US embassy cable - 05TAIPEI3141

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 003141 
 
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WASHINGTON PASS AIT/W 
 
E.O. 12958: DECL: 07/25/2015 
TAGS: PGOV, PREL, TW, Military Issues 
SUBJECT:  DOD CHINA MILITARY REPORT DEMARCHE TO TAIWAN NSC 
AND MND 
 
REF: A. TAIPEI 133146 
 
     B. TAIPEI 3097 
     C. TAIPEI 3030 
 
Classified By:  AIT Deputy Director David J. Keegan, Reason 1.4 b 
 
1.  (C) AIT presented the DOD China Military Report demarche 
to National Security Council (NSC) Secretary General Chiou 
I-Jen and Vice Minister of National Defense (VMND) Michael 
Tsai (Ming-hsien).  Both expressed appreciation for and 
 
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concurrence with the report, and both said they are working 
to increase Taiwan's regular defense budget to around three 
percent by 2008.  Taiwan's impending National Security Report 
will reinforce the DOD report, and any mention of 
counterstrike measures will be clearly for purposes of 
delaying a PRC attack on Taiwan and not aimed at the mainland 
civilian population.  Action Request: Chiou asked for Taiwan 
access to see information from the classified annex of the 
2005 DOD China Military Report.  End Summary. 
 
DOD China Military Report Demarche 
---------------------------------- 
 
2.  (C) The Deputy Director met with NSC Director Chiou I-Jen 
and VMND Michael Tsai on July 21 and 22 to present the 2005 
DOD China Military Report demarche as instructed (Ref A). 
Both men expressed appreciation for the DOD report and 
emphasized that Taiwan fully concurs with its findings. 
Chiou noted that Taiwan's view of PRC military development 
closely tallies with the DOD Report.  Chiou, who was 
accompanied by NSC Deputy SecGen Henry Ko (Cheng-heng), told 
the Deputy Director that he hopes the DOD report will help 
Taiwan authorities educate Taiwan political leaders on the 
realities of the security situation Taiwan faces and the 
importance of enhancing the regular defense budget and 
passing the long-stalled Defense Procurement Special Budget. 
 
3.  (C) VMD Tsai expressed appreciation for the briefing and 
for the report itself.  He noted that he had arranged for a 
one-day rush translation of the report into Chinese, with the 
permission and support of ASD Peter Rodman.  Tsai told the 
Deputy Director he had already read the Preface and the last 
two chapters, and found this year's report more comprehensive 
than last year's.  For example, this year the alternate 
attack scenarios on Taiwan were both reduced from seven to 
five and appeared more realistic.  Tsai said he had gained a 
more comprehensive understanding of PRC military build-up in 
the near term, including its capabilities against Taiwan and 
other nations in the region, including Japan, Australia, and 
Southeast Asian nations. 
 
4.  (C) Tsai pointed to the more indirect threat from the 
PRC's three-pronged "soft power" strategy against Taiwan -- 
legal, psychological and opinion warfare.  Legally, the 
Anti-Secession Law was designed to give China legal authority 
to deploy "non-peaceful measures" against Taiwan. 
Psychologically, Beijing has embarked on united front tactics 
(tongzhan) to entice opposition political leaders, business 
people, and farmers.  Taiwan has a responsibility, Tsai said, 
to defend itself and to maintain peace.  Noting that 80 
percent of the PRC's oil passes through the Taiwan Strait, 
Tsai said peace in the Strait is also important to China. 
 
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Maintaining a regional security dialogue with Japan, the U.S. 
and other neighbors in the region, Tsai told the Deputy 
Director, is a top priority for Taiwan. 
 
Increasing the Defense Budget 
----------------------------- 
 
5.  (C) Chiou told the Deputy Director that the Taiwan 
government hopes to increase the regular defense budget over 
the next three years to reach three percent of GDP by 2008. 
VMND Tsai reported that President Chen has indicated he 
supports consideration of a gradual increase in the regular 
defense budget to three percent; now the real challenge 
facing MND is to convince Premier Frank Hsieh and the 
Executive Yuan (EY).  Increasing the defense budget, however, 
will necessitate cuts elsewhere and arouse protests from 
other government agencies.  For this reason, Tsai noted, MND 
had turned to the Special Budget mechanism to finance the 
three-part package now stuck in legislative limbo.  This 
week, Tsai will propose to the EY that the Special Budget 
components that do not pass the LY be funded out of the 
regular budget.  In response to the Deputy Director's 
statement of U.S. concern over other defense procurement 
issues, notably ammunition, Tsai stated MND is currently 
assessing these needs and will discuss with the U.S. 
 
