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Text: "Taiwan Today and the Challenges Ahead"

Many thanks for that warm introduction, and for the warm welcome you have extended to us. I feel that the AmCham reception last week and the opportunity to meet some of you earlier, gave me a chance to become familiar with the important issues on your agenda, and to underscore the importance of the work we do together.

You asked me to speak about the challenges ahead and my expectations as the new Director of AIT. Surely one of my greatest challenges will be to maintain the momentum so ably established by my predecessor, Lynn Pascoe, who worked closely with the AmCham and with the Taiwan authorities during some, shall we say, "interesting times."

But I would like to take your topic a bit further by adding some observations on Taiwan today -- after all, I've been here nearly two months, so my right to express unfounded opinions will soon be over. And I would like to add some personal observations on the times we live in.

Kathleen and I are delighted to be here. I say that at the beginning of every speech -- I said it at the reception introducing our new AIT Director in Kaohsiung two weeks ago; I said it at the opening of a new US-owned computer factory in Hsin-chu on Friday; I said it at the opening of a marvelous exhibition by a black American painter in Taichung on Saturday. So the phrase is standard. But beyond politeness, we really are delighted to be here, and we are here by choice -- in fact, Taipei was our first choice as a posting. For Kathleen, it is her first experience in the Chinese part of Asia and her first exposure to the complexities of the Chinese language, to "real" Chinese food and to the cultural ambiance so gloriously exhibited in the Palace Museum. For me, coming back to Taiwan represents a sense of rounding out my service in the world of China, dating back to my language training in Taichung in 1969 and continuing through four years at our Consulate General in Hong Kong, before the U.S. had any mission in mainland China, three years as the "China watcher" at our Embassy in Moscow, four years working on China and other Asian issues in Washington, and three years at our Embassy in Beijing. That's 16 years out of 31 in my career.

But this chronology does not convey the historic sweep or the personal memories of times or places, so let me highlight a few. When I joined the Foreign Service in 1965, I told my personnel officer that I wanted to in Chinese affairs because US relations with Asia in general and with China in particular were so distorted then by the Vietnam War and by a climate of major conflict which carried back to the Korean War and beyond that to World War II in the Pacific and East Asia. If my generation could not do a better job of managing our role in this part of the world than three major wars in 30 years, the next generation might not have the option. It is worth remembering now, as we revel in the progress we see all around us in East Asia, that peace is not inevitable change is not always for the better. In fact, the status quo is sometimes better than any likely alternative.

During my time in Hong Kong, the Administration of President Nixon undertook one of the two most profound shifts in geopolitics in the post-World War II world with its opening to Beijing. We in Hong Kong watched grainy black and white PRC television coverage of Nixon descending from his plane to shake the hand of Chou En-lai and we knew that our world had changed forever. And despite the disappointments which followed, and some unrealistic hopes, that change has mainly been for the better, for the people of America, for the people of the PRC, and for the people of Taiwan and the rest of Asia.

The other fundamental shift in the world's geopolitical map was the end of the Cold War and the collapse of the Soviet Union. This process began with the Polish elections of June 4, 1989 -- the same date as the Tiananmen massacre in Beijing, and five months before the fall of the Berlin Wall. And modesty aside, I can assure you that those of us who were in Warsaw at that time knew that the Communists would lose that election and that the consequences would be profound. The collapse of the Soviet Union followed two years later when the Baltic States achieved real independence in September, 1991, and the Soviet state ceased to exist in December of that year; we watched on Lithuanian television as the flag of the Soviet Union came down over the Kremlin for the last time on Christmas Day, 1991. Again, this shift did not bring in the millennium, and many people have been disappointed that conflict and strife have continued, even in Europe. But I would argue that the world is fundamentally safer for more people in more places than it was before 1989.

Meanwhile, Taiwan was undergoing a quieter revolution but one whose consequences were altogether as profound. When I was here in 1969, the walls were full of slogans about reconquering the mainland, and any mention of Taiwan independence would have earned time on Green Island. The media were centrally controlled, not to mention being boring and uninformative. Real democracy was something that happened far away in different cultures, and the idea that people from Taiwan could legally visit and do business on the mainland was inconceivable.

