This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 000008 
 
SIPDIS 
 
E.O. 12958: DECL: 01/03/2015 
TAGS: CH PGOV PREL TW
SUBJECT: CHEN SHUI-BIAN APPEALS TO BASE, CONFRONTS 
OPPOSITION IN NEW YEARS DAY SPEECH 
 
REF: TAIPEI 4926 
 
Classified By: AIT Director Douglas Paal, Reasons: 1.4 (b/d) 
 
¶1.  (C) Summary.  President Chen Shui-bian's New Years Day 
speech surprised Taiwan with its harsh line toward the 
opposition Kuomintang party (KMT) and its reiteration of old 
ideas and charges.  Political leaders across the blue-green 
spectrum had expected a more moderate, conciliatory speech in 
the wake of the ruling Democratic Progressive Party (DPP) 
December 3 election loss and President Chen's month-long 
"self-examination" sequestration and after numerous promises 
that the speech would be "very important."  Following so 
closely on the heels of the DPP's December 20 legislative 
"surprise attack" on the KMT (Ref A), however, Chen's speech 
will only deepen the mutual distrust and antagonism between 
the Green and Blue coalitions and continue legislative 
gridlock.  The unanswered question is whether and to what 
extent Beijing will signal its displeasure at Chen's saber 
rattling coolly or more emotionally.  End Summary. 
 
¶2.  (C) In his 2006 New Year's address, Taiwan President Chen 
Shui-bian, departing from past practice of offering moderate 
and reassuring remarks on such occasions, chose this time to 
stress controversial themes such as the need to strengthen 
Taiwan identity, PRC plans to "annex" Taiwan, a timetable to 
develop and hold a referendum on a new Taiwan constitution, 
and the need to track down the opposition Kuomintang's 
ill-gotten party assets.  Chen's address had been touted as a 
major new policy statement, and many DPP political leaders, 
in addition to pan-Blue politicians and the general public, 
were clearly surprised by both the content and the 
confrontational tone of Chen's speech. 
 
¶3.  (C) Over the next day and a half after Chen made his 
speech, a parade of government officials went before the 
press to clarify Chen's statement and to ensure the public 
that there would be no radical changes.  Presidential Deputy 
Secretary-General James Huang told the press that President 
 
SIPDIS 
Chen's cross-Strait policy "has not changed," but explained 
that in the past Taiwan policy had focused to heavily on 
"opening" and not enough on "management."  Economic Minister 
Ho Mei-yueh insisted that Chen's formulation of "Pro-active 
Management, Effective Opening" would not mean a retrenchment 
or tightening of cross-Strait policy or a resurrection of Lee 
Teng-hui's "Go Slow" policy. 
 
Greens Surprised 
---------------- 
 
¶4.  (C) Nevertheless, many DPP political leaders were clearly 
caught by surprise by the content and tenor of Chen's speech. 
 An uncomfortable Mainland Affairs Council (MAC) Chairman 
Joseph Wu acknowledged to hostile pan-Blue legislators 
yesterday, January 2, that he had not been informed of 
President Chen's decision to reverse the earlier "Pro-Active 
Opening, Effective Management" formulation.  DPP candidate 
for Taipei Mayor and former legislator Shen Fu-hsiung told 
AIT that the rush of government officials to explain and 
defend Chen's New Year speech showed both the lack of 
coordination within the government and the limited scope of 
outside advice Chen is receiving. 
 
¶5.  (C) DPP Legislator and New Tide faction member Shen 
Fa-hui told AIT that he was disappointed with Chen's speech, 
which defined the party's December 3 defeat as the result of 
not adhering tightly enough to the party's fundamental 
values, including Taiwan independence.  Chen, Shen suggested, 
is trying to stop the growing criticism of himself within the 
DPP, please the party's fundamentalists, and thereby 
stabilize his power in the party.  Such a move, Shen 
continued, might help Chen but would not help the party.  He 
predicted that Chen's speech will stop discussion and change 
within the DPP, which should be having a policy debate in the 
run up to the 2008 presidential election.  The speech, he 
added, will also give the public the impression that the DPP 
is not willing to change and will limit the positions that 
potential DPP presidential candidates can take. 
 
