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Cablegate: Ustr-Ait Advance Trade Agenda in Preparation For

VZCZCXRO7758
RR RUEHCN RUEHGH RUEHVC
DE RUEHIN #0310/01 0660417
ZNR UUUUU ZZH
R 060417Z MAR 08 ZDK CORRECTED COPY - ADDED CAPTION ZDK
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 8277
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHGV/USMISSION GENEVA 1835
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 TAIPEI 000310

SIPDIS

SENSITIVE

SIPDIS

C O R R E C T E D C O P Y ADDED SENSITIVE CAPTION

STATE PASS USTR
STATE FOR EAP/TC,USTR FOR STRATFORD, KATZ, AND RAGLAND
TREASURY FOR OASIA/TTYANG
COMMERCE FOR BRENDA CARTER-NIXON, JOSHUA PIERCE, AND
MICHAEL CHOI

E.O. 12958: N/A
TAGS: EFIN ECON ETRD KIPR TW
SUBJECT: USTR-AIT ADVANCE TRADE AGENDA IN PREPARATION FOR
SUMMER TIFA MEETING

REF: 2005 TAIPEI 3982

TAIPEI 00000310 001.2 OF 002


Summary
--------

1. (SBU) During February 22-26 meetings in Taipei, USTR
Senior Director for China and Taiwan Affairs David Katz and
AIT/W Director of Trade and Commercial Programs Rick Ruzicka
laid the groundwork for the summer 2008 Trade and Investment
Framework Agreement (TIFA) meeting in Taipei by pressing U.S.
market access and reform concerns (septel covers agricultural
issues, including pork and beef). Katz and Ruzicka expressed
interest in continuing to explore a possible bilateral
investment agreement (BIA), but cautioned that progress would
depend in part on Taiwan reducing its list of non-conforming
measures (NCMs). They observed that Taiwan must provide
additional reassurances on its legal basis for information
sharing in order to facilitate continued discussions on a
bilateral tax agreement. Taiwan officials indicated
willingness to negotiate a bilateral textile transshipment
MOU as quickly as possible. On WTO issues, Taiwan has not
yet reached an internal decision on whether or not to support
the U.S. position on the information technology agreement
(ITA), but indicated general support for U.S. goals in
pursuing the Doha Development Agenda (DDA). The U.S. and
Taiwan made a tentative agreement to hold annual TIFA talks
in Taipei in July, and to explore options for including a
business-oriented regulatory reform agenda under the TIFA
rubric. End summary.

BIA, Bilateral Tax Agreement Still on Taiwan's Mind
--------------------------------------------- -------

2. (SBU) On their first day of meetings, Katz and Ruzicka met
with the Office of Trade Negotiations (OTN) Chief Negotiator
John Deng and other OTN senior staff.
The two sides had a long exchange on how best to move ahead
on investment talks, with Katz stressing the U.S. desire to
determine the likelihood of obtaining a strong agreement
before making a formal decision to launch negotiations. In
response to Katz's request, Deng said Taiwan would try to
reduce its list of non-conforming measures (NCMs). Deng also
said the Taiwan side is ready to engage in issue-specific
investment-related DVCs as requested by the U.S.

3. (SBU) Katz and Ruzicka discussed bilateral tax issues with
Ministry of Finance (MOF) Deputy Minister Chang Sheng-hord,
who noted that the Financial Supervisory Commission (FSC) and
MOF have a difference of opinion on the information-sharing
provisions that the U.S. is seeking. According to Cheng, the
FSC sees the provisions as difficult to implement under
current Taiwan law, while MOF believes otherwise. Chang told
Katz that he hopes after additional interagency
consultations, Taiwan will be able to resolve the issue.
(Note: His encouraging words on the tax issue paper over the
real challenges in resolving this interagency dispute without
a clear push from a higher level. End note.)

Textile Transshipment MOU Coming Soon?
--------------------------------------

4. (SBU) During their February 22 meeting with OTN, Katz and
Ruzicka told OTC Chief Negotiator John Deng that the U.S. is
still very interested in finalizing the textile transshipment
MOU. At the MOEA Bureau of Foreign Trade (BOFT), Director
General Franco Huang said he "sees no issue" with the textile
transshipment MOU, which he believes can be negotiated "very
soon."

Still Undecided on ITA
----------------------

5. (SBU) BOT DG Franco Huang said Taiwan is still hammering
out an interagency view on whether or not to support the U.S.
position on the Information Technology Agreement (ITA), and
indicated, as AIT has heard before, that Customs is hesitant.
Katz asked for Taiwan's support on the ITA, as well as on
broader U.S. goals to advance the Doha Round, and observed
that Taiwan in particular stands to benefit from progress on
multilateral trade liberalization. During their visit to the
Office of Trade Negotiations (OTN), Katz also highlighted
U.S. interest in Taiwan support for our WTO positions,
including ITA.

TAIPEI 00000310 002.2 OF 002

Tyco Case Grinds Along
----------------------

6. (SBU) During a February 25 meeting with Ministry of
Finance (MOF) Administrative Deputy Minister Chang, Chang
said that the Tyco case was now before the Ministry of
Finance Appeals Committee, which he chairs. Tyco has a
long-standing dispute with Customs on the proper
classification of its thermistors involving more than a
thousand individual cases under various stages of
consideration ranging from administrative review by Customs
to final rulings by Taiwan courts. Tyco has been insisting
that the product should be classified under Harmonized System
Code 8533 and thus eligible for duty-free importation under
the terms of the WTO Information Technology Agreement. Taiwan
Customs, on the other hand, has insists that the product
falls under HS 8536 and thus is subject to an import duty
(reftel).

7. (SBU) Chang stated that committee members were
independent, but that he would do his best to resolve the
issue as soon as possible, preferably before TIFA in July.
He suggested informally that Tyco's lawyers still had a lot
of homework to do and suggested that the case is more
difficult for Tyco to resolve since--in addition to pursuing
an administrative appeal--they had also gone to the Taiwan
courts where they had lost the case. The MOF, he pointed
out, has no control over the Judiciary.

Pharma
------

8. (SBU) Katz and Ruzicka emphasized the ongoing U.S. focus
on pharmaceutical market access in a meeting with Vice
Minister of Health Chen Shih-chung. In particular, Katz
noted U.S. interest in including IP issues such as patent
linkage and data exclusivity on the TIFA agenda. Katz and
Ruzicka also discussed drug issues with the AmCham
Pharmaceutical Committee. Drug company representatives
complained to Katz and Ruzicka that Taiwan has become one of
the slowest and most difficult places in Asia to get
regulatory approval for new drugs or new indications of
current drugs, due to increasing demands by Taiwan
authorities for second-country trial data and additional
studies. Amcham's pharma members also lamented the Bureau of
National Health Insurance's pricing structure for new-drug
reimbursement, which has pushed the average new-drug price in
Taiwan to below 50 percent of the average developed-world
price, down from above 80 percent in 2002. Participants
suggested to Katz that the United States push to include a
pricing-related working group in the TIFA structure, in
addition to the current working groups on the separation of
dispensing and prescribing (SDP) and standard contracts.
AmCham members also complained that they are having more and
more trouble arranging meetings with BNHI and other DOH
officials, and are frustrated by the lack of communication.

Comment
-------

9. (SBU) The Katz-Ruzicka visit was useful in preparing the
ground for TIFA talks in July in terms of discussions of
possible deliverables. We will continue to work to
consolidate this list prior to the proposed AUSTR Stratford
visit in June after the transition to a new administration in
Taiwan. Moreover, we will continue to push for a reduction
in NCMs before the start of investment negotiations. End
comment.
YOUNG

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