VZCZCXRO3411
OO RUEHCN RUEHGH
DE RUEHIN #0672/01 0820905
ZNR UUUUU ZZH
O 230905Z MAR 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4591
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6513
RUEHUL/AMEMBASSY SEOUL PRIORITY 8540
RUEHKO/AMEMBASSY TOKYO PRIORITY 8583
RUEHCN/AMCONSUL CHENGDU PRIORITY 1751
RUEHGZ/AMCONSUL GUANGZHOU PRIORITY 0083
RUEHHK/AMCONSUL HONG KONG PRIORITY 7756
RUEHGH/AMCONSUL SHANGHAI PRIORITY 0908
RUEHSH/AMCONSUL SHENYANG PRIORITY 5719
RUEAIIA/CIA WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1798
RUEHC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 TAIPEI 000672 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS AIT/W AND USTR 
STATE FOR EAP/TC, EAP/MLS, 
USTR FOR BOLLYKY, ALTBACH AND STRATFORD 
USDOC FOR 4431/ITA/MAC/AP/OPB/TAIWAN/JDUTTON 
USDOC FOR USPTO GIN AND BROWNING AND SNYDOR 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV KIPR TW
SUBJECT: AIT DIRECTOR REVIEWS TIFA AGENDA WITH ECON 
MINISTER CHEN 
 
 
Summary and Introduction 
 ------------------------ 
 
¶1.  (SBU)  On March 21, AIT Director called on Minister of 
Economic Affairs Steve Chen to review the bilateral trade 
relationship and the TIFA agenda.  Chen gave a positive 
assessment of the state of the relationship, but reiterated 
Taiwan's goal of signing a Free Trade Agreement (FTA) with 
the U.S.  He remains fully committed to making real progress 
through the TIFA process.  End Summary and introduction. 
 
Pity about FTA, but Committed to Progress through TIFA 
--------------------------------------------- --------- 
¶2.  (SBU)  Chen characterized the U.S.-Taiwan bilateral trade 
relationship as "very good," and once again stressed Taiwan's 
interest in a Free Trade Agreement.  We understand, he said, 
for the moment you have difficulty agreeing to negotiate an 
FTA with Taiwan.  While waiting for the green light, we are 
trying to improve our intellectual property rights regime, 
market access, and work through the TIFA process.   We are 
committed to making real progress in our bilateral 
relationship through TIFA.  Chen noted that on March 30, MOEA 
was opening a new Office of Trade Negotiation to be headed by 
John Deng, who most recently served as Deputy Director of 
TECRO Washington.  Chen hoped that through Taiwan's efforts 
the U.S. will eventually agree to enter FTA negotiations. 
 
¶3.  (SBU)  The Director agreed with Chen that the TIFA 
process was more than simply a means to a possible FTA, and 
would itself deliver benefits to both sides.  The Director 
noted that June/July were being looked at for the next round 
of TIFA meetings in Washington and some time in the second 
half of the year for start up of the Consultative Committee 
on Agriculture.   He then discussed the state of play of 
several items on the TIFA agenda. 
 
IPR - Good News and Bad News 
---------------------------- 
¶4.  (SBU)  The Director congratulated Taiwan on the passage 
of legislation establishing an IPR Court and noted that the 
U.S. was hopeful about the passage of two other pending bills 
on regulating peer-to-peer (P2P) file sharing and ISP 
liability.  Chen replied that he expected that these bills 
would pass this year.  The Director went on to note that the 
U.S. still had other concerns regarding IPR.  We were 
following the Phillips case, as well as legislation that 
could expand the scope of compulsory licensing in Taiwan. 
Chen replied that the U.S. did not need to worry about the 
Phillips case.  The EU is undertaking an investigation, he 
noted, and "there will be a solution pretty soon."  The 
Director added that it would be helpful if Taiwan was 
responsive to our concerns about the relevant legislation as 
well. 
 
¶5.  (SBU)  The Director also raised the U.S. concern that the 
Ministry of Education was not treating the IPR issue 
seriously.  IPR violations on campus and on TANet were not 
being addressed.  He recalled that during AUSTR Stratford's 
December visit, he called on the Minister of Education and 
urged him to name a high-level official to take 
responsibility for IPR issues in the Education Ministry.  It 
has not happened.  Chen acknowledged that Taiwan had to do 
more, and that he had personally encouraged one of the vice 
ministers of education to assume that role.  The Director 
said that he planned to raise the issue with Vice Premier 
Tsai later in the week (reported septel). 
 
SIPDIS 
 
Bilateral Tax, Investment and GPA Agreements 
-------------------------------------------- 
¶6. (SBU)  The Director updated Chen on the current status of 
possible bilateral agreements being discussed under TIFA: 
 
Bilateral Investment Agreement - USTR and Washington agencies 
 
TAIPEI 00000672  002 OF 003 
 
 
and Taiwan's Department of Investment Services are planning a 
digital video conference during the week of April 9 to 
discuss comments raised by Taiwan on the U.S. model agreement. 
 
Bilateral Tax Agreement - We are hearing more positive noises 
out of Washington, but the Director will learn more during 
his upcoming consultations in Washington. 
 
