Cablegate: U.S.-China Economic and Security Review Commission

DE RUEHIN #1999/01 2430436
O 310436Z AUG 07





E.O. 12958: N/A


1. (SBU) Summary: Vice Premier Chiou I-jen told the
U.S.-China Economic and Security Review Commission delegation
that the cross-Strait military balance is increasingly
favoring China. President Chen understands that U.S.-Taiwan
military cooperation is essential to Taiwan's defense, Chiou
added, and is working to increase military spending to 3
percent of GDP. Taiwan cannot stop its manufacturers from
moving to China, Chiou stated. Instead, Taiwan must preserve
and increase its advantage in tech- and service-intensive
industries. President Chen will spend the last months of his
presidency promoting "democratization" and "Taiwan identity."
Chiou predicted that hosting the Olympics will "seriously
challenge" Beijing's ability to control domestic dissent.
National Security Council Secretary-General Mark Chen
complained that China continues to obstruct Taiwan
participation in international organizations, and wondered
"how long" Taiwan could withstand a PRC attack.

2. (SBU) DPP advisers to presidential candidate Frank Hsieh
predicted a DPP victory if voter turnout next March is high,
and asserted that KMT candidate Ma Ying-jeou is too
"pro-China" for most Taiwan voters' liking. Ma told the
delegation that as president, he would resume dialogue with
China to seek a peace agreement, expanded economic and
cultural links, and an accord on Taiwan's international
"living space." Ma stated he would not sacrifice U.S.-Taiwan
military cooperation to appease PRC demands. Mainland
Affairs Council Chairman Chen Ming-tong dismissed Ma
Ying-jeou's proposed peace agreement as a "campaign
stratagem" that Beijing will not take seriously. Vice
Foreign Minister Katherine Chang emphasized the importance of
close ties between the U.S., Taiwan, and Japan. Defense
Minister Lee Tian-yu stated Taiwan is committed to
maintaining its self-defense capability. The delegation also
was briefed on Taiwan's defense communications capabilities.
Taiwan's counterterrorism coordinator told the delegation
that Taiwan does not perceive a significant domestic
terrorist threat. End summary.

Vice Premier Chiou on PRC Military Build-Up, Taiwan Identity

3. (SBU) Vice Premier Chiou I-jen covered a broad range of
topics in his very congenial meeting with the U.S.-China
Economic and Security Review Commission (USCC) delegation.
Pointing to the growing PRC military build-up, he said the
trend was obviously getting worse. President Chen, he said,
fully understands the challenge and is working to increase
the defense budget to 3 percent of GDP. Chiou stressed the
importance of U.S.-Taiwan military-to-military cooperation
and said that bilateral cooperation had greatly increased and
Taiwan was learning from the U.S. side in doctrine and
military reforms. In response to a question from Vice
Chairman Blumenthal about whether Taiwan people trust the
U.S., the Vice Premier replied that in some ways people
"trust the U.S. too much." He said that the U.S. was the one
country that had helped Taiwan develop its democracy, economy
and security. Taiwan counts too much on U.S. help, he said,
and noted that there had been a tremendous impact in Taiwan
when President Bush "criticized President Chen a little" at
the end of 2003.

4. (SBU) Vice Chairman Blumenthal asked Chiou what President
Chen's legacy would be, and what his priorities were in the
last seven months of his administration. Chiou said Chen had
promoted democratization and strengthened the public's sense
of Taiwan identity. Defining democratization rather broadly,
Chiou claimed that free speech in Taiwan was "freer" than in
the U.S., thanks to legal protections put in place during
Chen's administration. He also claimed that Chen would leave
behind a neutral military, wholly disconnected from any
political party.

5. (SBU) Chiou told the delegation that the rising sense of
"Taiwanese identity" is one of President Chen's lasting
contributions to Taiwan society. According to Chiou, in 2000

TAIPEI 00001999 002 OF 004

only 20 percent of those polled identified themselves as
"Taiwanese," whereas in recent polls, Chiou continued, more
than 60 percent identify themselves as "Taiwanese," thanks to
Chen administration initiatives. Chiou expressed the hope
that this number will continue to increase, and that someday
soon 70-80 percent of the public will call themselves
"Taiwanese." Chiou acknowledged that the "identity" issue
has become more complicated. In the past, if someone
considered himself to be "Taiwanese," he was almost certainly
a supporter of Taiwan independence. This is no longer the
case, Chiou continued, as identity and independence have
become de-linked. Chiou worries that older DPP leaders fail
to see this trend, and that Chinese and U.S. experts don't
see it either. On the other hand, Chiou continued, because
ethnicity (Mainland-born vs. Taiwan-born) and identity
(Chinese vs. Taiwanese) are no longer tied so closely
together, Taiwan's increasing number of immigrants will not
necessarily deter a rising sense of Taiwan identity, though
some may have trouble assimilating.

