VZCZCXRO5772
RR RUEHGH
DE RUEHIN #1901/01 1530905
ZNR UUUUU ZZH
R 020905Z JUN 06
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 0499
INFO RUEHBK/AMEMBASSY BANGKOK 3290
RUEHBJ/AMEMBASSY BEIJING 5260
RUEHBY/AMEMBASSY CANBERRA 4211
RUEHHI/AMEMBASSY HANOI 3076
RUEHJA/AMEMBASSY JAKARTA 3868
RUEHKL/AMEMBASSY KUALA LUMPUR 3505
RUEHML/AMEMBASSY MANILA 9732
RUEHUL/AMEMBASSY SEOUL 7857
RUEHGP/AMEMBASSY SINGAPORE 6467
RUEHKO/AMEMBASSY TOKYO 7745
RUEHWL/AMEMBASSY WELLINGTON 1504
RUEHGZ/AMCONSUL GUANGZHOU 9359
RUEHHK/AMCONSUL HONG KONG 6479
RUEHGH/AMCONSUL SHANGHAI 0175
RUEHC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 TAIPEI 001901 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR 
STATE FOR EAP/TC, 
USTR FOR STRATFORD AND ALTBACH, 
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON 
USDA FOR FAS/ITP/SHEIKH 
TREASURY FOR OASIA/LMOGHTADER 
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS, 
AND SAN FRANCISCO FRB/TERESA CURRAN 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN EINV TW
SUBJECT: NEXT STEPS FOR TAIWAN TIFA 
 
REF: A. TAIPEI 1803 
 
     ¶B. TAIPEI 1872 
     ¶C. TAIPEI 1873 
     ¶D. TAIPEI 1874 
     ¶E. TAIPEI 1875 
     ¶F. TAIPEI 1876 
     ¶G. TAIPEI 1877 
     ¶H. TAIPEI 1801 
     ¶I. TAIPEI 1837 
     ¶J. TAIPEI 1836 
     ¶K. TAIPEI 1840 
     ¶L. TAIPEI 1843 
     ¶M. TAIPEI 1831 
 
¶1.  (SBU) Summary and introduction: The fifth round of 
US-Taiwan Trade and Investment Framework Agreement (TIFA) 
talks concluded in Taipei on May 26.  Deputy USTR Karan 
Bhatia and Taiwan's Deputy Economic Minister Steve Chen 
jointly presided over the talks.  Reftels report on each 
session of the talks (refs A - G) as well as side meetings 
held on the margins of the talks (refs H - M).  Septel 
summarizes all of the public and private outcomes of the 
talks.  While the talks covered a wide range of topics 
important to US business interests, USG agencies should focus 
their immediate efforts on implementing the agreed outcomes 
on agricultural trade, intellectual property and 
pharmaceutical pricing.  In addition, AIT and TECRO should 
begin preparing for further discussions on establishing 
bilateral tax and investment agreements.  End Summary and 
introduction. 
 
Agricultural Trade 
------------------ 
 
¶2.  (SBU) The U.S.achieved its primary goal in the 
agricultural area by gaining agreement to establish a 
Consultative Committee on Agriculture (CCA).  A CCA will 
provide a high-level framework to address issues impacting 
the bilateral agricultural relationship and develop/enhance 
programs that support that relationship.  AIT views the CCA 
as a mechanism to create a political commitment to resolve 
technical market access issues and to address concerns over 
Taiwan,s agriculture trade policies in the WTO and 
elsewhere.   Taiwan is currently reviewing examples of a 
Memorandum of Understanding and Terms of Reference for a CCA 
and will provide its comments to AIT.  These documents, when 
negotiated and signed, will establish the CCA.  AIT's 
Agriculture Section will take the lead in the initial 
discussion.  We hope to complete this process relatively 
quickly; certainly by the end of this year. 
 
IPR 
--- 
¶3.  (SBU) Prior to the talks, both sides developed their 
independent plans to enhance enforcement of IPR.  The U.S. 
agreed to work off of the Taiwan IPR Action Plan with its 14 
separate points on issues ranging from combating 
internet-based piracy to enhancing copyright enforcement on 
university campuses and computer systems to establishing the 
IPR court and enhanced protection of patented 
pharmaceuticals.  These 14 items, along with additional 
concerns became the private outcomes of the TIFA session.  In 
addition, the U.S. gained Taiwan agreement to hold regular 
talks on IPR issues every six months.  The next set of IPR 
talks should be held before the end of this year and include 
 
TAIPEI 00001901  002 OF 002 
 
 
discussion of enhanced efforts to combat sales of counterfeit 
drugs by pharmacies.  AIT will work with U.S. agencies and 
TECRO to establish dates and set the agenda for the next 
round of IPR talks. 
 
Pharmaceutical Pricing 
---------------------- 
 
¶4.  (SBU) Taiwan's price/volume survey system for regulating 
pharmaceutical prices turned out to be the most contentious 
issue of the talks.  In the end, Taiwan agreed to hold off 
announcing any price cuts in pharmaceuticals to allow for 
consultations to be held between July 1 and September 30. 
These consultations are aimed at providing an opportunity for 
U.S. firms to explore and try to resolve their concerns over 
the methodology of Taiwan's price-volume survey that 
determines price cuts mandated by the authorities.  AIT will 
take the lead in discussions with Taiwan's Bureau of National 
Health Insurance (BNHI) to fix dates for the consultations 
and seek any background information required to prepare for 
them.  We recommend that Washington agencies consult with 
U.S. pharmaceutical manufacturers to secure their commitment 
to participate actively in such talks and seek their views on 
preferred dates. 
 
Tax & Investment Agreements 
--------------------------- 
 
¶5.  (SBU) Via Digital Video Conference (DVC), the two sides 
discussed the possibility of entering into talks to conclude 
agreements between AIT and TECRO on Avoidance of Double 
Taxation and Investment.  We agreed that further discussions 
on both issues would be desirable.  There are important 
technical legal issues concerning the mechanism to implement 
a tax agreement, but AIT understands from the U.S. business 
community in Taipei that there are real and immediate 
benefits that would accrue to U.S. firms once a tax agreement 
is implemented.  One firm told us that it believes a tax 
agreement would generate a 10% saving in its cost structure. 
This substantial economic benefit suggests that Washington 
agencies should continue exploring appropriate mechanisms to 
implement a tax agreement and continue discussion with Taiwan 
on setting dates for further discussions.  AIT will seek 
further views from Taiwan's Ministry of Finance on pursuing 
tax and investment agreements.  Taiwan reports that it has 16 
tax agreements, including with Australia, New Zealand, 
Malaysia, the UK and several other EU members.  A complete 
list and a statement of Taiwan's policies on Avoidance of 
Double Taxation agreements can be viewed at 
www.dot.gov.tw/en/display/show.asp?id=1123#se c2. 
YOUNG