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DE RUEHIN #0310/01 0660417
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R 060417Z MAR 08 ZDK CORRECTED COPY - ADDED CAPTION ZDK
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 8277
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHGV/USMISSION GENEVA 1835
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 TAIPEI 000310 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
C O R R E C T E D  C O P Y  ADDED SENSITIVE CAPTION 
 
STATE PASS USTR 
STATE FOR EAP/TC,USTR FOR STRATFORD, KATZ, AND RAGLAND 
TREASURY FOR OASIA/TTYANG 
COMMERCE FOR BRENDA CARTER-NIXON, JOSHUA PIERCE, AND 
MICHAEL CHOI 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD KIPR TW
SUBJECT: USTR-AIT ADVANCE TRADE AGENDA IN PREPARATION FOR 
SUMMER TIFA MEETING 
 
REF: 2005 TAIPEI 3982 
 
TAIPEI 00000310  001.2 OF 002 
 
 
 Summary 
-------- 
 
¶1.  (SBU) During February 22-26 meetings in Taipei, USTR 
Senior Director for China and Taiwan Affairs David Katz and 
AIT/W Director of Trade and Commercial Programs Rick Ruzicka 
laid the groundwork for the summer 2008 Trade and Investment 
Framework Agreement (TIFA) meeting in Taipei by pressing U.S. 
market access and reform concerns (septel covers agricultural 
issues, including pork and beef).  Katz and Ruzicka expressed 
interest in continuing to explore a possible bilateral 
investment agreement (BIA), but cautioned that progress would 
depend in part on Taiwan reducing its list of non-conforming 
measures (NCMs).  They observed that Taiwan must provide 
additional reassurances on its legal basis for information 
sharing in order to facilitate continued discussions on a 
bilateral tax agreement.  Taiwan officials indicated 
willingness to negotiate a bilateral textile transshipment 
MOU as quickly as possible.  On WTO issues, Taiwan has not 
yet reached an internal decision on whether or not to support 
the U.S. position on the information technology agreement 
(ITA), but indicated general support for U.S. goals in 
pursuing the Doha Development Agenda (DDA).  The U.S. and 
Taiwan made a tentative agreement to hold annual TIFA talks 
in Taipei in July, and to explore options for including a 
business-oriented regulatory reform agenda under the TIFA 
rubric. End summary. 
 
BIA, Bilateral Tax Agreement Still on Taiwan's Mind 
--------------------------------------------- ------- 
 
¶2. (SBU) On their first day of meetings, Katz and Ruzicka met 
with the Office of Trade Negotiations (OTN) Chief Negotiator 
John Deng and other OTN senior staff. 
The two sides had a long exchange on how best to move ahead 
on investment talks, with Katz stressing the U.S. desire to 
determine the likelihood of obtaining a strong agreement 
before making a formal decision to launch negotiations.  In 
response to Katz's request, Deng said Taiwan would try to 
reduce its list of non-conforming measures (NCMs).  Deng also 
said the Taiwan side is ready to engage in issue-specific 
investment-related DVCs as requested by the U.S. 
 
¶3. (SBU) Katz and Ruzicka discussed bilateral tax issues with 
Ministry of Finance (MOF) Deputy Minister Chang Sheng-hord, 
who noted that the Financial Supervisory Commission (FSC) and 
MOF have a difference of opinion on the information-sharing 
provisions that the U.S. is seeking.  According to Cheng, the 
FSC sees the provisions as difficult to implement under 
current Taiwan law, while MOF believes otherwise.  Chang told 
Katz that he hopes after additional interagency 
consultations, Taiwan will be able to resolve the issue. 
(Note:  His encouraging words on the tax issue paper over the 
real challenges in resolving this interagency dispute without 
a clear push from a higher level. End note.) 
 
Textile Transshipment MOU Coming Soon? 
-------------------------------------- 
 
¶4. (SBU) During their February 22 meeting with OTN, Katz and 
Ruzicka told OTC Chief Negotiator John Deng that the U.S. is 
still very interested in finalizing the textile transshipment 
MOU.  At the MOEA Bureau of Foreign Trade (BOFT), Director 
General Franco Huang said he "sees no issue" with the textile 
transshipment MOU, which he believes can be negotiated "very 
soon." 
 