Bilateral Government Procurement Agreement - Washington is 
preparing for bilateral negotiations by preparing a model 
bilateral GPA based on the WTO GPA.  Here in Taiwan, the 
Director noted that the new head of the EU representative 
office told him in a courtesy call and later told the Taiwan 
press that the EU continues to urge Taiwan to take a 
multilateral approach.  Chen noted that this representative 
was "too new" and that he had already advised him that the 
U.S. and Taiwan were preparing for bilateral negotiations. 
 
No Movement on Long Term Pharmaceutical Issues 
--------------------------------------------- - 
¶7.  (SBU)  The Director asked for Chen's help getting 
movement on long term pharmaceutical pricing issues.  He 
noted that there has been little or no movement on issues 
such as actual transaction pricing (ATP) and the separation 
of prescribing and dispensing (SPD). Both are goals that 
Taiwan has committed to achieving and to discussing with the 
U.S. as part of TIFA. Chen took note of the Director's 
concerns and also urged him to speak directly to the Minister 
of Health on the matter. 
 
 
Thanks for Cooperation on Export Controls 
----------------------------------------- 
¶8.  (SBU)  Thanking Chen for MOEA's hard work with the U.S. 
on export controls, the Director noted that AIT-sponsored 
training seminars on export control issues will continue 
every month through August.  He hoped, however, that Taiwan 
law enforcement would be more willing to work with the Bureau 
of Foreign Trade to move ahead with prosecutions for those 
caught violating the law.  Minister Chen noted that Chou 
I-ren, Secretary General of the Presidential Office, had 
recently asked for a briefing on this issue which shows the 
level of importance that the Taiwan government places on 
export control cooperation with the U.S. 
 
Doha - Important, but Not Likely Anytime Soon 
--------------------------------------------- 
¶9. (SBU)  The Director stated that the U.S. was not giving up 
on Doha and was still energetically looking for ways to 
reinvigorate the process.  He hoped that Taiwan was also 
looking for ways to contribute.  President Bush remains 
committed to concluding the Doha Round.  The success of the 
Doha round was extremely important to Taiwan, Chen replied. 
As it was having trouble signing FTAs or other bilateral 
trade agreements, Doha was an important vehicle for more 
liberalized trade. He was not optimistic, however, about any 
breakthrough soon.  He said the upcoming French presidential 
election would likely affect the EU position, and there was 
still the question of extension of the U.S. president's trade 
promotion authority.  Just the same, the Chinese Taipei 
mission in Geneva would continue to play an active role in 
promoting the Doha round. 
 
¶10.  (SBU)  Chen also noted that the Free Trade Area of the 
Asia Pacific (FTAAP) which the U.S. is supporting under APEC 
is also very attractive to Taiwan.  Director Young said, 
however, that while this was indeed an important initiative, 
it would likely move forward very slowly due to concerns from 
China. 
 
Cross-Strait Liberalization Inevitable, but Need Balance 
--------------------------------------------- ----------- 
¶11.  (SBU)  Turning to Cross-Strait issues, Director Young 
 
TAIPEI 00000672  003 OF 003 
 
 
noted that the MOEA had recently granted permission for TSMC 
to build a 0.18-micron semiconductor plant in China.  Was 
this decision made in isolation, or did it indicate a new 
proactive, more reasonable China investment policy in Taiwan? 
 The Director noted that both Intel and Japanese firms were 
building even more advanced plants in China.  Semiconductor 
executives aren't worried that China will seize Taiwan's 
semiconductor market anytime soon, he added.  Chen agreed, 
and acknowledged Taiwan currently had twelve 12-inch wafer 
semiconductor plants, eight more under construction, and 17 
more in the planning stages. Taiwan was competitive in this 
industry because it could keep costs low and can get a plant 
up and running fast. 
 
¶12.  (SBU)  Chen said that after May or June he would be in a 
better situation to say more.  The liberalizing trend was 
inevitable in cross-strait trade and investment, but that the 
speed of liberalization in the longer run would depend on the 
next Taiwan president. 
 
¶13.  (SBU)  Director Young stated that when he traveled in 
southern and central Taiwan and met with business people they 
asked for more forward-looking government policy out of 
Taipei.  They were actually doing quite well and were 
optimistic about the future.  Chen replied that while some 
sectors were indeed doing very well, others were lagging.  He 
highlighted the importance of "balanced development" and 
stressed that MOEA was committed to assisting small and 
medium-sized enterprises as well as traditional industries, 
many of which were having a difficult time. 
 
Director Urges Taiwan Action on the Tyco Case 
--------------------------------------------- 
¶14.  (SBU)  In closing, the Director raised the Tyco 
thermistor classification issue.  He said Tyco intends to 
file a 301 petition if the issue is not resolved soon and 
USTR plans to raise the issue in the TIFA talks if it is not 
resolved before the next round.  Tyco also will continue to 
inform members of Congress about the issue. It is best for 
both sides if the issue can be resolved soon.  Chen replied 
that he would once again raise the issue with the Minister of 
Finance, but noted that it was a difficult issue to settle, 
since the case was with the courts.  Director Young responded 
by saying that Tyco remains interested in and willing to 
reach a negotiated settlement. 
 
Comment 
------- 
¶15.  (SBU)  As in past meetings, Chen felt he had to stress 
Taiwan's goal of negotiating an FTA with the United States. 
Just as important, however, is his strong commitment to the 
TIFA process which he clearly sees as bringing benefits to 
both sides. 
YOUNG