Tending the Garden of U.S. - Taiwan Relations Remarks by Stephen M. Young, Director, American Institute in Taiwan Before the American Chamber of Commerce in Taipei

OT0621E | Date: 2006-11-21

President Johnson, Director Vuylsteke, ladies and gentlemen!  It is a pleasure to join you today at AmCham's General Meeting.  Let me take a moment to thank AmCham for all of its contributions to the U.S. - Taiwan relationship.  AmCham members - and AmCham the organization - have been good corporate citizens here in Taiwan.  You have worked hard advocating for American business and enhancing the U.S. - Taiwan relationship.  I can't think of another group that has done more.  Thank you very much.

Today is an excellent opportunity for me to talk about the U.S. Taiwan relationship - in particular the economic and trade relationship - and where it is going.  And what AIT and the U.S. are doing to make it even stronger.

Let me just say I can't promise my remarks will compete with the scintillating entertainment provided by some of your AmCham members at the American Ball a couple of weeks ago.   In particular, I am referring to Anita and the Board's floor show.  Wow!  That was terrific!

The U.S. - Taiwan Partnership is Strong

As you well know, the U.S. - Taiwan relationship is deep and strong and thrives on our long-term partnership.   Our partnership stands on three legs:

1 - Taiwan's Security:  This security is underpinned by U.S. commitments in the Taiwan Relations Act, and Taiwan's own commitment to providing for its self defense.  My October 26 press conference covered this subject in considerable detail and certainly caught people's attention!

2 - Taiwan's democracy:  As a free and open society - and a young democracy - Taiwan is a model for Asia and the world.  Its free and open society is a firm foundation for its own prosperity.  I am optimistic that the current uncertain period in Taiwan politics will contribute to the strengthening of democratic institutions, including a free and responsible media and rule of law by an independent judiciary.  I have spoken of this in the past, and intend to do so in the future.

3 - The robust U.S. - Taiwan bilateral economic and trade relationship:  This is where I plan to focus my attention today.

My topic is "Tending the Garden of U.S. - Taiwan Relations."  However, I will not be talking about weeds, fertilizer, and flowers.  What I have in mind is to convey the dynamic growth of our bilateral ties, particularly in the economic sphere.  This requires both sides' constant attention, to ensure a continuing harvest of mutual benefits.

Taiwan's Economy is in Good Shape

Before I get into what the U.S. is doing, I think it is important to take a look at Taiwan's economy.  If we look at the local press, and sometimes even AmCham's annual White Papers, there is generally a laundry list of problems, with occasional dire predictions of future decline.  While some of these concerns are valid, it is important to note that the data overwhelmingly points to a different conclusion.

Taiwan's economy is actually doing quite well.

Let's look at some key facts:

Unemployment is low.  It has fallen to below 4%

Taiwan has virtually no inflation.  Through the first nine months of this year, prices have risen less than 1%.

Taiwan has respectable GDP growth.  Year 2006 GDP growth estimates range around 4%, with similar forecasts for next year and beyond.

The Taiwan stock market is - again - demonstrating solid growth.  Up nearly 11% so far this year, it reflects continued investor confidence.

The banking system has succeeded in reducing previously worrisome levels of non-performing loans to under 3 percent.

Taiwan's private consumption in 2006 constitutes 62% of GDP.  This figure has risen significantly in the last fifteen years - up from 54.6% in 1991 - and is higher than in Hong Kong, South Korea, and Singapore.

There are other statistics as well - Taiwan's foreign exchange reserves, for example, have reached more than 260 billion US dollars.  This is one hundred billion dollars more than in 2002, and ranks Taiwan as third overall in the world.

In the first ten months of this year, inward foreign investment in Taiwan reached 11.2 billion US dollars.  This is more than triple the amount during the same period in 2005 and reflects a strong vote of confidence from foreign investors.

Taiwan has also become the envy of much of the world with two economic successes in particular.  What do most developed and developing economies want today?  They want to develop a strong hi-tech sector and a successful trading relationship with China.

Taiwan has done both in spades.  On the hi-tech side, it is a world leader in producing top quality computer components and electronics.  While there is no doubt that much traditional manufacturing has relocated to the PRC or elsewhere, our friends here in the hi-tech world tell us that business has never been better.  We also hear enthusiastic reports about how Taiwan companies see research and development as the key to their future.  They're exactly right.

