Latest Nelson Reports

The Nelson Report from last week noted (highlights are mine):

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US/CHINA/TAIWAN...Asst. Sec. State Chris Hill, somewhere in Indonesia today, apparently told a journalist that the President has ruled "no" on a visa request by Taiwan President-elect Ma Ying-jeou to visit Washington prior to the Inauguration in May.

No one involved will be surprised when this is formally announced. So attention has already turned to how the White House plans to compensate for so obviously catering to Beijing's concerns.[MT: Ouch! Wouldn't it be nice when we can have our very own US foreign policy, instead of Doing Whatever Beijing Wants?]

Most likely by sending a much higher-level official US delegation to the Inauguration than has been seen before...a decision now being worked on at the White House, Administration sources privately confirm.

Taiwan journalist sources say they've been told that Chris Hill himself will lead the US delegation, but former Administration officials here say they think that unlikely, given the self-imposed US ban on such a high-ranking State Department official visiting Taiwan in any capacity.

Rather, it is suggested, look to a delegation of high, and perhaps higher-level former officials...which opens up all kinds of interesting possibilities, so stay tuned.

(Since Commerce Secretaries and other Cabinet-level officers have previously visited Taiwan while in office, the distinction allegedly militating against an A/S from State is just one of the many weird bits of political catechism which makes parsing the Cross-Straits situation so interesting, we should note.)

Further gossip: it is now accepted by all concerned that in defiance of what may seem logical to the entire world outside of China, Beijing will continue to block Taiwan being granted "official observer status" at the World Health Association, when the meeting takes place in May.

The unofficially stated reason? Because DPP President Chen will still be in office, and Beijing is simply not going to give him any satisfaction on the "international space" issue, even though Ma's inauguration is the very next day.

(Remember Jimmy Carter and the Iranian hostages? The plane took off as Ronald Reagan was being sworn in, and not one minute sooner...)

There is considerable support here for having the White House tell Beijing it IS granting Ma a pre-inaugural visit precisely to underscore US anger at China's continued bullying on the WHA and similar issues, but apparently that argument is losing.

Also on the Taiwan wish-list agenda is, or are, whether the US will sell F-16's, an obvious heart-burn issue in Cross-Strait relations, if only as an offset to China's continued missile build-up on the coast.

Our sources indicate that the White House does not intend to deal with the F-16 issue in any way UNLESS it is formally requested to by DOD Secretary Gates...and they add that Gates won't unless HE is officially informed by PACOM that the Pacific commander considers F'16's to Taiwan to be a "military necessity".

OK, so if China is known, or felt, to be still opposed to WHA and other international space issues, and, of course, to enhanced military sales, what's the buzz on what Beijing IS willing to consider, now that it (and the US) have their wish of a DPP defeat, and a KMT victory?

Senior Chinese sources tell us that an immediate sphere of confidence building suggestions seem likely in the economic sector, since a strong Taiwanese economy is in Beijing's interest as much as Taipei's.

Included under that rubric would be direct flights, etc...issues firmly opposed by the DPP government on Taiwan, sources note.

But perhaps the most interesting potential indicated by our Chinese sources is a willingness to back-off from the expensive, often demeaning "competition" with Taiwan for official recognition by mainly African and Latin American nations willing to sell to the highest bidder.[MT: China could easily buy all those nations if it wanted....]

Obviously, an "international space" concession of this nature will be 100% contingent on the new Ma/KMT government proving itself to Beijing...something of a chicken and egg process, given Beijing's blockage on the WHA, etc.

What about those 1200 missiles along the coast of the Strait? Well, actually, yes, Beijing understands the symbolic importance of making some kind of gesture in that area.[MT: Rumor printed in today's Taipei Times says China will reduce the missile force by half.]

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And this from a few days later, just three days ago:

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TIBET...TAIWAN...the two issues are not formally "paired" but for tonite's Report, we want to follow-up on a discussion at Brookings yesterday, and Heritage last Friday, and see if Beijing can make a virtue out of necessity.

That is, everyone agrees that with the return to power of the KMT, even if a KMT which now fully accepts the nationalist implications of "Taiwan identity", that the coming months will see an improvement in both atmosphere and substance between Taipei and Beijing.

Whether these same moves help push a split between the new KMT and the "old" Taiwan Lobby here, founded as it is on conservatism and anti-China views and defense policies, is something we've warned about in past Reports, and will be watching for future Reports.

