VZCZCXRO0663
OO RUEHGH
DE RUEHIN #0550/01 0680908
ZNY SSSSS ZZH
O 090908Z MAR 07
FM AIT TAIPEI
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S E C R E T SECTION 01 OF 03 TAIPEI 000550 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/TC, ISN/CB AND ISN/MTR 
 
E.O. 12958: DECL: 03/11/2027 
TAGS: CN CW ETTC KNNP PARM TW
SUBJECT: CWC-RESTRICTED CHEMICALS IN TAIWAN 
 
REF: A. TAIPEI 78 
     ¶B. MIKULAK-NEELY EMAIL OF 12/20/2006 
 
Classified By: AIT Director Stephen Young, 1.4 B/C 
 
¶1.  (S) Summary: As reported ref A, China is now Taiwan's 
sole acknowledged source of Chemical Weapons Convention 
(CWC)-restricted schedule two (S2) chemical imports.  This 
contributes to a significant gap in CWC controls and is 
contrary to U.S. interests because: 1) Taiwan's trade, 
production, and use of CWC-restricted chemicals remains 
entirely outside the CWC control regime; 2) China ignores CWC 
rules by shipping restricted chemicals to Taiwan without 
effective jurisdiction over the end users; 3) As the main 
supplier of chemicals critical for Taiwan's high tech 
industries, China potentially could cut off Taiwan's 
production and sales to the United States of certain 
strategic high tech items.  AIT explored ways to better 
protect these U.S. interests with a Taiwan interagency group 
on March 7.  AIT recommends that we work with Gameplan 
partners to set up a CWC-like inspection regime to bring 
Taiwan under international supervision.  End summary. 
 
Years of Stalemate on Monitoring Taiwan's Chemicals 
--------------------------------------------- ---- 
 
¶2.  (S) While the Head of China's MFA CW/CB Office Chen Kai 
claims that China is open to pragmatic solutions to enable 
Taiwan's participation in the CWC, China's suggestions have 
been non-starters (i.e, Taiwan should first accept the "one 
China" principle, ref B), and China has blocked efforts to 
find a formula acceptable to both sides.  China appears to 
benefit from the current situation and lacks incentive to 
change it. 
 
How China Benefits From Taiwan's Exclusion from CWC 
--------------------------------------------- ---- 
 
¶3.  (S) As reported ref A, Taiwan Customs statistics show 
that China has become the sole-source supplier of CWC S2 
chemicals imports, which are used by Taiwan's high tech 
industries as cleaning and doping agents in semiconductors, 
specialty glass, light-emitting diodes, and electronics 
production.  Taiwan produces several S3 chemicals and at 
least one S2 chemical on the island.  China claims that its 
chemical shipments to Taiwan are "internal transfers" rather 
than "exports" and therefore not a violation of CWC controls. 
 
 
¶4.  (S) According to Taiwan officials, China has also become 
Taiwan's largest supplier of S3 chemicals, providing about 
half of Taiwan's total imports of these chemicals.  Taiwan 
officials explain that China's simplified approval process is 
one of the attractions of S3 suppliers in China: it is much 
easier to get an unofficial end-user certificate from one of 
Taiwan's several private industry associations (which is all 
that China requires) than to get an official end-user 
certificate from Taiwan's Ministry of Economic Affairs (MOEA) 
Bureau of Foreign Trade (BOFT) (which all other CWC member 
states must obtain in order to export S3 chemicals to 
Taiwan).  This gives chemical companies in China a clear 
commercial advantage in the Taiwan market. 
 
Red Question Marks Over Taiwan 
------------------------------ 
 
¶5.  (S) Although PRC officials permit shipments of 
CWC-restricted chemicals to Taiwan, China does not have 
effective jurisdiction over the end users of the chemicals, 
and has no way to conduct background checks, inspect, 
monitor, or sanction the Taiwan end users as required by the 
CWC.  China also lacks the direct communications with Taiwan 
Customs and other enforcement agencies necessary to verify 
whether the chemicals actually enter Taiwan or are diverted 
 
TAIPEI 00000550  002 OF 003 
 
 
to other countries or to illicit users. 
 
¶6.  (S) The evidence for S2 chemical imports are Taiwan 
Customs documents showing a total of approximately US$5 
million worth of five different types of S2 chemicals 
imported from China from January 2004 through October 2006. 
However, PRC officials, who see only the unverified industry 
association-issued end user certificates, may not even be 
aware that S2 chemicals are being shipped to Taiwan. 
 