In the last ten years, beginning with the last years of President Chiang Ching-kuo's rule, Taiwan's role in the world, including its relations with its giant neighbor, began to change. This change was a reflection of Taiwan's greater confidence, which derived in part from the confidence of others in Taiwan's capacity to prosper despite its lack of official diplomatic status in most countries. Unofficial contacts with other countries, including the United States, expanded while semi-official contacts with the mainland began. Cross-Strait trade and investment blossomed, as did private and business travel.

One small vignette which highlights this change: earlier this month a businessman friend explained that he would not be able to play golf on a certain date because he and several friends were going out of Taiwan for their annual fall tournament. Where were they going to play golf? At the Chong Shan course designed by Arnold Palmer -- in Guangdong Province! This episode brought home to me the commonplace nature of travel to the mainland in recent years by literally millions of people from Taiwan.

Taiwan's objective of becoming an Asian-Pacific Regional Operations Center (APROC) is a logical extension of these contacts and a potential spur to expanded trade, investment, travel and other contacts. It now seems clear that Taiwan's obvious economic success in the last 20 years is proof that differing views of its proper international status have not been a significant limiting factor. Taiwan as a global economic force is a fact. And as we have been frequently reminded in recent months, Taiwan also has a growing capacity to influence regional events. And with that capacity comes added responsibility.

Domestically, this society has evolved to the point where the government truly derives its authority from the will of the governed, freely expressed. This government, like any democratic government, may not always like what it hears the people saying. But it does not contest the principle that they have the right to say it. One aspect of life here which far exceeds my expectations is the degree of openness of the media. To see basic issues of national policy presented and debated every day in the press -- issues such as the appropriate policy on investment in the mainland, such as official corruption and crime, such as political maneuvering within the various parties, such as commercial tenders and the decision-making process -- is simply remarkable. Very few places in the world have a press which is more candid. A free press is one feature of a self-confident society. Another is free elections. The people and the leaders of Taiwan, especially President Lee Teng-hui, have every right to be proud of the free and fair presidential election last March, and of the legislative and local elections which took place over the previous year. These are truly impressive examples of Taiwan's transformation to a vibrant democracy, which, in turn, has contributed to its economic success and has earned it the admiration of others.

This month, the American Chamber of Commerce in Taipei celebrates its 45th anniversary. Seeing Taiwan's prosperity today, it's hard to think back to what its economy looked like 45 years ago. But here are some numbers: the 1952 per capita Gross National Product in Taiwan was $196 U.S. Dollars; nowadays, one could easily spend $196 on one dinner for one person at one of the better restaurants in Taipei! In 1995, Taiwan's per capita GNP reached over $12,000. Taking account of price changes over that time, that means that real income here has increased almost 11 times since the AmCham was founded. In 1952, Taiwan's global two-way trade totaled $300 million; in 1995 it is about $215 billion. In 1952, the United States exported $86 million worth of goods to Taiwan; today, Taiwan is our seventh largest export market and our fifth largest market for agricultural exports: we exported over $19 billion worth of U.S. products to Taiwan last year, 15 percent more than we exported here the previous year and almost twice what we exported to the PRC. Our 1995 exports represented one-fifth of Taiwan's imports. In turn, we are Taiwan's largest export market: Taiwan exports to the United States increased over 8 percent in 1995, totaling over $28 billion, or almost one quarter of all Taiwan exports. The United States is also the largest investor in Taiwan: Taiwan's Ministry of Economic Affairs approved a total of $1.3 billion in new U.S. direct investment in 1995, more than four times the level approved in 1994. Total U.S. investment in Taiwan by the end of 1995 had reached $6.3 billion.

When I last lived here, most of Taiwan's exports were labor-intensive products. In 1995, more than half of Taiwan's exports were of high-tech and capital-intensive goods. Taiwan is the world's number one exporter of many computer related products. Taiwan is also the world's seventh largest outward investor, with investments of as much as $30 billion in the PRC, $30 billion in South East Asia, and $3 billion in the United States.