¶6.  (C) Shen Fa-hui noted that there are two theories 
circulating within the DPP about Chen's statements on 
cross-Strait policy.  The predominant view is that Chen's 
statement signals his intention to tighten rather than open 
cross-Strait relations.  The alternative minority view is 
that Chen wants to stabilize his base before further opening 
of cross-Strait economic relations.  While the New Tide 
faction has publicly expressed its view on the need for 
Taiwan to further open cross-Strait economic links, he 
explained, it has been careful not to criticize Chen's speech 
in order to prevent factional struggle within the DPP. 
 
¶7.  (C).  Shen Fu-hsiung told AIT that he "perplexed" why 
Chen made his speech which, he lamented, was "totally 
illogical."  In the first place, he said, it was very 
inappropriate to criticize Ma Ying-jeou, particularly with Ma 
sitting right there, as this will only further alienate the 
KMT and prevent needed cooperation.  Shen stated that the 
speech had been particularly disappointing after the numerous 
promises last week from Chen and his advisors that this would 
be very important speech, raising expectations.  After nearly 
a month of seclusion and re-thinking and after all these 
promises, for Chen to now come out with such a "simplistic" 
set of policy options was particularly disappointing to 
moderate DPP members, Shen concluded. 
 
KMT Responds Negatively 
----------------------- 
 
¶8.  (C) KMT legislator and Defense Committee member Su Chi 
told AIT that the general KMT reaction to Chen's speech was 
very negative, and that most KMT leaders believe a 
beleaguered Chen, shaken by the DPP's loss in December's 
"three-in-one" elections, chose to consolidate his deep-Green 
support base in order to make himself feel "more secure."  Su 
said Chen's attacks on the KMT have soured the KMT caucus 
against any cooperation with their DPP counterparts, at least 
for the short term.  Su added that KMT Legislative Yuan (LY) 
Speaker Wang Jin-pyng is particularly upset, because he had 
hoped to play an important role in expanding cross-Strait 
links, whereas Chen's decision to tighten government 
oversight of cross-Strait relations and investment will 
narrow the opportunity for cross-Strait progress, and limit 
Wang's potential role. 
 
¶9.  Su also noted that there is little chance that a draft 
constitution promised by Chen would receive the three-fourths 
LY majority needed to put it on a referendum ballot, though 
it only takes one-fourth of the LY (55 votes under its 
present configuration) to put the issue on the agenda for 
debate.  Thus, if Chen can secure 55 votes in the LY, said 
Su, he can use the constitutional debate to create a 
political firestorm within Taiwan and to provoke reactions 
from the PRC.  Su surmised that Chen may be angling to play 
the China card during the 2008 presidential election, or to 
position himself after he leaves office to replace Lee 
Teng-hui as the godfather of Taiwan independence.  While Chen 
may succeed in doing either of these, Su noted, he is 
dragging the DPP down in the process, which explains why the 
DPP's New Tide faction has become more openly critical of 
Chen in recent months.  Su added that, while he personally 
does not support this view, some within the KMT have 
suggested the KMT should sit back as Chen continues to 
escalate his rhetoric, leaving it to the U.S. and/or China to 
rein Chen in, as they did in November 2003. 
 
¶10.  (C) National Taiwan University political science 
professor and former KMT member of the Mainland Affairs 
Council (MAC) Bau Tzong-ho told AIT that many in the academic 
community believe Chen's reversion to "fundamental" Green 
positions was largely motivated by frustration over the 
limited achievements of his administration.  Bau said that 
Chen tried to become more moderate following his 2004 
re-election, but, since China has and will continue to ignore 
the DPP government until Chen accepts the "one country, two 
systems" framework, Chen has little hope of improving 
cross-Strait relations during his remaining tenure.  Bau 
mused that Chen is uncomfortable playing the moderate, and 
since he cannot accept the "One China" framework without 
alienating his core supporters, he has chosen to revert to 
his deep-Green roots, where he is ideologically most 
comfortable. 
 