Also of particular note is Taiwan's extraordinary success in China.  No other country has been more successful at entering the PRC market or using it as a manufacturing base.  Official Taiwan statistics put Taiwan investment across the strait at around 50 billion US dollars.  Most of us believe that the actual amount is at least two or three times that.  The rate of investment continues to accelerate and is up 27% so far this year.

Taiwan businesspeople - by the thousands - run factories, enterprises, and other successful firms throughout China.  Some of China's best known and respected firms are - as is no surprise to anyone here - Taiwan firms.  Many of these firms, in turn, are some of Taiwan's biggest customers.

In sum, Taiwan is doing very well with its China business.  China is now Taiwan's largest trading partner.  If we include Hong Kong in the PRC figures, China imported 65 billion US dollars worth of goods from Taiwan in the first nine months of 2006.  This is a 17% increase over the same period last year.  During the same nine month period, Taiwan ran a trade surplus with China (including Hong Kong) of nearly 46 billion US dollars.  No other country even comes close.

So we can see, despite some local worries, Taiwan is very much a world economic player.

U.S.-Taiwan Economic Ties Significant

How does the U.S. fit into all of this?  The U.S. - Taiwan economic relationship is robust and growing steadily.  As you well know, the U.S. is Taiwan's 3rd largest trading partner, and Taiwan is America's 8th largest trading partner.  We expect two-way trade to top 60 billion US dollars this year.

Taiwan is our 6th largest agricultural market, which is remarkable when you consider its relatively small population.  Taiwan consumers, per capita, import more U.S. agricultural products than any other nation, except Canada.  This goes to show you that Taiwan consumers demand the quality which U.S. producers can provide.

There is over 13 billion US dollars in U.S. direct investment here, and much more portfolio investment via the equity markets.

Building the Bilateral Economic Relationship

These numbers represent the real economic partnership between the U.S. and Taiwan.  Let me assure you that AIT is working to make the most of the opportunities that our strong relationship offers.  We believe that there are excellent opportunities for significant progress in our bilateral economic relationship.

First I should point out the high-level visits we have had over the last few months.  In May, Deputy U.S. Trade Representative Karan Bhatia led a large delegation to Taiwan.  His visit re-started the Trade Investment Framework Agreement (or TIFA) talks.  At AIT we are excited about the TIFA talks, because this has become an active and ongoing process that allows us to make progress on a variety of trade issues.

As part of this framework, we just hosted the Deputy Undersecretary of Agriculture, Dr. Charles Lambert.  He came to work with Taiwan's Council of Agriculture to establish a formal joint U.S. - Taiwan Consultative Committee on Agriculture.  It may be a mouthful, but it is important.  This is a forum where high-level officials from both sides will meet regularly to discuss issues of concern.  We are quite close to concluding an agreement.

As we continue to manage our dynamic economic relationship, we expect to see more senior economic and commercial representatives from both sides traveling between Washington and Taipei to explore both opportunities and challenges to this key partnership.

Beef, by the way, is one of those issues.  We have been pleased to see that Taiwan is once again importing U.S. beef.  Taiwan followed a rigorous process in reviewing the imported beef issue.  By following international standards set by the World Trade Organization on trade in beef, Taiwan led the way in the region by relying on sound, scientific data as the basis for reopening its market to U.S. beef.  Japan and South Korea have recently followed suit.

This decision is good for America's farmers who produce the highest quality beef in the world for American as well as foreign consumers.  Americans, who first and foremost demand that their food meet rigorous health, safety, and quality standards, will consume about 12.8 million metric tons of beef this year.

Taiwan consumers also know the taste and quality of U.S. beef.  Taiwan purchases of U.S. beef this year have already set a record - 16, 300 metric tons of beef in the first nine months of 2006.  Taiwan consumers' high appreciation for U.S. beef is readily apparent to anyone who has been at Costco on a weekend trying to walk past the meat counter.  It is work to reach the U.S. rib eyes, and if there are free samples, be prepared to wait in line.