But even happy marriages require candor and the ability to work through differences. To this end, the United States has always been forthright in pressing our interests in Taiwan, and I intend to continue doing so. To review some of our efforts in recent months:

-- In April, the United States and Taiwan conducted Special 301 talks on intellectual property. As a result of these talks, Taiwan announced an 18-point action plan which will further improve Taiwan's protection of intellectual property rights. Taiwan has since made excellent progress in implementing that plan and, more generally, in improving IPR protection.

-- In July, we held consultations regarding Taiwan's telecommunications liberalization. As a result of these talks, Taiwan agreed that it would remove its 11.5 percent cap on return on investment for telecom service providers and would relax its debt/equity ratio. Taiwan also assured the United States that foreign wireless service providers would be accorded the same treatment as its State-run holding company, Chunghwa telecom.

-- In August, we held talks on air cargo services, and are hopeful that this issue will be resolved in due course.

-- On September 11, U.S. Secretary of the Interior Bruce Babbitt officially lifted the 1993 certification of Taiwan under the Pelly Amendment to the Fisherman's Protective Act. This action came as a result of Taiwan's dramatic improvement in its protection of endangered species.

-- Last week, following consultations between U.S. and Taiwan officials, Taiwan agreed to respond to U.S. concerns regarding access for U.S. medical devices under Taiwan's National Health Care system. We are hopeful that these problems can be addressed and resolved before the September 30 Super 301 deadline.

-- Also last week, Deputy Treasury Secretary Lawrence Summers headed the U.S. delegation to the second AIT-TECRO Sub-Cabinet Economic Dialogue. The Deputy Secretary was the highest ranking U.S. Government official to travel to Taiwan in nearly two years, and these were the first bilateral talks held at this level in Taipei since the 1970's. The Deputy Secretary's delegation included representatives from the Federal Reserve, the Department of Commerce, the U.S. Special Trade Representative's office, and the Department of State. Our delegations exchanged views on a wide range of important economic topics, several of which Dr. Summers addressed in his talk to the AmCham on September 16.

At the same time that Dr. Summers was in Taipei, AmCham leaders from Taipei were in Washington taking part in their semi-annual "door-knock" campaign to heighten awareness in Washington on issues of concern to American business people in Taiwan. The success of these efforts testifies to the value of the Chamber's work. Similarly, we at AIT value AmCham's input and cooperation as we work together with the Taiwan authorities to address continuing problem areas. The Chamber's direct interventions with Taiwan officials on specific issues such as telecom liberalization, health care and financial services, as well as on broader market access issues, have helped to shape solutions which benefit U.S. firms and Taiwan consumers. You deserve to be proud of the AmCham's accomplishments over the last forty-five years -- and over the past one year.

We recognize, however, that there are still problems to resolve in our bilateral economic, financial, and commercial relations with Taiwan. We need to continue our work to overcome these remaining obstacles facing U.S. businesses in Taiwan today:

-- market access, especially in sectors such as telecommunications and government procurement;

-- transparency, including the removal of unreasonable bureaucratic obstacles and corruption;

-- a level playing field, including fair laws and regulations, consistently applied.

One of our major goals over the coming months will be to conclude our bilateral WTO negotiations. The United States supports Taiwan's accession to the WTO on commercially viable terms, and we understand the high importance which Taiwan attaches to WTO accession. Our negotiations are going well, but there are a number of important issues yet to be resolved, such as reform of the Taiwan Tobacco and Wine Monopoly Bureau and access for certain agricultural products. We also remain concerned over the issues of tariffs and quotas for automobiles. Legal services, too, remain unresolved. The essential point is that accession to the WTO is based on economic criteria. We believe that Taiwan's accession, like all others, should be handled on its commercial merits.

I've talked a lot today about what Taiwan looked like in the past, and what it looks like today. What will Taiwan look like forty-five years from now? With continued liberalization, Taiwan's economy will be even stronger than it is today, and today's high-tech items will be tomorrow's museum pieces. But with your help, we can ensure that the U.S. role in Taiwan's economy will be even greater than it is today. The result will be greater prosperity for both the United States and Taiwan. The people of Taiwan will be grateful. The American people will be grateful. And the President of the United States -- she'll be grateful, too.

Thank you.