VZCZCXRO9346
PP RUEHCN RUEHGH RUEHVC
DE RUEHIN #1748/01 3530845
ZNY CCCCC ZZH
P 180845Z DEC 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC PRIORITY 0586
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 001748 
 
CODEL 
SIPDIS 
 
H - PLEASE PASS TO REPRESENTATIVE ISSA 
 
E.O. 12958: DECL: 12/16/2038 
TAGS: CH EAGR ECON EFIN ETRD INT PGOV PINR PREL TW
SUBJECT: MA TO CODEL ISSA: CROSS-STRAIT TIES ON RIGHT 
TRACK, BUT CHALLENGES AHEAD 
 
Classified By: AIT Director Stephen M. Young for 
Reasons 1.4(B) and (D). 
 
¶1. (C) Summary. As the new U.S. administration reviews its 
approach on trade issues, Taiwan hopes to work with the U.S. 
to put in place the building blocks for an eventual bilateral 
FTA, Taiwan President Ma told Congressman Darrell Issa during 
a December 17 meeting.  Taiwan appreciates U.S. security 
assistance as it works to improve relations with China, first 
by securing peace and prosperity across the Straits and 
resolve urgent problems while leaving more difficult issues 
for later.  The mainland is sophisticated and pragmatic 
enough to understand this approach.  Improving economic ties 
with the mainland will provide increased investment 
opportunities for both sides and help address the 
deterioration of Taiwan's economic competitiveness caused by 
previous isolationist policies.  Backing away from earlier 
optimism regarding WHO/WHA observership, Ma expressed hope 
only that Taiwan could "make it" to the WHA meeting in May 
¶2009.  Congressman Issa urged President Ma to quickly resolve 
the beef issue.  End Summary. 
 
Trade, Arms Top Wishlist for Congress 
------------------------------------- 
 
¶2. (C) Taiwan President Ma Ying-jeou and Rep. Darrell Issa 
(R-CA) discussed cross-Strait relations, U.S.-Taiwan ties, 
economic issues and prospects for China's political 
development in the course of a cordial one-hour December 17 
meeting.  AIT Director and Taiwan NSC Senior Advisor Yang 
Yung-ming also participated in the meeting.  Asked what 
issues Congress should raise with the new administration, Ma 
said he hoped U.S. policy toward Taiwan would remain 
unchanged.  While he understood USG concerns about fully 
opening the Taiwan market to U.S. beef, Taiwan was still 
dealing with heightened public sensitivities about food 
safety in the aftermath of the melamine scare from the 
mainland.  In Ma's view, the Obama administration would be 
lukewarm to FTAs, so Taiwan was focused instead on putting in 
place "building blocks" that would eventually lead to an FTA. 
 The first such step would be a bilateral investment 
agreement, hopefully followed by a tax-avoidance agreement. 
 
¶3. (C) Ma noted that improvements in the cross-Strait 
relationship were accompanied by some increased risks.  In 
particular, the missile threat is very different from 10 
years ago.  As dialogue with China moves forward, it was 
essential that Taiwan maintain a strong defense capability 
and continue its intelligence sharing relationship with the 
United States.  Taiwan appreciated U.S. support in the form 
of military hardware, as well as technical assistance and 
other "software."  Congressman Issa reassured Ma that the 
U.S. would use its resources to make sure that Taiwan was not 
caught off-guard and would provide the intelligence analysis 
needed to counter any threats that might arise. 
 
WHO/WHA 
------- 
 
¶4. (C) Taiwan stood a better chance than in the past of 
securing some form of participation in the WHA or WHO in 
2009, Ma said.  He pointed to Lien Chan's participation at 
the APEC meeting in Lima, the six agreements signed between 
SEF and ARATS in 2008, and ARATS Chair Chen Yunlin's visit to 
Taiwan as signs of Beijing's growing trust and grounds for 
cautious optimism.  However, despite this good start, 
difficult work remained.  It could not be accomplished 
"overnight."  (Comment: Ma appears to have stepped back 
slightly from his previous statements on his WHO/WHA goals. 
In the past, he called for securing a deal with Beijing on 
WHA observership by the May 2009 meeting.  In this meeting 
and in a recent Washington Post interview, the President said 
only that he hoped to "make it" to the WHA.  End comment.) 
 