Let me highlight several areas where we are working with Taiwan under the TIFA umbrella - tending the garden, if you will.  These include improving intellectual property protection, fair pharmaceutical pricing, and pursuing formal agreements on government procurement, tax and investment.

IPR

Better IPR protection is important to U.S. and Taiwan scientists, authors, computer programmers, and movie and music creators.  It is of fundamental importance to Taiwan as it develops its knowledge-based economy.  A place that wants to attract more research and development, build a biotech industry, explore the emerging world of nanotechnology and maintain its role in the electronics industry needs a strong IPR regime.  This has been a key area where the U.S. and Taiwan have established a strong dialogue.

For example, earlier this month more than 20 officials from several different Taiwan government agencies met - via digital video conference - with U.S. officials in Washington, to review the IPR situation in Taiwan.   The Taiwan Intellectual Property Office has done a great job leading this dialogue on the Taiwan side.  As the dialogue has expanded, we have also had the opportunity to work with the Ministry of Justice, law enforcement, and the Ministry of Education.

Results of this dialogue are impressive.

There is now a dedicated IPR police force making a growing number of seizures and arrests.  They are devoting more and more resources to fighting cyber crime.

Internet piracy is an area of increasing concern everywhere in the world.  Taiwan's Legislative Yuan is taking action.  We are pleased to see that the LY is currently reviewing two draft laws that will help to prevent Internet piracy.  One bill will improve regulation of peer-to-peer (P2P) file sharing.  If you don't know what P2P means, just ask your kids.  The other legislation will help ISPs (Internet service providers) prevent online infringement.

The LY is also reviewing legislation to establish a specialized Intellectual Property Court.  This legislation represents the hard work of the Judicial Yuan which drafted the legislation.  While we believe that this bill is not perfect, since the scope of the IP court is limited and does not include criminal cases in the first instance, it is a step in the right direction.   We would encourage the LY to expand the scope of the court.  Another alternative is to dedicate additional resources and training so that judges and prosecutors are well-prepared to deal with IPR cases at all levels of the court system.

Even with the significant progress that Taiwan has made on IPR, we believe there is still more work to be done.  The legislation that I have just mentioned is very important.  We also encourage the Ministry of Education to be more active in protecting IPR on campus and on TANet [T A Net], the Ministry's computer network, which has about two million users.  We look forward to working with the Ministry of Education on this issue.

We are worried about counterfeit pharmaceuticals - which not only cheat U.S. firms, but also present a real risk to the people of Taiwan.

Pharmaceuticals

There are other issues involving pharmaceuticals as well.  This summer and fall AIT and the Bureau of National Health Insurance engaged in a productive dialogue on pharmaceutical pricing.  I don't want to get into the technical aspects here, but if you are sitting near an AmCham member of a pharmaceutical firm, I am sure he or she is willing to go on at length about this topic.

We believe the drug pricing and reimbursement system as implemented by the Bureau of National Health Insurance remains flawed.  The system restricts patient and doctor choice.  It pays too little for cutting-edge new drugs and too much for generics.  Still, we made good progress with the Bureau of National Health Insurance on this issue and helped U.S. innovative drug makers get a fair hearing.     Both the U.S. and Taiwan have agreed to set up working groups to tackle the larger issues weighing down the system.  I expect that this will be a difficult issue, but progress is important to both sides.

Export Controls

Another vital trade and security issue is export control.  We have been working closely with Taiwan to control the goods and technologies that could be used to develop Weapons of Mass Destruction and their delivery systems.  We appreciate the measures Taiwan has taken to restrict trade, travel, and financial dealings with North Korea in response to recent UN resolutions, and other recent measures to strengthen its export control regime.   We need to keep working together to further strengthen Taiwan's export control regime.

I'd also like to thank AmCham's President Tom Johnson for sending two of his company's executives to accompany a U.S. interagency delegation to the Tainan Science Park last week to speak to companies and officials there on best practices in export control.  This was an excellent example of how AIT and AmCham can work together to promote a "first class" strategic trade control system for Taiwan that will contribute to stability in the region and demonstrates that Taiwan is a responsible member of the international community.  I think all of us here today can agree that it is also very good for business.

