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Cablegate: Ait Director Reviews Tifa Agenda with Econ

VZCZCXRO3411
OO RUEHCN RUEHGH
DE RUEHIN #0672/01 0820905
ZNR UUUUU ZZH
O 230905Z MAR 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4591
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6513
RUEHUL/AMEMBASSY SEOUL PRIORITY 8540
RUEHKO/AMEMBASSY TOKYO PRIORITY 8583
RUEHCN/AMCONSUL CHENGDU PRIORITY 1751
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0083
RUEHHK/AMCONSUL HONG KONG PRIORITY 7756
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0908
RUEHSH/AMCONSUL SHENYANG PRIORITY 5719
RUEAIIA/CIA WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1798
RUEHC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 TAIPEI 000672

SIPDIS

SENSITIVE
SIPDIS

STATE PASS AIT/W AND USTR
STATE FOR EAP/TC, EAP/MLS,
USTR FOR BOLLYKY, ALTBACH AND STRATFORD
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON
USDOC FOR USPTO GIN AND BROWNING AND SNYDOR

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV KIPR TW
SUBJECT: AIT DIRECTOR REVIEWS TIFA AGENDA WITH ECON
MINISTER CHEN


Summary and Introduction
------------------------

1. (SBU) On March 21, AIT Director called on Minister of
Economic Affairs Steve Chen to review the bilateral trade
relationship and the TIFA agenda. Chen gave a positive
assessment of the state of the relationship, but reiterated
Taiwan's goal of signing a Free Trade Agreement (FTA) with
the U.S. He remains fully committed to making real progress
through the TIFA process. End Summary and introduction.

Pity about FTA, but Committed to Progress through TIFA
--------------------------------------------- ---------
2. (SBU) Chen characterized the U.S.-Taiwan bilateral trade
relationship as "very good," and once again stressed Taiwan's
interest in a Free Trade Agreement. We understand, he said,
for the moment you have difficulty agreeing to negotiate an
FTA with Taiwan. While waiting for the green light, we are
trying to improve our intellectual property rights regime,
market access, and work through the TIFA process. We are
committed to making real progress in our bilateral
relationship through TIFA. Chen noted that on March 30, MOEA
was opening a new Office of Trade Negotiation to be headed by
John Deng, who most recently served as Deputy Director of
TECRO Washington. Chen hoped that through Taiwan's efforts
the U.S. will eventually agree to enter FTA negotiations.

3. (SBU) The Director agreed with Chen that the TIFA
process was more than simply a means to a possible FTA, and
would itself deliver benefits to both sides. The Director
noted that June/July were being looked at for the next round
of TIFA meetings in Washington and some time in the second
half of the year for start up of the Consultative Committee
on Agriculture. He then discussed the state of play of
several items on the TIFA agenda.

IPR - Good News and Bad News
----------------------------
4. (SBU) The Director congratulated Taiwan on the passage
of legislation establishing an IPR Court and noted that the
U.S. was hopeful about the passage of two other pending bills
on regulating peer-to-peer (P2P) file sharing and ISP
liability. Chen replied that he expected that these bills
would pass this year. The Director went on to note that the
U.S. still had other concerns regarding IPR. We were
following the Phillips case, as well as legislation that
could expand the scope of compulsory licensing in Taiwan.
Chen replied that the U.S. did not need to worry about the
Phillips case. The EU is undertaking an investigation, he
noted, and "there will be a solution pretty soon." The
Director added that it would be helpful if Taiwan was
responsive to our concerns about the relevant legislation as
well.

5. (SBU) The Director also raised the U.S. concern that the
Ministry of Education was not treating the IPR issue
seriously. IPR violations on campus and on TANet were not
being addressed. He recalled that during AUSTR Stratford's
December visit, he called on the Minister of Education and
urged him to name a high-level official to take
responsibility for IPR issues in the Education Ministry. It
has not happened. Chen acknowledged that Taiwan had to do
more, and that he had personally encouraged one of the vice
ministers of education to assume that role. The Director
said that he planned to raise the issue with Vice Premier
Tsai later in the week (reported septel).

SIPDIS

Bilateral Tax, Investment and GPA Agreements
--------------------------------------------
6. (SBU) The Director updated Chen on the current status of
possible bilateral agreements being discussed under TIFA:

Bilateral Investment Agreement - USTR and Washington agencies

TAIPEI 00000672 002 OF 003


and Taiwan's Department of Investment Services are planning a
digital video conference during the week of April 9 to
discuss comments raised by Taiwan on the U.S. model agreement.

Bilateral Tax Agreement - We are hearing more positive noises
out of Washington, but the Director will learn more during
his upcoming consultations in Washington.