Taiwan Economy 
-------------- 
 
¶5. (C) Taiwan had not taken advantage of its position at the 
geographic center of East Asia, Ma said and, by waiting too 
long to improve cross-Strait ties, had closed some doors for 
its economic competitiveness.  The results were clear. 
Kaohsiung harbor, once the world's third-busiest port, had 
dropped to eighth.  The Chen administration's isolationist 
policies had exacerbated Taiwan's trade problems, but the 
business environment on the mainland had also changed and 
 
TAIPEI 00001748  002 OF 003 
 
 
Taiwan was looking at incentives to encourage Taiwan 
businessmen to return home.  For example, Ma said, Kaohsiung 
was adding a new container terminal to capture more 
transshipment traffic. 
 
¶6. (C) Just twenty years ago, Taiwan had to send Buy America 
missions to the U.S. every year to look at California 
oranges, Washington apples, and other products.  Now, said 
Ma, there was no need to educate the Taiwan business 
community on American products.  The U.S.-Taiwan trade 
relationship is vibrant and, because the U.S. is the largest 
consumer market in the world, its financial situation affects 
world markets.  Congressman Issa warned that U.S. orders of 
consumer electronics were likely to drop in the first quarter 
of 2009, affecting Taiwan's exports and economic performance 
in the first half.  However, if the new Obama administration 
takes the fiscal policy measures anticipated, he continued, 
we should see a positive effect in the second half of 2009. 
Congressman Issa also urged President Ma to quickly resolve 
outstanding issues involving U.S. beef. 
 
¶7. (C) Despite the limited global exposure of its banks, Ma 
said, Taiwan still had economic problems, exacerbated by 
years of isolationist policies under the Chen administration. 
 Taiwan would be "getting fiscal," boosting the economy by 
funding infrastructure projects, encouraging increased 
consumption, and providing employment opportunities.  To 
increase consumption, by Chinese New Year the government 
would issue consumer vouchers which could be used to buy 
almost anything.  The administration had also encouraged the 
business community to come up with innovative strategies to 
get people to buy more.  Asked about currency exchanges 
between Taiwan and the mainland, Ma said these had occurred 
for more than six years and, since July 30, they had taken 
place on a nationwide basis despite the lack of a settlement 
agreement.  Currency swaps might be on the agenda of future 
cross-Strait discussions, he noted. 
 
¶8. (C) While some criticized him for "kowtowing" to China, Ma 
said, a significant majority of the people on Taiwan were in 
favor of expanding ties with the mainland.  The agricultural 
sector, in particular, would benefit greatly from decreased 
transportation times and increased markets on the mainland. 
Produce prices were highly volatile due to Taiwan's frequent 
heavy rains and typhoons and its relatively small market.  If 
China could take just a few thousand tons of produce each 
year, it would greatly relieve these pricing pressures. 
 
¶9. (C) Congressman Issa asked if Taiwan was looking at the 
photovoltaic market for the future.  Taiwan's flat screen 
technology could serve as a basis for future photovoltaic 
production.  The synergies were there and California, said 
Issa, would much rather spend its money on green technology 
than purchasing carbon credits. 
 
China's Path to Social and Political Reform? 
-------------------------------------------- 
 
¶10. (C) The gap between rich and poor in Taiwan was quite 
low, Ma said, making it easier to attain social harmony. 
Congressman Issa noted that if there was an equitable 
distribution of opportunities, then wealth would follow. 
Common prosperity was only possible in free societies like 
Taiwan.  The PRC will never make the jump Taiwan has made 
until they have rule of law, said Issa.  Allowing some people 
to get rich first was the only way the mainland could achieve 
such phenomenal economic growth, Ma noted, expressing hope 
for China,s future democratic development.  While the USSR 
seldom sent students to the West, after 1978 China followed 
the Taiwan model and sent hundreds of thousands.  In Taiwan, 
initially only 17 percent of Taiwan students abroad returned. 
 Ten years later, though, 70 percent (including Ma) had done 
so because Taiwan had changed and economic opportunities had 
increased.  As Chinese students return from studying in the 
West, Ma argued, they will bring back the democratic values 
to which they were exposed.  Ma admitted that the process 
would inevitably take longer in a country as vast as China. 
 
¶11. (C) If prosperity could spread from the few coastal 
cities, such as Shanghai and Hong Kong, to the rest of China, 
Congressman Issa asked, could change follow?  A few years 
ago, Ma noted, Beijing had a plan to develop the northeast 
hinterland, but there was not enough incentive for coastal 
companies to move.  There needed to be more investment in 
infrastructure, expanding rail lines and highways.  The 
 
TAIPEI 00001748  003 OF 003 
 
 
current global economic situation, however, would probably 
delay this type of investment. 
 
¶12. (U) Delegation has not cleared. 
SYOUNG