Moving Toward Agreement(s)

Let me also mention two significant agreements that are the on the table, and one which could come to the table soon.  All three would bring significant benefits to both Taiwan and the U.S.  I believe all three agreements are well within reach over the next few months.

The first is the WTO Government Procurement Agreement - For some time, Taiwan has been ready in substance to accede to the WTO Government Procurement Agreement.  The U.S. has been a strong supporter of Taiwan's accession to this agreement.

A government procurement agreement would make it much easier for U.S. firms to bid on government tenders here in Taiwan and for Taiwan firms to sell to the US government.  We remain flexible in our approach to concluding such an agreement, and are confident our Taiwan partners will demonstrate similar flexibility.

The second is a Bilateral Investment Agreement - The U.S. has already provided Taiwan with a draft copy of a model agreement.  Taiwan has agreed to move forward soon on these discussions.  Such an agreement would provide assurances of national treatment for U.S. investors in Taiwan.

Finally, AIT is eager to begin negotiations on a bilateral tax agreement.  U.S. business has been interested in a tax agreement for years.  A tax agreement could be advantageous for U.S. companies operating in Taiwan and for Taiwan firms with investments in the U.S.

We are working closely with agencies in Washington to move this forward and hope to see progress in the near future.

There are several other areas in our bilateral economic relationship where we are working hard and enjoying the support of AmCham and its individual members.

In telecommunications and broadcasting, for example, we encourage Taiwan to continue to develop the National Communications Commission into an independent and world-class regulator that befits a modern economy such as Taiwan's.  We are encouraging the Department of Health to begin a meaningful dialogue with chiropractors so these U.S.-trained professionals, many of whom are U.S. citizens, can practice their profession here.

What about an FTA?

An issue that is raised regularly with AIT and I know with many of you, is Taiwan's strong interest in negotiating a free trade agreement (or FTA) with the United States.  First let me say, it is a luxury to serve at a post where your hosts approach you with a sincere wish to liberalize trade between both sides.  The U.S., of course, wants freer trade with all of its trading partners.

As Deputy U.S. Trade Representative Karan Bhatia made clear during his visit here last May, there are some impediments to negotiating an FTA with Taiwan at this time.  Some are being addressed through our TIFA process.  Taiwan's obtaining vocal support from American business is also critical to moving forward.  But as we have expressed to our Taiwan counterparts, the U.S. administration's "fast track" Trade Promotion Authority (TPA) expires June 30.   Based on my recent consultations in Washington, where Susan Schwab spoke about USTR's plans for bilateral FTAs, I don't think it is reasonable to expect to start a new set of FTA talks now and have a finalized agreement ready to present to the Congress before TPA expires.  Our colleagues at USTR have an extremely full schedule dealing with FTA negotiations - and other international trade talks - already in play and do not have the resources to commence a new set of negotiations at this time.

I understand USTR intends to request extension of Trade Promotion Authority, but it is early yet to say how the recent mid-term elections will affect Congressional views on TPA.  Although not the dominant issue in the campaign, it is reasonable to expect the new Congress will want to take a careful look at any proposals on TPA before making a decision.   Already, some of the new leadership are stating that Congress will not re-authorize fast track authority unless it is strengthened with provisions on environmental protection and labor rights.  And before you know it, the U.S. will be in the middle of a presidential election campaign.

One more note about FTA - I know that Taiwan has reached out to many of you seeking U.S. business support for an FTA.  I think it is useful for Taiwan to bring its argument directly to you.  But make this dialogue meaningful.  Ask Taiwan authorities to explain clearly how an FTA would benefit your firm.  Ask for explanations that go beyond generic.  What concrete benefits would directly accrue to your firm?  This will be key to building U.S. business support for any future FTA.

Seeking Free Trade Through APEC

It is also useful to bring up our efforts to expand free trade through our participation in APEC and the WTO.  I want to highlight that during last weekend's APEC meeting, leaders issued a joint statement backing a resumption of the Doha Development Agenda.  A successful Doha Round will have important benefits for both the U.S. and Taiwan.    The U.S. has also encouraged APEC to work towards the creation of a Free Trade Area of the Asia Pacific.  Of course we would support Taiwan's participation in such an arrangement as an APEC member economy.  We continue to encourage Taiwan's active participation in APEC and in the WTO to achieve success in these important trade initiatives.