¶7.  (S) The total lack of outside inspection or monitoring of 
CWC-restricted chemicals in Taiwan exacerbates the unknowns 
surrounding Taiwan's possible chemical/biological (CB) 
weapons programs, possible plans to develop satellite space 
launch and long-range cruise missile capabilities, and its 
possible interest in acquiring retaliatory capabilities to 
deter attack from China.  AIT does not/not see any 
indications of a chemical weapons program in Taiwan, but even 
the small value of S2 chemicals shown on Customs documents 
entering Taiwan could be significant in a weapons program. 
 
 
More Dangerous Than Chemical Weapons 
------------------------------------ 
 
¶8.  (S) From a broader point of view, the greatest danger in 
the current situation comes from Taiwan's high tech 
industries' dependence on China for critical inputs.  China 
could potentially use this dependence to speed the migration 
of these high tech industries to China (which is already 
underway for various other reasons) or to disrupt the supply 
of high tech products to global markets.  About two-thirds of 
the world's semiconductor foundry production is done in 
Taiwan.  Taiwan supplies 40-50 percent of the global market 
for glass fibers, integrated circuit packaging, and liquid 
crystal displays, and is the world's second largest supplier 
of integrated circuit substrates and dynamic random access 
memory chips.  These and other high tech electronics products 
require small quantities of CWC-restricted chemicals in their 
manufacture. 
 
AIT Discussions on Protecting U.S. Interests 
-------------------------------------------- 
 
¶9.  (S) On March 7, AIT met with an interagency group of 
Taiwan officials to exchange views and explore ideas on how 
to arrange outside inspection and monitoring of Taiwan's 
trade, production, and stores of CWC-restricted chemicals. 
The discussion covered how CWC-like inspections could be 
conducted that did not include China (Taiwan officials said 
that Taiwan could not accept inspections involving officials 
from China.) 
 
¶10.  (S) Taiwan officials reacted positively to the 
possibility of allowing inspections of both civilian and 
military production and stores by officials from the export 
control Gameplan participants (Australia, Germany, Japan, UK, 
and the United States) and to having the Gameplan 
participants replace China as the source of the 
CWC-restricted chemicals needed in Taiwan's high tech 
industries.  Taiwan officials agreed to research further how 
a CWC-like regime of outside inspections could be established 
under the Gameplan for both civilian and military chemical 
facilities in Taiwan, but they cautioned that this idea would 
require clearance at the highest levels. 
 
¶11.  (S) The Taiwan officials acknowledged that there are 
stockpiles of S2 chemicals in Taiwan, but said that these 
stockpiles had mainly been imported prior to the year 2000, 
when CWC restricted such exports to Taiwan.  They mentioned 
one Taiwan company that produced a "small quantity" of an S2 
chemical for its own "internal" use (the company and chemical 
name were not mentioned), but claimed to have no information 
on military production and stores of CWC-restricted 
 
TAIPEI 00000550  003 OF 003 
 
 
chemicals. 
 
¶12.  (S) Taiwan participants in the discussions: 
-- Ms. Liu Shu-lin, Technical Specialist, IDB, MOEA 
-- Mr. Lai Kwo-shing, Deputy Director BOFT, MOEA 
-- Ms. Susan Lu, Export Control Task Force, BOFT 
-- Dr. William Jang, Director, ITRI 
-- Mr. Ke Liang-ruey, Department of Treaty and Legal Affairs, 
MOFA 
 
No Immediate Problem for Taiwan 
------------------------------- 
 
¶13.  (S) Between its stockpiles, domestic production, and 
imports, Taiwan does not seem to be facing any acute crisis 
regarding supplies of CWC-restricted chemicals.  The current 
situation is not so much a problem for Taiwan as it is a 
significant gap in the global controls over CWC-restricted 
chemicals. 
 
¶14.  (S) Recommendations: AIT recommends that we press China, 
like all other CWC member states, to require official 
BOFT-issued end user certificates for its exports of 
CWC-restricted chemicals to the WTO-designated "Separate 
Customs Territory of Taiwan, Penghu, Kinmen, and Matsu."  The 
industry-issued certificates now accepted by China provide 
little guarantee of how or where the chemicals are being 
used, and the claim that these are "internal transfers" is 
inappropriate.  We should consult with our export control 
Gameplan partners about establishing a CWC-like control and 
inspection regime for Taiwan under the Gameplan and replacing 
China as Taiwan's main source of CWC-restricted chemicals. 
To have an effective global regime to prevent proliferation 
of chemical weapons, Taiwan's chemicals must be subject to 
outside inspection and monitoring. 
YOUNG