Of interest to the "old" faction, and a possible challenge to the "new" KMT, will be the apparent view of the Bush Administration that it IS willing to sell F-16's to Taiwan, but that given the KMT/DPP domestic political games of recent years (and, of course, the implications for cross-Strait relations) Ma will have to make the request.

(From the above, we can deduce that the necessary preconditions for an F-16 decision have taken place. That is, PACOM has formally told DOD Secretary Gates the jets are a "military necessity", and Gates has so informed the White House.)

For tonite, let's take a quick survey of what is expected bilaterally across the Strait.

First move, we'd argue, has been made by President-elect Ma, who said this week that he's OK with the "Chinese Taipei" name if it allows Taiwan to join international organizations, such as the World Health Association...a decision due the day before Ma's inauguration, and thus in doubt.

(Note to friendly Loyal Readers...for ONCE we are right in a factoid. The WHA is a sub-group of the WHO, and consists of the Ministers of Health of the members.)

WTO is, of course, a different animal. There Taiwan is the "customs territory of Penghu, Kinmen and Taiwan", and the deal with Beijing back in 2000-2001 was that Taiwan could join as an "economic entities."

Semantics have been matters of potential life and death, in the Strait, since 1972.

Anyhow, after our trip to Taiwan for the election, we've had a chance to compare notes with informed experts on what a Ma Administration can be expected to try, and on what schedule.

Here's a summary of the most informed current thinking on Ma's intentions, which experts see as occuring in three stages:

(1) Weekly charter flights and Chinese tourists. The negotiations on these two linked issues (carried out under the "Macau formula" in which the two sides are represented by their industries, but with government figures present using non-government titles) are essentially complete. But Beijing has put completion on hold until CSB leaves office. Most people expect this can be wrapped up by July 1, as Ma has publicly called for. The result probably wouldn't have been much different under Hsieh.

(2) New economic/trade issues: Progressing to even more frequent flights, going from charter to regular flights. Direct shipping and cargo flights. Relaxing rules on investment/allowing banks to open branches on the other side (some of this can done by each side unilaterally). A more advanced part of this stage could be a trade and investment agreement between the two sides.

Early aspects of Stage 2 could be done under the "Macau" formula, but eventually the two sides would probably have to go to the Straits Exchange Foundation of Taiwan, and Association for Relations Across the Strait of the Mainland (SEF/ARATS) quasi-official format that has been virtually in suspension for ten years.

(3) The tough political issues: Taiwan's international space; the missiles and military pressure in general; and ultimately, a peace agreement.

Ma is reported by our expert sources to believe that these three stages will be mostly sequential, and that they may not get to stage three in Ma's first four-year term. But negotiations need not be completely sequential: quiet, non-publicized contacts on the Stage 3 sensitive issues could be going on while more public discussions on the trade and economic issues are making progress.

The new government understands that it has to move at a measured pace. The election results show that 40% of Taiwan's population is solidly "Green" and not enthusiastic about most of this agenda. If the new government moves too quickly, there is risk of large demonstrations in the streets once again. But Ma and his people seem to understand that.[MT: The demonstrations will occur when Ma finally sells out. The pro-Taiwan side is already talking about it. But such mass energy will be too little, too late, without the revival of the DPP.]

Finally, even without the complication of Tibet, there is the question of whether Beijing will play this right. Subtly and flexibility in cross-strait relations has rarely been Beijing's strong suite, especially when it feels beleaguered by "splittism" in other parts of the empire.

The Ma government presents Beijing with a great challenge. He is the best they are going to get. If they don't deal with him skillfully, he could easily be replaced by another DPP government. But he also has made clear that Taiwan's future will be decided by the 23 million people of Taiwan.[MT: Does anyone actually believe him? I guess in Washington, they do.]

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So in sum (1) we're going to see Ma pass many of the investment measures that will hollow out the economy. It will be interesting to see whether the legislature generates any resistance to Ma's program. Likely not; the big infrastructure programs will buy the hearts of many of a local. Perhaps the wisdom many assert, that the companies that wanted to move have already moved, will turn out to be true and our manufacturing base won't disappear; (2) The F-16s sold to Taiwan; (3) Ma will take office -- and the Olympics will open, soon after. The perfect stage for a Ma-Hu summit?

[Taiwan]