Still Undecided on ITA 
---------------------- 
 
¶5. (SBU) BOT DG Franco Huang said Taiwan is still hammering 
out an interagency view on whether or not to support the U.S. 
position on the Information Technology Agreement (ITA), and 
indicated, as AIT has heard before, that Customs is hesitant. 
 Katz asked for Taiwan's support on the ITA, as well as on 
broader U.S. goals to advance the Doha Round, and observed 
that Taiwan in particular stands to benefit from progress on 
multilateral trade liberalization.  During their visit to the 
Office of Trade Negotiations (OTN), Katz also highlighted 
U.S. interest in Taiwan support for our WTO positions, 
including ITA. 
 
TAIPEI 00000310  002.2 OF 002 
 
 
 
Tyco Case Grinds Along 
---------------------- 
 
¶6.  (SBU) During a February 25 meeting with Ministry of 
Finance (MOF) Administrative Deputy Minister Chang, Chang 
said that the Tyco case was now before the Ministry of 
Finance Appeals Committee, which he chairs. Tyco has a 
long-standing dispute with Customs on the proper 
classification of its thermistors involving more than a 
thousand individual cases under various stages of 
consideration ranging from administrative review by Customs 
to final rulings by Taiwan courts.  Tyco has been insisting 
that the product should be classified under Harmonized System 
Code 8533 and thus eligible for duty-free importation under 
the terms of the WTO Information Technology Agreement. Taiwan 
Customs, on the other hand, has insists that the product 
falls under HS 8536 and thus is subject to an import duty 
(reftel). 
 
¶7. (SBU) Chang stated that committee members were 
independent, but that he would do his best to resolve the 
issue as soon as possible, preferably before TIFA in July. 
He suggested informally that Tyco's lawyers still had a lot 
of homework to do and suggested that the case is more 
difficult for Tyco to resolve since--in addition to pursuing 
an administrative appeal--they had also gone to the Taiwan 
courts where they had lost the case.  The MOF, he pointed 
out, has no control over the Judiciary. 
 
Pharma 
------ 
 
¶8. (SBU) Katz and Ruzicka emphasized the ongoing U.S. focus 
on pharmaceutical market access in a meeting with Vice 
Minister of Health Chen Shih-chung.  In particular, Katz 
noted U.S. interest in including IP issues such as patent 
linkage and data exclusivity on the TIFA agenda. Katz and 
Ruzicka also discussed drug issues with the AmCham 
Pharmaceutical Committee.  Drug company representatives 
complained to Katz and Ruzicka that Taiwan has become one of 
the slowest and most difficult places in Asia to get 
regulatory approval for new drugs or new indications of 
current drugs, due to increasing demands by Taiwan 
authorities for second-country trial data and additional 
studies. Amcham's pharma members also lamented the Bureau of 
National Health Insurance's pricing structure for new-drug 
reimbursement, which has pushed the average new-drug price in 
Taiwan to below 50 percent of the average developed-world 
price, down from above 80 percent in 2002.  Participants 
suggested to Katz that the United States push to include a 
pricing-related working group in the TIFA structure, in 
addition to the current working groups on the separation of 
dispensing and prescribing (SDP) and standard contracts. 
AmCham members also complained that they are having more and 
more trouble arranging meetings with BNHI and other DOH 
officials, and are frustrated by the lack of communication. 
 
Comment 
------- 
 
¶9.  (SBU) The Katz-Ruzicka visit was useful in preparing the 
ground for TIFA talks in July in terms of discussions of 
possible deliverables.  We will continue to work to 
consolidate this list prior to the proposed AUSTR Stratford 
visit in June after the transition to a new administration in 
Taiwan.  Moreover, we will continue to push for a reduction 
in NCMs before the start of investment negotiations. End 
comment. 
YOUNG