Olympics Will Challenge China's Stability

6. (SBU) Chiou predicted that hosting the Olympics will
"seriously challenge" China's ability to maintain control.
Dissidents, foreign pressure groups, Tibetan separatists, and
the Falun Gong, among others, will press Beijing for
concessions. If Beijing cracks down before or during the
games, Chiou continued, international criticism will be
intense. But, if CCP leaders give in to domestic demands, it
will be difficult to change direction once the games are
over. Chiou noted that the number of protests in China has
increased in recent years. Some of the protests have been
large and violent, but because they had no centralized
leadership, none of them has posed a serious threat to CCP
control. If Beijing loosens its grip in advance of the games,
however, it could provide an opportunity for dissident groups
to increase both their organization and effectiveness.

NSC's Mark Chen on UN Referendum, China Threat

7. (SBU) National Security Council (NSC) Secretary-General
Mark Chen told the delegation that Taiwan's UN bid had served
to catapult Taiwan into the international media after years
of being ignored. The ruling DPP's proposed referendum to
join the UN under the name "Taiwan," he explained, was in
response to Taiwan public opinion polls consistently showing
72-77 percent of Taiwan people support joining the UN as
Taiwan. Even the opposition KMT, he noted, had "surprisingly
enough" followed the ruling party's lead and proposed its own
UN referendum in order to attract votes in upcoming
legislative and presidential elections. Chen then launched
into a long complaint over China's efforts to isolate Taiwan
by preventing its participation in international
organizations and over China's military build-up, notably its
increase over the past seven years from some 200 missiles to
around 1,000 missiles aimed at Taiwan. In response to a
query from the delegation, Chen stated the cross-Strait
military balance has shifted in favor of China, but he
"honestly did not know how long Taiwan could hold out" in the
face of a PRC military assault on Taiwan. Finally, Chen told
the USCC delegation that China's rise "is not peaceful" and
that "Taiwan is Taiwan, China is China, and will never
succumb to PRC pressure to unify with China."

DPP: KMT Hobbled by "Pro-China Stance

8. (SBU) The USCC delegation met with DPP presidential
candidate Frank Hsieh's Policy Director Kenneth S. Lin and
International Affairs Director Bikhim Hsiao on August 22 to
discuss election strategy and campaign platforms. Lin told
the delegation that the DPP is confident that if there is a
high voter turnout Hsieh will be able to defeat KMT candidate
Ma Ying-jeou. The Hsieh campaign will push institutional
reforms, social welfare, and Taiwan identity issues as major
election themes. Lin said the 2008 race would in essence be
a choice between a pro-Taiwan DPP candidate and a pro-China
KMT candidate. Although either candidate as president would
face the same constraints in dealing with China, Lin
suggested that the KMT's "pro-China" leanings undermine Ma's
electoral chances because voters do not trust him and suspect

TAIPEI 00001999 003 OF 004

he would be too accommodating to the PRC and "cave under

9. (U) Bikhim Hsiao argued that in terms of foreign policy
the KMT is "moving closer" to positions advocated by the DPP
because of the election. For example, she said the KMT has
shifted away from its traditional "one China" policy and is
supporting Taiwan's UN bid and the signing of free trade
agreements with other countries. Nevertheless, Hsiao
suggested that the KMT was moving away from supporting a
"natural" Taiwan-U.S. relationship by questioning the need
for purchasing advanced weapons systems from the U.S. and
arguing that if a better relationship is forged with China
then Taiwan would not have to spend so much on its defense.
Hsiao suggested that China's interference in the upcoming
elections could be significant because most media outlets on
Taiwan are very critical of the DPP administration, have
financial problems, and are suspected of receiving funding
from Beijing. China also has the ability to pressure Taiwan
businessmen invested in the mainland to withhold public and
financial support for the DPP, Hsiao added.

KMT'S Ma Ying-jeou: Beijing Will Act Reasonably

10. (SBU) KMT presidential candidate Ma Ying-jeou told the
USCC delegation that, if elected, he will resume dialogue
with the PRC under the "One China, Different Interpretations"
framework, in order to secure a long-term peace agreement, to
expand cross-Strait economic and cultural links, and to
preserve Taiwan's "international living space." Under his
leadership, Ma continued, Taiwan will not pursue de jure
independence; therefore, Taiwan will no longer be a "flash
point" for conflict between the U.S. and China. Ma explained
that a peace agreement would be conditioned on Beijing's
removal of all missiles aimed at Taiwan. A commissioner
asked Ma whether he would be willing to decrease U.S.-Taiwan
defense cooperation if the PRC demanded it in exchange for
removing the missiles, or other concessions. Peace
discussions with China would not be allowed to adversely
affect U.S.-Taiwan defense cooperation. Taiwan must maintain
a credible deterrent to PRC aggression, he added, which it
cannot do without close U.S. support. How likely is it, one
of the Commissioners asked, that China might stir up
nationalist sentiment against Taiwan in order to distract
attention from a domestic political crisis? Ma replied that,
as long as Taiwan is not pursuing de jure independence,
Beijing would not be able to use Taiwan for that purpose.
China wants peace across the Strait, he continued, because it
wants peace with the U.S. Peace in the region will enable
Beijing to concentrate on resolving its domestic economic and
political crises.

