VZCZCXRO1080
RR RUEHGH
DE RUEHIN #0134/01 0180844
ZNR UUUUU ZZH
R 180844Z JAN 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 3777
INFO RUEHBJ/AMEMBASSY BEIJING 6230
RUEHUL/AMEMBASSY SEOUL 8396
RUEHKO/AMEMBASSY TOKYO 8395
RUEHGP/AMEMBASSY SINGAPORE 6773
RUEHKL/AMEMBASSY KUALA LUMPUR 3653
RUEHML/AMEMBASSY MANILA 9916
RUEHHI/AMEMBASSY HANOI 3209
RUEHHK/AMCONSUL HONG KONG 7459
RUEHGZ/AMCONSUL GUANGZHOU 9907
RUEHGH/AMCONSUL SHANGHAI 0728
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/USDA FAS WASHDC 2603

UNCLAS SECTION 01 OF 04 TAIPEI 000134 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS TO AIT/W 
STATE FOR EAP/RSP/TC, EAP/EP and EB/TPP/MTA/IPC 
STATE PASS to USTR for BOLLYKY and ALTBACH, STRATFORD 
USDOC for 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON 
USDOC for USPTO Gin and Browning and Snydor 
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT 
FAS FOR OCRA/Smith, Mireles 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EIND EAGR KIPR TW
SUBJECT: Taiwan TIFA:  Board of Foreign Trade Passes the Buck on WTO 
GPA; Progress on Other Issues 
 
REF: TAIPEI 2962 
 
Summary 
------- 
¶1. On December 17 Assistant USTR Timothy Stratford and Deputy 
Assistant USTR Eric Altbach reviewed the U.S. - Taiwan Trade 
Investment Framework Agreement (TIFA) agenda with Bureau of Foreign 
Trade (BOFT) Director General Franco Huang and relevant government 
agencies.  Stratford made a strong case for Taiwan acceding to the 
WTO GPA and accepting current footnote language.  Huang stated that 
current footnote language was unacceptable to Taiwan at this time. 
Taiwan would, however, be prepared to negotiate a bilateral GPA with 
the US.   Stratford and Huang also reviewed the status other TIFA 
items including possible agreements on investment and taxes. 
Stratford noted that Tyco was preparing to file a 301 petition and 
urged Taiwan to settle the case quickly.  Stratford also urged 
Taiwan end the ban on medical devices manufactured in China, and 
open up Taiwan's market to chiropractors.  Meetings with other 
officials are reported septels.  End summary. 
 
Current Language Unacceptable for WTO GPA Accession 
--------------------------------------------- ------ 
¶2. Stratford opened the meeting by urging Taiwan to move ahead with 
its accession to the WTO Government Procurement Agreement.  He 
stated that the language proposed by the US together with the EU was 
neutral, and the benefits of accession far outweigh any negatives. 
Taiwan, Stratford noted, had made a commitment to accede to the GPA 
and had already done a great deal work negotiating its accession. 
The U.S. hopes that Taiwan will not be isolated and supports 
Taiwan's membership in international organizations where sovereignty 
is not a requirement.  Acceding to the GPA will improve Taiwan's 
international standing. 
 
¶3.  Stratford said that over time it may become more difficult for 
Taiwan to accede to the GPA.  In the future, when China is a member 
or is actively negotiating its own accession, the dynamic of the 
committee may change and requirements for Taiwan may become more 
onerous.  The current situation may be Taiwan's window of 
opportunity.  Stratford raised the example of Taiwan's decision not 
to continue it's participation in the United Nations, noting that 
sometimes walking away from opportunities have long-term 
ramifications. 
 
¶4.  The underlying principles of the GPA are worth enjoying and 
embracing, he continued.  It would provide advantages for Taiwan's 
own industries in international government competitions and make 
government procurement in Taiwan more efficient and transparent. 
Our greatest hope, he said, is for Taiwan to join the WTO GPA, but 
if Taiwan is not ready, the U.S. is ready to launch a bilateral GPA 
negotiation as an alternative.  The U.S. would have special 
advantages under a bilateral arrangement, Stratford noted, but we 
are trying to think broadly, beyond our own commercial interests. 
 
¶5.  In conclusion, AUSTR stated that his purpose was to get a clear 
indication of Taiwan's intentions in this regard.  If Taiwan is not 
interested, USTR is extremely busy and will focus on other matters. 
 
The Nomenclature Problem is a Problem 
------------------------------------- 
¶6.  Director General Huang acknowledged that Taiwan had committed to 
acceding to the WTO GPA and had finished bilateral negotiations with 
GPA members.  He thanked both the U.S. and EU for the support that 
they have provided to Taiwan's accession bid.  He went on to state 
however that Taiwan had serious problems with deal that Taiwan would 
have to accept to join the agreement.  The first decision taken by 
the committee that refers specifically to "customs territories" is a 
problem for Taiwan and current proposed footnote language, which 
refers to the decision or to prior decisions, is not acceptable to 
Taiwan at this time. 
 
