VZCZCXRO1154
OO RUEHCN RUEHGH RUEHVC
DE RUEHIN #1407/01 2690723
ZNR UUUUU ZZH
O 250723Z SEP 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0010
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RUEKJCS/SECDEF WASHINGTON DC
RHHMUNA/USPACOM HONOLULU HI
RHHJJAA/JICPAC HONOLULU HI

UNCLAS SECTION 01 OF 03 TAIPEI 001407 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USCC FOR SCOTT BUNTON 
 
E.O. 12958: N/A 
TAGS: PREL PGOV MARR MCAP TW US CH
SUBJECT: USCC MEETING WITH TAIWAN PRESIDENT MA YING-JEOU 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary: Taiwan's key short-term goals in its 
relations with the United States are securing the approval of 
the pending package of weapons systems, obtaining public U.S. 
support for Taiwan's proposal on meaningful participation in 
UN specialized agencies and strengthening of bilateral 
commercial ties, preferably through an FTA, President Ma told 
visiting members of the U.S.-China Economic and Security 
Review Commission (USCC) during their August 22 meeting.  Ma 
described his strategy for improving cross-Strait relations, 
building trust (and bolstering Taiwan's economy) by removing 
barriers to economic, commercial and cultural exchanges 
before moving on to the thornier political issues.  The USCC 
members expressed concern about the danger of increased 
transfers of sensitive technologies that could result from 
increasing economic integration and investment.  End summary. 
 
Cross-Strait Tensions Down, U.S. Relations Improving 
--------------------------------------------- ------- 
 
¶2. (SBU) Ma began the meeting by expressing appreciation for 
the Commission's work and by underscoring his goal of 
improving Taiwan's relations with the United States.  His 
recent transits of the United States had gone well, Ma said, 
and U.S. officials had also expressed relief that his less 
confrontational policy toward China had reduced tensions in 
the region.  Asked by USCC Vice Chair Bartholomew to identify 
specific things he hoped to achieve from closer U.S. ties, Ma 
listed approval of a pending request to sell Taiwan a package 
of defense items, support for his recently announced effort 
to secure meaningful participation in UN specialized agencies 
and eventual conclusion of a bilateral free trade agreement. 
 
Pending Arms Sale a Key to Taiwan Defense 
----------------------------------------- 
 
¶3. (SBU) Despite the improvement in relations with China, Ma 
said, he was acutely aware of the continuing military threat. 
 He cited in particular the &phenomenal8 growth in the size 
of the Chinese military budget and the enormous improvements 
in the quality and precision of PLA missiles targeting the 
island.  It was therefore essential that Taiwan be prepared 
militarily to respond to this threat.  While Ma dodged a 
request to prioritize the items on the pending notification, 
he did note the particular importance the Taiwan military 
placed on improving its C4ISR capabilities and the value of 
high-level contacts like (ret.) Adm. Blair,s participation 
in the recent Hanguang exercise 
 
¶4. (SBU) At the same time, Ma added, Taiwan's response cannot 
be limited simply to buying more weapons, citing William 
Murray,s article on Taiwan's defense strategy in the Summer 
2008 edition of the Naval War College Journal.  (Note: This 
article, which AIT forwarded to EAP/TC, argues that Taiwan 
should shift to an asymmetrical defense strategy that plays 
to its strengths as a defender.) 
 
&Meaningful Participation" in Key UN Agencies 
--------------------------------------------- 
 
¶5. (SBU) Taiwan needed to have a voice in key international 
organizations, Ma emphasized.  For example, he said, access 
to basic health information provided by the WHO was a 
question of fundamental human rights.  Politically, he added, 
it would be impossible for him to ignore the will of the 
people of Taiwan, who felt strongly about the need to be 
treated with respect by the international community.  That 
said, he was aware of the problems created by Taiwan's 
previous efforts to gain full membership in the UN and its 
specialized agencies.  Instead, his administration had taken 
the concerns of the United States and others into account and 
was seeking only &meaningful participation8 in key 
agencies.  While Taiwan did not expect the proposal submitted 
by its diplomatic allies on August 14 to be voted on at the 
UNGA, it was essential that the United States and others 
support it publicly.  The real test would be in May of 2009, 
he said, when Taiwan's request for WHA observer status would 
once again be on the table. 
 