6.  (C) Chiou opined that there is still a possibility the 
long-stalled Defense Procurement Special Budget will be 
approved by a Legislative Yuan (LY) Special Session this 
summer.  Speaker Wang Jin-pyng, he said, "wants to help" and 
is working on a mechanism for getting the Special Budget 
through the Special Session.  (Note: Chiou's information 
proved overly optimistic; at almost the same moment Chiou was 
insisting on Wang's willingness and the likelihood for 
passage, Wang himself was telling the Director there was no 
way the Special Budget would pass in the Special Session; see 
Ref B).  Noting that PFP legislator Lin Yu-fang had announced 
July 21 that he was changing his position and will now 
support discussing the Defense Procurement Special Budget in 
the regular LY session beginning September, the Deputy 
Director asked if this shift by a long-time critic of the 
Special Budget would make a difference.  Tsai responded that 
the Special Budget is still up in the air and while Wang may 
be amenable, Lin's PFP and its Chair, James Soong, continue 
to oppose the Special Budget. 
 
Taiwan's National Security Report 
--------------------------------- 
 
7.  (C) The Deputy Director asked both Chiou and Tsai about 
the status of Taiwan's National Security Report (NSR) due out 
later this summer (see Ref C).  Chiou explained that the 
report is still in the drafting-revision stage, with NSC, MND 
and National Security Bureau (NSB) working to integrate the 
various proposed changes into a draft that will be submitted 
to President Chen Shui-bian.  The President will then hold a 
formal National Security Meeting, the first of his five years 
as President, Chiou explained.  The draft NSR view of the 
pace of PLA development, Chiou noted, is similar to that of 
the DOD report.  When the Deputy Director urged that AIT be 
allowed to review the document before completion, Chiou 
assured that AIT will have access. 
 
8.  (C) The Deputy Director asked whether the NSR will 
include counterattack measures (fanzhi, see Ref C).  Chiou 
responded affirmatively, explaining that deterrence to Taiwan 
means providing time.  Additional time, Deputy SecGen Ko 
interjected, will make the PRC hesitant to use force because 
it will increase the possibility of outside intervention. 
Ko, however, assured that Taiwan will not deploy 
counterattack measures until it has consulted with the U.S. 
VMND Tsai separately explained that Taiwan is focusing on 
countermeasures to prolong an attack on Taiwan. 
Countermeasures, Chiou stressed, will not be used to attack 
PRC population centers, but rather military bases, missile 
sites, and radar installations.  Nor will Taiwan fire the 
first shot, but when hit it will respond in self defense to 
slow down the pace of attack. 
 
9.  (C) The Deputy Director raised the issue of resource 
efficiency, noting that development of new weapons systems is 
a very expensive proposition and that the development and 
production of domestically produced counterattack systems 
currently envisioned would divert money from direct defense. 
Tsai responded that sometimes deterrence is cheaper and more 
 
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efficient than defensive weapons.  Counterattack, he argued, 
is both more efficient and adds more to defensive capability, 
whereas defensive weapons are more expensive to maintain than 
offensive weapons. 
 
Comment 
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10.  (C) The publication of the DOD report has been 
enthusiastically welcomed by the Taiwan authorities, who have 
immediately insisted that it confirms their own claims of a 
China threat.  This emphasis on a China threat has been used 
both to justify delaying improvement in cross-Strait economic 
linkages and to criticize the Pan-Blue opposition as being 
pro-China and, therefore, anti-Taiwan.  AIT will continue 
closely monitoring the NSR as it moves forward in the 
drafting stage, and pressing for access.  Providing Taiwan 
officials with access to information from the classified 
annex of the 2005 DOD China Military Report would increase 
our leverage in pressing for access to the NSR draft. 
11.  (C) Action Request.  Please provide response to Taiwan 
request for information from the classified annex to the DOD 
report. 
PAAL