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Cablegate: Taiwan Waits for Prc Response On Sand Export

VZCZCXRO1969
RR RUEHCN RUEHGH RUEHVC
DE RUEHIN #0650 0810329
ZNR UUUUU ZZH
R 220329Z MAR 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 4562
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHML/AMEMBASSY MANILA 9977
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS TAIPEI 000650

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR
STATE FOR EAP/TC
COMMERCE FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
USTR FOR STRATFORD, ALTBACH

E.O. 12958: N/A
TAGS: ETRD ECON PREL CH TW
SUBJECT: TAIWAN WAITS FOR PRC RESPONSE ON SAND EXPORT
REQUEST

REF: TAIPEI 297

1. (SBU) Summary: Effective March 1, the PRC banned sand
exports, which supply nearly 25 percent of Taiwan's sand
needs for construction. Taiwan has requested cross-
Strait consultations to negotiate relaxation of the ban
for Taiwan, but Beijing has not yet agreed to a meeting.
In the meantime, Taiwan has moved to increase imports
from the Philippines, use local stockpiles and expand
local production. End summary.

2. (U) The PRC banned all sand exports on March 1,
approximately one year after initially announcing its
intention to do so. Taiwan's local construction industry
relies on imports of PRC sand. According to the Taiwan
Ministry of Economic Affairs (MOEA) Bureau of Bureau of
Mines, Taiwan imported 30 million metric tons of river
sand from China in 2006 accounting for nearly 25 percent
of sand used in Taiwan. Taiwan's own sand resources are
unable to meet demand as sand extractors have been forced
farther upriver to sources where the sand has higher
stone content. An MOEA official speculated to AIT that
exports to Taiwan accounted for more than 90 percent of
the PRC's total sand exports prior to the ban.

Seeking Consultations
---------------------

3. (SBU) The Taiwan authorities have requested cross-
Strait consultations to negotiate a relaxation of the ban.
Beijing concluded talks in February with Hong Kong and
Macao in which it agreed to continue sand exports.
According to media reports, PRC officials have also
expressed willingness to work out a similar arrangement
with Taiwan. Each side has appointed a semi-official
trade entity to nominally lead the discussions. Taiwan
appointed the Taiwan External Trade Development Council
(TAITRA), while China named the Association for Economy
and Trade across the Taiwan Strait. However, MOEA and
Mainland Affairs Council officials separately told AIT on
March 20 that Beijing had not yet agreed to a meeting.

Searching for Other Sources
---------------------------

4. (U) Taiwan is working on developing alternative
sources for sand. Taiwan firms have increased investment
in the Philippines. MOEA believes that investment could
increase Philippine sand exports to Taiwan from 110,000
metric tons in 2006 to 3.5 million metric tons this year.
Taiwan officials have urged local firms to release their
stockpiles of sand. MOEA estimates this could add
another 2.3 million metric tons to the market. In
addition, Taiwan firms are being encouraged to accelerate
dredging in Taiwan and increase the capacity to grind
stone into sand. However, MOEA officials acknowledge
these measures will not be sufficient to meet the short
fall caused by the PRC ban.

5. (SBU) The price of sand has stayed relatively stable,
rising only about 1 percent. However, if there are no
consultations within the next month or two, MOEA
estimates the price could rise by approximately 7 percent
after the busy season for construction begins.
YOUNG

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