US embassy cable - 05TAIPEI4405

UNCLAS SECTION 01 OF 02 TAIPEI 004405 
 
SIPDIS 
 
DEPT PASS AIT/WASHINGTON 
DEPT FOR EAP/TC, INR/EAP 
 
FROM AIT KAOHSIUNG BRANCH OFFICE 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, TW 
SUBJECT: Southern Taiwan Farmers Expect China's Fruit 
Import Policy to Have Scant Impact on the Farm Vote 
 
 
  1.  Summary: Farmers' Association representatives in 
  Tainan and Pingtung Counties said that China's offer of 
  tax free importation of certain species of tropical fruit 
  from Taiwan is largely a political ploy.  They point out 
  that Taiwan is a net importer for several of the fruits, 
  and already has a mechanism in place for exporting the 
  others.  Since brokers on the mainland deal with all of 
  the import tax issues, any benefit from the scheme would 
  accrue to the brokers rather than to Taiwan's farmers. 
  Moreover, they fear that if the scheme is implemented, 
  mainland farmers who produce the same crops may demand 
  access to Taiwan's market.  While they said while some 
  individual farmers might be swayed to vote for pan-Blue 
  candidates, most of their members see the ploy for what 
  it is and will continue to support pan-Green candidates. 
  End Summary. 
 
  2.  Following visits to Beijing by pan-Blue leaders Lien 
  Chan and Soong Chu-yu, Beijing announced on July 28 a 
  plan to allow Taiwanese farmers a total import tax 
  exemption for certain species of tropical fruits exported 
  to China.  The species include pineapples, papayas, star 
  fruits, mangos, guavas, grapefruits, coconuts, plums, 
  peaches, persimmons, loquats, Chinese dates, custard 
  apples, wax apples, pomelos, and betel nuts.  China also 
  offered to streamline customs clearances to alleviate 
  difficulties of Taiwan farmers in overproduction and 
  distribution process. 
 
  3. Guantien Town Agricultural Association Secretary 
  General, Lin Cheng-jong, said Beijing's offering is 
  purely a trick, using import policy in an attempt to 
  manipulate Taiwanese farmers' votes, particularly in the 
  pan-Green's southern stronghold.  Lin pointed out that 
  among the particular list of fruits selected for the tax 
  exemption, betel nuts, loquats, persimmons, and peaches, 
  are products that Taiwan does not produce in sufficient 
  quantities to meet domestic demand.  There is no problem 
  with oversupply or distribution of these species.  Lin 
  went on to say that export mechanisms already exist for 
  the other species on the list.  He said that there is no 
  problem with accessing the China market, but that Japan 
  and Korea are the preferred markets, due to higher 
  prices. 
 
  4.  President Chen Tai-neng, of Taiwan's Wax Apple 
  Development Association in Pingtung County, stated that 
  members have been selling wax apples to the China market, 
  as well as other foreign markets, for more than five 
  years.  Pingtung County farmers produce approximately 82 
  percent of Taiwan's total wax apple crop. They currently 
  export approximately 100,000 kg of wax apples annually to 
  markets in Canada, Hong Kong, Singapore, Russia, and 
  China.  They ship to China using the mini three links 
  from Kaohsiung to Xiamen via Kinmen. 
 
  5.  According to Chen, the members sell their produce to 
  local brokers in Xiamen and the brokers deal with all 
  import, tariff and customs issues.  Wax apple farmers 
  sell their produce at a 40 percent premium compared to 
  Taiwan's domestic market.  The brokers deal with all 
  import related issues and assume all risk resulting from 
  government induced delays or irregularities in the China 
  market.  Chen said Taiwan's Council of Agriculture (COA) 
  and Taiwan External Trade Development Council (TAITRA) 
  have helped promote exports to other markets and that the 
  members see no need for government assistance in 
  accessing the China market.  The Association's members 
  said Beijing's offer would only benefit the brokers. 
  Further, they worry that the offer could disrupt the 
  market by inducing marginal producers of wax apples to 
  enter the market and adversely impact pricing. 
 
  6.  Lin went on to point out that import duties are a 
  minor cost compared to locally imposed sales taxes of 
  13.5 percent currently levied on Taiwan fruit.  These 
  taxes will not be affected by the new policy.  Further, 
  doing business directly rather than through a broker 
  would make Taiwan's farmers assume risks currently 
  assumed by the brokers. 
 
  7.  Lin said further that most of crops on the list are 
  also grown by Taiwanese farmers in China.  Lin said those 
  Taiwanese Agri-business concerns in China are in fact 
  hoping that, once China's markets are opened to Taiwan's 
  produce, Beijing could request that Taiwan grant China 
  the same tax treatment on their produce.  Lin worried 
  that such an outcome could do severe damage to Taiwan's 
  agriculture industry. 
 
  8.  While farm groups remain wary of Chinese overtures, 
  Secretary General Huang Cheng-ching of Yujing Town 
  Agricultural Association said that his Association is 
  currently pursuing opportunities in Guangzhou and Fuzhou. 
  Huang said that Taiwan needs to seriously study any 
  opportunity to expand Taiwan's agricultural markets. 
 
  9.  The Associations' executives uniformly agreed that 
  Beijing's overtures might sway some votes among their 
  membership.  However, they went on to say that most of 
  their membership is sophisticated enough to see Beijing's 
  offer as a ruse designed to benefit pan-Blue candidates 
  rather than a genuine effort to aid Taiwanese farmers. 
  They said that if Beijing really hopes that such an offer 
  will shake farm support for pan-Green candidates in 
  Southern Taiwan, Beijing is in for a disappointment. 
 
  10.  Comment:  The arguments made by the Farmers' 
  Association were reflected repeatedly in visits by AIT/K 
  to DPP party offices throughout the south.  Pingtung, 
  Chiayi, and Taitung DPP officials all called the fruit 
  export issue an "empty one" that will play no role 
  whatsoever in turning green votes into blue votes.  While 
  this issue may have captured the attention of the press 
  and non-farming audiences, it is a non-starter for the 
  KMT in local elections where the voting population 
  includes a significant number of farmers.  Historically, 
  the Associations have refrained from endorsing candidates 
  from either side.  However, their membership, like most 
  other demographic groups in the South, has supported DPP 
  candidates in recent years.  End Comment. 
Thiele 
Paal