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Cablegate: Cross-Strait Trade and Economics Surging Forward at Cifit

VZCZCXRO7721
RR RUEHCN RUEHGH
DE RUEHGZ #0574/01 2730840
ZNR UUUUU ZZH
R 300840Z SEP 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0966
INFO RUEHGZ/CHINA POSTS COLLECTIVE 0276
RUEHBJ/AMEMBASSY BEIJING 0758
RUEHCN/AMCONSUL CHENGDU 0215
RUEHHK/AMCONSUL HONG KONG 0285
RUEHGH/AMCONSUL SHANGHAI 0214
RUEHSH/AMCONSUL SHENYANG 0224
RUEHIN/AIT TAIPEI 0206
RUEHGV/USMISSION GENEVA 0008
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0151
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC 0023
RHEHAAA/NSC WASHINGTON DC 0065
RUEAIIA/CIA WASHDC 0263
RUEKJCS/DIA WASHDC 0259

UNCLAS SECTION 01 OF 02 GUANGZHOU 000574

SENSITIVE
SIPDIS

State for EAP/CM; EEB/CIP; EEB/TPP; INR/EAP; S/P
USTR for China Office; IPR Office
NSC for JBader, JLoi


E.O. 12958: N/A
TAGS: ETRD PREL EINV KIPR ECON PGOV TW CH
SUBJECT: Cross-Strait Trade and Economics Surging Forward at CIFIT
Conference

REF: A) GUANGZHOU 546, B) BEIJING 2574, C) BEIJING 2534, D) AIT
TAIPEI 1076

(U) This document is sensitive but unclassified. Please protect
accordingly. Not for release outside U.S. government channels. Not
for internet publication.

1. (SBU) Summary and comment: Cross-Strait economic cooperation was
a hot topic at the 13th annual China International Fair for
Investment and Trade (CIFIT) Conference earlier this month in
Xiamen. A large group of Taiwan business leaders, academics and
working-level officials participated in a half-day seminar organized
by the PRC's Ministry of Commerce (MOFCOM) and Taiwan Affairs Office
(TAO) on how to establish mechanisms to promote cross-Strait trade
and investment. Most of the public discussions focused on the
Economic Cooperation Framework Agreement (ECFA) agreement currently
under discussion between the PRC and Taiwan. Participant comments
from both Chinese and Taiwan speakers were almost all positive,
conveying a sense of inevitability regarding increased economic
cooperation and the signing of ECFA. Among the few negative
comments, one participant highlighted PRC concerns about third
countries possibly using Taiwan as a duty free entry to mainland
markets if ECFA were fully implemented, and a Taiwan business leader
called for improved rule of law in the mainland, especially to
protect intellectual property rights of Taiwan investors.

2. (SBU) Comment continued: Although no Chinese officials said so
directly, observers noted several symbolic differences from last
year's CIFIT Conference including the absence of a high-level Taiwan
official at the opening ceremonies and a relatively lower profile
for the Taiwan pavilion in the CIFIT exhibition hall. These
differences might indicate that despite robust working-level
engagement on purely economic issues, political-level steps forward
are still affected by external factors such as the Dalai Lama's
Taiwan visit one week before CIFIT. End summary and comment.

Cross-Strait Trade and Investment Full-Steam Ahead
--------------------------------------------- -----

3. (U) MOFCOM Vice Minister Jiang Zengwei opened the Cross-Strait
Economic Cooperation and Development Forum by reviewing recent
progress, including the economic evolution from three "big links" to
further opening of cross-Strait direct investment. He told an
audience of more than 200 people that "peaceful development" had
become the theme of cross-Strait relations. Jiang said mainland
buying missions who had recently visited Taiwan and purchased
billions of dollars in Taiwan-produced goods were good for both
sides, and he said that institutionalizing the mechanism to
facilitate even greater economic activity would be beneficial.
Director Liu Xueqin of MOFCOM-affiliated Chinese Academy of
International Trade and Economic Cooperation offered a variety of
economic statistics and analysis to support completion of ECFA. As
if anticipating criticism that ECFA might benefit Taiwan more than
the mainland, Director Liu said that early and complete
implementation of the agreement would allow larger scale mainland
purchases of Taiwan-produced goods and services, giving Taiwan
businesses the financial boost they need to further increase direct
investment on the mainland. Liu said that in addition to the
benefits of consuming high quality Taiwan products, mainland firms
would benefit from increased access to technology and expertise
developed on the island, and ECFA-related growth would be
self-reinforcing.

4. (U) Taiwan business leaders echoed MOFCOM's positive assessment
and called for early completion of ECFA as the best way to move
forward. Wang Zhigang, Chair of Taipei World Trade Center, said
that Taiwan investors are well-positioned to participate in the
mainland's industrial upgrading. Wang told the audience that Taipei
World Trade Center is planning product promotion fairs in 50 second-
and third-tier mainland cities in order to take advantage of
ECFA-induced market liberalization. Chair Wang Wenyuan of the

GUANGZHOU 00000574 002 OF 002


Taiwan Textile Promotion Association explained that the mainland
textile industry's advantages in natural fibers and Taiwan's
strength in synthetic fibers are complementary and will yield
unprecedented opportunities for both sides once ECFA is signed.

Some Sensitivities Persist on Each Side
---------------------------------------

5. (SBU) Buried in the middle of her otherwise optimistic speech,
MOFCOM Trade Academy Director Liu Xueqin did raise a sober warning
that both the PRC and Taiwan must carefully respect trade-related
sensitivities that would inevitably arise from increased
liberalization. Specifically, Liu cautioned that full
implementation of ECFA would create a virtually duty-free market
between the PRC and Taiwan, which third countries might try to
exploit in their efforts to penetrate mainland markets. Although
Liu couched her comments in the language of WTO compliance and trade
liberalization, her warning was clear - Taiwan can not allow third
countries to skirt the PRC's import tariff regime by establishing
separate agreements or transshipping products through Taiwan for
sale on the mainland with reduced or waived duties.

6. (SBU) Director Huang Fuxiong of the Taiwan Industrial and
Commercial Promotion Association also detoured from otherwise upbeat
remarks to call for improved rule of law and increased regulatory
transparency on the mainland, especially relating to protection of
intellectual property rights (IPR) for Taiwan investors. Huang said
that without such improvements, investors would hesitate to
introduce new technology to the mainland market, regardless of how
open the market was. He said that improvements could already be
seen across the mainland, but problems still remained that would
require efforts from Chinese officials at every level of government
and across many bodies including both the enforcement departments
and the judicial system.

Symbolism Still Appears Important at Higher Levels
--------------------------------------------- -

7. (SBU) Despite all of the positive discussion of cross-Strait
economic cooperation, CIFIT opening ceremonies this year were
conspicuous in their absence of a high-level Taiwan leader. This
contrasted with last year's participation of Legislative Yuan Vice
President Tseng Yung-Chuan, who joined Vice Premier Wang Qishan and
former Vice Premier Wu Yi for opening ceremonies at the 12th annual
CIFIT conference in September 2008. In addition, this year's Taiwan
pavilion occupied a relatively lower profile in the exhibition hall
when compared to its central position at last year's exhibition.
Although no Chinese officials directly acknowledged the symbolism,
MOFCOM Vice Minister Jiang Zengwei did use his opening of the
Cross-Strait Economic Cooperation and Development Forum to note that
difficulties caused by the Dalai Lama visit and other political
irritants should be recognized and avoided.

GOLDBECK

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