¶7.  Stratford noted that this issue had been discussed for many 
 
TAIPEI 00000134  002 OF 004 
 
 
months and that the language of the footnote, while probably not 
ideal for Taiwan, was neutral.  He hoped Taiwan could agree on the 
language and move to accede to the WTO GPA quickly.  Huang replied 
that acceding to the WTO GPA was a priority for Taiwan, but that it 
could not accept the language as it now stands.  He claimed that the 
Ministry of Foreign Affairs rejects the current language and has not 
proposed alternative language.  He stated that it would probably 
take "several weeks" to receive an answer from MOFA as to whether 
other language would be acceptable.  The Vice Premier would also 
need to be involved in the process. 
 
¶8. Huang reassured Stratford that there were no concerns beyond the 
nomenclature issue blocking Taiwan's action on GPA.  Stratford 
closed this topic by stating that he wanted to be frank so that 
Taiwan could understand the situation we were in.  He stated that if 
any of the US logic was faulty to please correct him, but that logic 
seems clear for Taiwan's WTO GPA accession.  Huang offered to push 
MOFA to respond quickly with any possible alternative language that 
would be acceptable in a footnote. 
 
Bilateral Tax Agreement 
----------------------- 
¶9.  Moving on the possible bilateral tax agreement, Stratford noted 
that experts at the State Department and the U.S. Treasury were 
studying possible modalities for implementing any such agreement. 
Would a new law need to be passed by both houses of Congress?  Which 
committees have jurisdiction?  Exploring these issues has resulted 
in a delay on our side, but we are interested to move ahead on tax 
and investment agreements.  If new tax legislation is required to 
implement a tax agreement, the administration may be reluctant to 
present such legislation to a congress which could use that as a 
vehicle to amend the U.S. tax code.  Congressional leadership 
changes can also slow down the legislative process. 
 
¶10.  The U.S. Treasury is reluctant to move ahead on a tax agreement 
until an appropriate modality has been worked out.  We are sorry 
that our complexities slow down the process, he said.  Informal 
bilateral discussions might be useful and preliminary talks might be 
possible early next year, but the US side is not yet ready.  More 
interagency consultations are necessary. 
 
¶11.  Taiwan Ministry of Finance officials noted that Taiwan's 
current tax treaties follow the OECD model, but they understand the 
U.S. treaty model is different.  They asked for a draft agreement to 
informally discuss, noting that it might take some time to study. 
 
Bilateral Investment Agreement 
------------------------------ 
¶12.  Berton B.C. Chiu, Director General of the Department of 
Investment Services, MOEA led the discussion for Taiwan on the 
investment agreement.  His office had reviewed the model agreement 
provided by USTR and the model agreement was now moving through the 
interagency process.  He stated Taiwan had some technical questions 
about the text and anticipated that the interagency review would be 
completed after the end of the month.  He agreed with AUSTR 
Stratford to forward a non-paper of Taiwan's comments by mid January 
and then schedule a digital video conference to discuss next steps. 
 
¶13.  Would any bilateral investment agreement need to be submitted 
to the U.S. Congress, he asked.  Stratford replied that some form of 
Congressional approval would be required, but that the process would 
be easier than for a tax bill.  Chiu asked what sectors might be 
covered in an agreement, noting that any agreement might have WTO 
implications.  Stratford responded that the U.S. approach would be 
to have a negative list with virtually every sector covered. 
Altbach noted that there is no obligation under the WTO to extend 
MFN status to third countries for investment preferences negotiated 
in a bilateral agreement. 
 
¶14.  Stratford noted that during the just-completed Strategic 
Economic Dialogue with China both sides had agreed to set up an 
 
TAIPEI 00000134  003 OF 004 
 
 
exploratory group to study a possible U.S.-China bilateral 
investment agreement.  On the US side State and USTR lead.  Commerce 
leads on the China side.  China had wanted to launch negotiations 
and conclude an agreement in six months, but the US suggested at 
this stage it would be best begin more slowly to explore the 
feasibility of such an agreement.  The U.S. would welcome more 
Chinese direct investment. 
 