Mainland Affairs Council: KMT Peace Treaty a Non-Starter

11. (SBU) In response to Commissioners' questions about Ma's
proposal for a peace treaty with China, MAC Chairman Chen
Ming-tong dismissed the concept as a campaign stratagem that
would not be taken seriously by Beijing. Chen added that the
relationship between China, Taiwan and the U.S. is really a
matter of global political balance, and not simply about the
relationship across the Strait. Responding to Commission
Chairman Bartholomew's question about the legacy of Chen
Shui-bian's presidency, Chen stated that re-unification with
the mainland was no longer the only political option for
Taiwan. Regarding the 2008 presidential election, Chen said
that if Ma Ying-jeou is elected, Beijing will pressure him to
accept the "1992 Consensus" ("One China, Different
Interpretations"). In Chen's view, Beijing interprets the
1992 Consensus to mean both sides can agree to disagree about
the future resolution of the relationship between Taiwan and
China, while China continues to push for acceptance of the
one China principle. Chen said he believes Hu Jintao has
consolidated his power in Beijing, but still must manage the
hawkish elements within the CCP leadership who might push to
resolve the cross-Strait question by force.

Vice Foreign Minister Chang: China Won't Ease Pressure

12. (SBU) VFM Chang emphasized to the US-China Commission
delegation that China continues to try to squeeze Taiwan's

TAIPEI 00001999 004 OF 004

international "space" and to block Taiwan's participation in
international organizations, such as the World Health
Organization. In response, Vice Chairman Blumenthal inquired
about Taiwan's preparations to deal with a major health
crisis, such as avian influenza or SARS. VFM Chang explained
that Taiwan maintains working-level contacts with disease
control agencies in other countries in the region, but
because of China's objection is denied access to WHO
technical meetings. Regarding Taiwan's security,
Commissioner Feidler inquired whether China's anti-satellite
missile test affects Taiwan. Chang urged the USG to play
close attention to the threat of potential disruption of
communication channels between the US and Taiwan. She also
emphasized the close ties between Taiwan and Japan, as well
as Taiwan's active cultivation of relationships with its
Central American allies.

Minister of National Defense: Taiwan Only Seeking Space to

13. (SBU) Minister of Defense Lee Tian-yu highlighted the
transparency of Taiwan in dealing with the US on defense
matters, and said he hoped the US can separate politics from
military issues in the US-Taiwan defense dialogue. Lee
emphasized that the threat from China lies not only in its
military expansion but also in its economic growth. Whereas
China has a strategic plan for the Asia Pacific region,
Taiwan is only seeking space for survival. He noted that in
previous war games scenarios, Taiwan estimated it could cause
attrition of 18 percent of China's military forces. Lee
expressed his concern that China not underestimate Taiwan's
resolve, as any military conflict would be costly to China in
terms of number of casualties. He noted that China's opening
to the rest of the world is considered by some conservative
members of the Chinese leadership to create unwelcome popular
demand for political change. Lee encouraged the US to allow
more students and visitors from China to travel to the US to
see for themselves what a democratic society is like and thus
increase the demand for political reform in China.

14. (SBU) The delegation visited the Joint Operations
Command Center (JOCC) and were briefed by JOCC commander MG
Chao and saw a demonstration of the Po Sheng command and
control system purchased from the US. The delegation also
toured the operations and intelligence staff sections of the
JOCC. The Commissioners asked about the interoperability of
US and Taiwan forces in the event the US should take military
action in defense of Taiwan, and were told that due to
equipment non-compatibility and lack of US cryptologic
material, US and Taiwan forces do not have interoperability.
This is a matter of US policy and not lack of desire by the
Taiwan military to obtain the necessary equipment.

Counter-Terrorism Director Kuo: No Significant Terrorist

15. (SBU) The Chief Coordinator of the Counterterrorism
Office within the Executive Yuan, Dr. Kuo Lin-wu told the
delegation that Taiwan does not perceive a significant
terrorist threat domestically, although its ability to share
intelligence is limited. Taiwan's ability to respond to a
terrorist attack is untested, as it has never experienced a
real attack, but the primary concerns are about possible
attacks by China on infrastructure and computer and
information systems. Taiwan's focus has been on detection of
materials that could be used in a terrorist attack, and has
cooperated closely with the US and Japan on this as well as
on export control systems. Money laundering continues to be
an issue Taiwan is working to address. Unlike the US
approach to homeland security, Taiwan is not consolidating
agencies, but focusing on enhancing coordination between
agencies. Dr. Kuo stated that Taiwan needs assistance in
information capacity building.

16. (U) This cable was cleared by USCC Chairman Bartholomew.

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