Bilateral Government Procurement Agreement - Washington is
preparing for bilateral negotiations by preparing a model
bilateral GPA based on the WTO GPA. Here in Taiwan, the
Director noted that the new head of the EU representative
office told him in a courtesy call and later told the Taiwan
press that the EU continues to urge Taiwan to take a
multilateral approach. Chen noted that this representative
was "too new" and that he had already advised him that the
U.S. and Taiwan were preparing for bilateral negotiations.

No Movement on Long Term Pharmaceutical Issues
--------------------------------------------- -
7. (SBU) The Director asked for Chen's help getting
movement on long term pharmaceutical pricing issues. He
noted that there has been little or no movement on issues
such as actual transaction pricing (ATP) and the separation
of prescribing and dispensing (SPD). Both are goals that
Taiwan has committed to achieving and to discussing with the
U.S. as part of TIFA. Chen took note of the Director's
concerns and also urged him to speak directly to the Minister
of Health on the matter.


Thanks for Cooperation on Export Controls
-----------------------------------------
8. (SBU) Thanking Chen for MOEA's hard work with the U.S.
on export controls, the Director noted that AIT-sponsored
training seminars on export control issues will continue
every month through August. He hoped, however, that Taiwan
law enforcement would be more willing to work with the Bureau
of Foreign Trade to move ahead with prosecutions for those
caught violating the law. Minister Chen noted that Chou
I-ren, Secretary General of the Presidential Office, had
recently asked for a briefing on this issue which shows the
level of importance that the Taiwan government places on
export control cooperation with the U.S.

Doha - Important, but Not Likely Anytime Soon
---------------------------------------------
9. (SBU) The Director stated that the U.S. was not giving up
on Doha and was still energetically looking for ways to
reinvigorate the process. He hoped that Taiwan was also
looking for ways to contribute. President Bush remains
committed to concluding the Doha Round. The success of the
Doha round was extremely important to Taiwan, Chen replied.
As it was having trouble signing FTAs or other bilateral
trade agreements, Doha was an important vehicle for more
liberalized trade. He was not optimistic, however, about any
breakthrough soon. He said the upcoming French presidential
election would likely affect the EU position, and there was
still the question of extension of the U.S. president's trade
promotion authority. Just the same, the Chinese Taipei
mission in Geneva would continue to play an active role in
promoting the Doha round.

10. (SBU) Chen also noted that the Free Trade Area of the
Asia Pacific (FTAAP) which the U.S. is supporting under APEC
is also very attractive to Taiwan. Director Young said,
however, that while this was indeed an important initiative,
it would likely move forward very slowly due to concerns from
China.

Cross-Strait Liberalization Inevitable, but Need Balance
--------------------------------------------- -----------
11. (SBU) Turning to Cross-Strait issues, Director Young

TAIPEI 00000672 003 OF 003


noted that the MOEA had recently granted permission for TSMC
to build a 0.18-micron semiconductor plant in China. Was
this decision made in isolation, or did it indicate a new
proactive, more reasonable China investment policy in Taiwan?
The Director noted that both Intel and Japanese firms were
building even more advanced plants in China. Semiconductor
executives aren't worried that China will seize Taiwan's
semiconductor market anytime soon, he added. Chen agreed,
and acknowledged Taiwan currently had twelve 12-inch wafer
semiconductor plants, eight more under construction, and 17
more in the planning stages. Taiwan was competitive in this
industry because it could keep costs low and can get a plant
up and running fast.

12. (SBU) Chen said that after May or June he would be in a
better situation to say more. The liberalizing trend was
inevitable in cross-strait trade and investment, but that the
speed of liberalization in the longer run would depend on the
next Taiwan president.

13. (SBU) Director Young stated that when he traveled in
southern and central Taiwan and met with business people they
asked for more forward-looking government policy out of
Taipei. They were actually doing quite well and were
optimistic about the future. Chen replied that while some
sectors were indeed doing very well, others were lagging. He
highlighted the importance of "balanced development" and
stressed that MOEA was committed to assisting small and
medium-sized enterprises as well as traditional industries,
many of which were having a difficult time.

Director Urges Taiwan Action on the Tyco Case
---------------------------------------------
14. (SBU) In closing, the Director raised the Tyco
thermistor classification issue. He said Tyco intends to
file a 301 petition if the issue is not resolved soon and
USTR plans to raise the issue in the TIFA talks if it is not
resolved before the next round. Tyco also will continue to
inform members of Congress about the issue. It is best for
both sides if the issue can be resolved soon. Chen replied
that he would once again raise the issue with the Minister of
Finance, but noted that it was a difficult issue to settle,
since the case was with the courts. Director Young responded
by saying that Tyco remains interested in and willing to
reach a negotiated settlement.

Comment
-------
15. (SBU) As in past meetings, Chen felt he had to stress
Taiwan's goal of negotiating an FTA with the United States.
Just as important, however, is his strong commitment to the
TIFA process which he clearly sees as bringing benefits to
both sides.
YOUNG

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