¶11.  (C) Bau opined that Chen may also be trying to 
manipulate the China issue again to increase the DPP's 
chances in the 2008 presidential race.  Chen's popularity is 
at an all-time low, Bau noted, and the DPP administration is 
widely viewed as corrupt and ineffective.  Barring a 
spectacular comeback during his last two years, no Pan-Green 
presidential candidate would stand a chance running on Chen's 
presidential record.  However, Bau continued, if Chen can get 
voters to focus on the China threat instead of his own 
record, the DPP might have a chance at holding on to the 
presidency.  Chen could not exploit the "China issue" while 
cross-Strait relations were stable and improving, Bau told 
AIT, so Chen may be acting to darken Taiwan's views of the 
PRC.  For example, Bau said, Chen must know a constitutional 
referendum has little chance of getting past the Pan-Blue 
dominated LY, and therefore must have raised the prospect of 
Taiwan independence to antagonize China.  Bau acknowledged 
that this divisive strategy had worked for Chen in the past, 
but expressed doubts that it would work as well again. 
 
Comment:  Why and Whither? 
-------------------------- 
 
¶12.  (C) The big question in Taipei is why Chen made such a 
confrontational speech on the heels of the DPP's heavy 
election loss to the KMT on December 3.  Many KMT critics 
argue that Chen is just recognizing the reality that he 
cannot compete on the moderate stage with the Ma 
Ying-jeou-led KMT, has given up on his oft-reported hope to 
establish a "legacy," and is now turning back to his 
fundamentalist deep-Green base.  All but the deepest Green 
political commentators over the past two days have made the 
case that Chen is returning to his "deep green" 
pro-independence fundamentalist base and consolidating its 
support.  Another way of reading Chen and his speech is that 
neither really matters all that much.  Chen has from time to 
time veered into radical, hard line statements only to follow 
up with inaction and little change.  The steep 86-point 
Taiwan Stock Exchange (Taiex) decline on January 2, Shen 
Fu-hsiung noted, lasted only one day.  By noon on January 3, 
the decline had just as rapidly regained its previous day's 
losses, indicating, Shen Fu-hsiung argued, that many in 
Taiwan "do not take President Chen seriously anymore." 
 
¶13.  (C) Following so closely on the heels of the DPP's 
December 20 legislative "surprise attack" on the Defense 
Procurement Special Budget (Ref A), however, Chen's speech 
will only deepen the mutual distrust and antagonism between 
the Green and Blue coalitions.  Restitution of MAC funding, 
which was deeply cut in November, will now be difficult. 
Movement on the Defense Procurement Special Budget will also 
be difficult, but the possibility of some kind of action on 
P-3C anti-submarine surveillance aircraft appears to remain 
alive.  The renewed and heightened inter-party hostility 
could also change the KMT's reticence toward the 
"Cross-Strait Peace Promotion Bill" of its pan-Blue coalition 
partner, People First Party (PFP), which would shift much of 
the government's authority over cross-Strait relations to the 
LY and its political free-for-all. 
 
¶14.  (C) While Chen's domestic audiences have responded to 
his speech, Beijing has thus far remained silent.  Clearly 
the speech will reinforce the leadership's suspicions of Chen 
and his government.  Any hope of progress on cross-Strait 
official dialogue, or international space for Taiwan, already 
extremely small, has been still further reduced.  The 
immediate question is whether Beijing will signal its 
displeasure by imposing additional constraints on 
improvements in econmic relations.  Beijing would be wiser 
coolly to judge Chen to be weakened and on his way out, and 
continue the moderation of its rhetoric.  This has, up to 
now, reduced the temperature of cross-Strait politics and 
clearly frustrated President Chen. 
 
 
PAAL