FTA Would Address Critical Economic Worries 
------------------------------------------- 
 
¶6. (SBU) While his efforts to reduce cross-Strait tensions 
 
TAIPEI 00001407  002 OF 003 
 
 
had gotten the most attention outside of Taiwan, Ma said, 
people on the island were more interested in his ability to 
deliver on economics.  He recounted how small textile mill 
owners in a remote corner of the island buttonholed him about 
their fears that the Korean free trade agreement (FTA) would 
put them out of business.  That said, Ma recognized the 
difficulty in our system of getting FTA negotiations started 
at this time, and said Taiwan hoped also to pursue interim 
steps under the TIFA. 
 
Removing Barriers to Cross-Strait Economic Ties 
--------------------------------------------- -- 
 
¶7. (SBU) Cross-Strait relations had entered a new phase in 
the three months since his inauguration, Ma told the 
delegation.  He expressed optimism that his call for a 
diplomatic truce to what he termed &malignant competition8 
between Taiwan and China over diplomatic recognition was 
achieving results.  For example, Ma said, China had not 
responded positively to approaches by some of Taiwan's 
diplomatic allies considering recognizing the PRC. 
Maintaining the status quo was important to Taiwan, which now 
had only 23 diplomatic partners whereas China, recognized by 
171 countries, did not need more allies. 
 
¶8. (SBU) His first priority in the cross-Strait relations, 
however, was allowing closer economic integration with the 
mainland.  China's initial response to Taiwan's new approach 
had generally been positive, Ma said, citing the inauguration 
of direct weekend charter passenger flights between Taiwan 
and the mainland, mainland Chinese tourist travel to Taiwan, 
his decision to legalize the exchange of renminbi on Taiwan 
and relaxation of investment controls.  These were positive 
first steps, he said, and his government hoped to reach 
agreement soon to start daily charter flights and to 
eliminate the costly and time-consuming requirement that they 
fly through the Hong Kong FIR rather than directly from 
Taiwan to mainland destinations. 
 
¶9. (SBU) Commissioner Shea expressed concern that the 
proposal to lift the cap on Taiwan investments in the 
mainland would leave the island increasingly vulnerable and 
could result in the transfer of sensitive technology.  Ma 
responded that his proposal to raise the investment ceiling 
to 60 percent would, and was intended to, encourage Taiwan 
investors to relist their companies on the Taiwan stock 
market.  At present, he said, the cap forced many investors 
doing business in China to sever financial ties with Taiwan. 
Already, he added, seventeen companies had relisted on the 
Taiwan exchange. 
 
¶10. (SBU) Taiwan also had concerns about technology transfer, 
Ma said, and had in place controls on sensitive and dual-use 
items in line with international regimes.  Responding to 
Commissioner Mulloy,s specific question about 
semiconductors, Ma noted that Taiwan also had to think of 
market share.  For example, he said, Taiwan previously 
prohibited investors from producing 12 inch wafer chips in 
China.  Now that U.S. manufacturer Intel was doing so, 
however, Taiwan had to consider the need to preserve market 
share in a sector critical to its economy. 
 
Participants 
------------ 
 
¶11. (U) Taiwan: 
 
President Ma Ying-jeou 
National Security Advisor Su Chi 
Deputy Minister of Foreign Affairs David Lin 
MFA DG for North American Affairs Harry Tseng 
MFA DDG for North American Affairs Douglas Hsu 
MFA U.S. Desk Officer Hans Chiao 
 
United States: 
 
Carolyn Bartholomew, Vice Chair 
Daniel Blumenthal, Commissioner 
Peter Brookes, Commissioner 
Jeffrey Fiedler, Commissioner 
Patrick Mulloy, Commissioner 
Dennis Shea, Commissioner 
Daniel Slane, Commissioner 
Scott Bunton, USCC Executive Director 
 
TAIPEI 00001407  003 OF 003 
 
 
John Dotson, USCC Research Coordinator 
Shannon Knight, Research Coordinator 
Robert Wang, AIT A/DIR 
Dave Rank, AIT Political Chief 
Deanna Kim, AIT Political Officer 
 
¶12.  (U) The delegation has cleared this cable. 
YOUNG