opening of its markets in order to boost KMT 
prospects in the year-end local elections. 
 
DPP Sees Short-Term KMT Gain, But Long Term Loss 
--------------------------------------------- --- 
 
7. (C) On July 6, a delegation of six KMT and PFP 
legislators, led by Executive Director of the KMT Central 
Policy Committee Tseng Yung-chuan, extended an invitation to 
the Mainland Affairs Council (MAC) to include its own 
representatives in the July 7 visit to Beijing.  (Note: 
Beijing had earlier stated it would not oppose the 
participation of a government representative. End note.)  The 
invitation was declined.  Press reports quote MAC 
Vice-Chairman You Ying-lung reiterating the government's 
position that TAITRA is the only institution authorized to 
discuss trade-related issues with the PRC.  MAC Chairman 
Joseph Wu later told the Taiwan press that in conducting 
trade discussions with the TPFA and not TAITRA, China's 
intention was to undermine the authority of the Chen 
government.  Wu added that by inviting MAC to participate in 
the visit, the KMT was hoping to get the government's 
endorsement, and to "enhance the importance" of the trip.  Wu 
urged opposition parties to cooperate with the ruling DPP to 
make China respect the authority of the Taiwan. government. 
 
8. (C) The Director of the DPP's Chinese Affairs Department 
Dong Li-wen told AIT that the Chen government does not oppose 
produce exports to China, but must insist that all trade 
negotiations be conducted through the designated government 
agency. If Beijing is unwilling to work through Taiwan's 
elected government, the problem lies with Beijing, and not 
President Chen.  Dong argued that since the value of Taiwan's 
fruit exports to the mainland is small, the real importance 
of the fruit export issue is not economic, but political. 
(Note: AIT concurs that the economic impact any duty-free 
export program will be minor. End note.)  The Chen government 
considers it to be part of a larger PRC strategy to use the 
KMT's desire to weaken President Chen to drive a wedge 
between the DPP and KMT, making cooperation between them 
impossible, thereby precluding Taiwan from forming a coherent 
response to China. 
 
9. (C) Dong said the KMT played the China card hoping to 
score political gains against the DPP, but the first round 
ended up a tie.  Dong explained that although the popularity 
of Lien and the KMT rose dramatically after Lien's visit to 
the PRC, the KMT did poorly during the subsequent National 
Assembly election, in which the DPP won the majority of 
seats.  Dong conceded the KMT strategy to lure farmers away 
from the DPP might work in the short term, causing DPP 
candidates to suffer during the year-end local elections, but 
he remains confident that the KMT's overt cooperation with 
the PRC will hurt them badly come the 2008 presidential 
election.  Dong told AIT that Beijing's policy toward Taiwan 
has not changed -- it will not recognize Taiwan as a 
sovereign, independent country, it works actively to 
frustrate Taiwan's international relationships, and it 
continues to threaten Taiwan militarily.  Dong believes that 
in cooperating so closely with the PRC, the KMT has made 
itself vulnerable to claims that it too supports opposing 
Taiwan independence by force -- an insurmountable black mark 
for any presidential candidate. 
 
10. (C) Comment: The KMT seems to lack a clear vision of 
where they want Taiwan's relationship with the Mainland to be 
twenty years from now.  In response to a pointed question 
regarding the KMT's long-term vision for Taiwan, KMT 
Spokesman and Central Committee Mainland Affairs Department 
Director Chang was unwilling or unable to say whether the KMT 
wanted an economically integrated but politically separate 
Taiwan, complete economic and political unification with the 
mainland, or something in between.  Chang said the KMT is now 
focused solely on doing whatever it takes to restore itself 
to power.  The DPP is taking much the same approach, 
subordinating vision to the need for short-term political 
victories. End Comment. 
KEEGAN