Consultative Committee on Agriculture 
------------------------------------- 
¶15.  Huang advised that Taiwan's Council on Agriculture (OA) was not 
opposed to establishing Consultative Committee on Agriculture (CCA), 
but preferred phytosanitary and sanitary issues to be covered in the 
technical bilateral working group which is already established. 
Stratford replied that it would be useful to discuss these issues 
via both mechanisms - at the working level in the technical 
bilaterals, and at a higher policy level in the CCA.  He noted that 
he would meet with COA the following day where he would discuss the 
issue further. (Note:  The Deputy Minister of Agriculture LEE 
Jen-chyuan confirmed that COA agreed to include 
sanitary/phytosanitary issues into the CCA and welcomed 
participation by the Department of Health.  Details of this meeting 
reported septel.  End note) 
 
MOU on Transshipment of Textiles 
-------------------------------- 
¶16.  AUSTR Stratford stated that the MOU on Textile Transshipment 
was in the final interagency clearance process and he expected that 
it would be released quickly. 
 
The IPR Dialogue 
---------------- 
¶17.  Highlighting the importance of our IPR dialogue, Stratford 
noted that earlier that day he had met with the Taiwan Intellectual 
Property Office and had reviewed the status of several important 
pieces of pending IPR legislation.  He asked the Board of Foreign 
Trade and the Ministry of Economic Affairs to actively support this 
legislation which covers regulation of Peer-to-peer file sharing, 
Internet Service Provider liability, and the creation of an 
intellectual property court. 
 
¶18.  He noted industry concerns that the ISP legislation was still 
too vague on take down provisions.  The US recommended that details 
be spelled out in the law.  Regarding the IP court legislation, we 
were pleased with the progress in this area, but since the law 
envisioned criminal cases to appear before district courts, the U.S. 
hoped for training and resources to be allocated to prosecutors and 
judges at the district level that will improve their capacity for 
handling IPR cases. 
 
¶19.  Stratford also noted that he had called on the Minister of 
Education to press the Ministry to take more aggressive action to 
deal with IPR protection on TANet and illegal textbook 
photo-copying. 
 
Pharmaceuticals 
--------------- 
¶20.  Turning to the pharmaceutical and drug pricing issue, Stratford 
noted that he would call on the Vice Minister of Health the 
following day and hoped to move ahead with establishing working 
groups to tackle some of the long term reform goals that the U.S. 
and Taiwan had talked about for some time.  Director General Huang 
noted that the new president of Bureau of National Health Insurance 
was starting work that very day and was a former classmate. 
 
Individual Cases 
---------------- 
¶21.  Commencing a review of some specific trade-related cases, 
Stratford thanked the BOFT for it's handling of S.C. Johnson's long 
standing request to lift the ban on insecticide imports from China. 
After the issue was raised by DAUSTR Altbach in August (REFTEL), the 
 
TAIPEI 00000134  004 OF 004 
 
 
ban was lifted, and the company was able source its Raid product 
from its regional production facility in China. 
 
¶22.  Stratford asked that the BOFT also lift the ban on blood 
glucose meters produced in China.  U.S. firms were complaining that 
as more and more medical device production is shifted to China, the 
Taiwan ban on China-produced medical devices will have a greater 
effect on U.S. firms. 
 
¶23.  Stratford then turned his attention to the Tyco customs case, 
which also had been raised by DAUSTR Altbach during his August visit 
(REFTEL).  He encouraged Taiwan to find a way to settle the case 
with Tyco and noted that the company was planning to file a WTO 301 
petition if the case was not settled.  Tyco had already started to 
build support for its stance in Congress and one member of congress 
had already written to TECRO asking for resolution of the case. 
Huang argued that since the Tyco case was already in the Taiwan 
court system that it would be difficult for the MOEA to intervene. 
In the past MOEA had been criticized in the court for supposed 
intervention. DAUSTR Altbach rejoined that the case would be much 
more difficult for Taiwan to deal with if it became a WTO case, as 
well as becoming very much a matter of public record.  Altbach noted 
that Tyco was interested in settling the case and hoped that Taiwan 
Customs would find a way to do so. 
 
Chiropractors 
------------- 
¶24.  Stratford also raised the issue of market access for 
U.S.-qualified chiropractors.  It appeared, he said, that 
restrictions are based on protectionism, not due to concerns about 
medical care.  He urged the BOFT to do what it could to look into 
the issue and resolve the problem.  "Arresting them all" is not the 
way to do deal with the issue, argued Stratford. 
 
Comment 
------- 
¶25.  Clearly the decision on the GPA does not rest with the BOFT, 
but as our primary interlocutor on trade issues was well-prepared to 
discuss the list of TIFA items for action.  Taiwan remains actively 
engaged in the TIFA process and expects to make progress in a number 
of areas.  AIT will follow-up with BOFT next month on status of a 
non-paper with comments on the model investment agreement.  Taiwan 
is waiting for our next move on the tax agreement and would like a 
copy of a model agreement for their preliminary review.  AIT will 
also continue to push the long term IPR and pharmaceutical issues. 
 
YOUNG