More Mainland Links

As a final point, we encourage Taiwan to take steps in another area, which is of direct interest to both US and Taiwan firms.  We encourage Taiwan to negotiate with China to open the three links -- especially direct flights -- as soon as possible.  You know, any FTA with the U.S. will not replace the benefits of closer cross-strait ties.  But closer such ties might improve the climate for concluding an FTA in the future, assuming Congress extends fast track authority.

Like you in AmCham, we encourage Taiwan to remove barriers to additional trade and movement of people back and forth across the Strait.  We know this is a sensitive issue, but for Taiwan to remain an important part of the global supply chain, it needs to establish direct links with China.

It is also important to U.S. firms who face obstacles importing into Taiwan products or components that they produce in China.  It is still far too difficult for companies to bring PRC staff to Taiwan for training or business meetings.

Taiwan has seen that market forces, not government edicts, control the flow of capital.  Taiwan's enormous investments in China make this very clear.  But so do its significant investments elsewhere.  Taiwan has become Vietnam's largest foreign investor, and is steadily expanding its presence in Southeast Asia, India and elsewhere.  It is best for Taiwan to let the markets decide where the capital should go.

Taiwan should not fear closer ties to its huge and rapidly growing neighbor, so long as it retains its ability to defend itself - a subject on which I have recently commented in some detail.

The longer Taiwan waits to open the three links, the greater risk it faces of placing itself outside of regional integration trends.  Establishing the three links will make Taiwan more competitive and a better place to invest and do business.

Conclusion

In closing let me just say that even with the dramatic rise of China's economy, Taiwan remains extremely important to the United States.  Our partnership is long and deep.   Beyond the economic statistics I stated earlier, one of the best measures of the depth of our relationship is that there are currently nearly 29,000 Taiwan students studying in the United States.  That is the sixth-highest of any country.  Most of the students from Taiwan are studying for graduate degrees.  They represent some of Taiwan's best and brightest, and we are proud to host them for a few years.

It is increasingly clear that U.S. and Taiwan economic interests have converged in many areas.  Both sides will benefit from increased IPR protection.   Reforms to Taiwan's national health care system will not only benefit innovative drug companies - many of which are U.S. firms - but also will benefit Taiwan patients, and will stimulate Taiwan's own efforts to establish a biotech industry.  Improved market access for U.S. products such as beef, and for services such as chiropractic, brings more choices for Taiwan consumers.   More open telecommunications and broadcasting requirements bring more competition, lower prices, and, again, more choices for Taiwan consumers.  Agreements in government procurement, tax, and investment, should also bring clear benefits to businesses, taxpayers, and consumers in Taiwan and in the United States.

We have a lot on our plate, but together we can accomplish a great deal.  With a bit of a push, we can accomplish it in the next year or so.  The U.S. is committed to making progress in all of these areas.   Just like AmCham, we are looking for results -and so is Taiwan.

Sometimes pessimistic voices here express concern that Taiwan's economy might become marginalized by current trends in East Asia.  We even hear that this is inevitable without an FTA with America.  While I want to emphasize that an FTA remains on the table, I don't share this concern.  This is because my country will continue to work creatively with our Taiwan partners to ensure they keep contributing to the dynamic regional and global trends that benefit all of us so much already.  That includes making sure that Taiwan's voice is heard in trade organizations like APEC and the WTO.  With this in mind, I want to personally assure you that the U.S. will continue to work to insure that Taiwan will remain a prosperous, vibrant partner with the U.S.

So, optimistic in the knowledge that our common road ahead offers great opportunities for both the U.S. and Taiwan, I look forward to a very good year for our AmCham partners and for the U.S. - Taiwan relationship.

We have, as I have described today, an abundant set of tools in our shed.  Let's keep them handy as we continue to work together tending this fertile and productive garden of bilateral relations.

Thank you very much.

 

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Transcript of Q & A with AmCham Members

QUESTION:  (Alice Kao, Vice President, ETTV) I'm from the Eastern Broadcasting Company.   My question probably has no relation with your topic today.

MODERATOR:  In that case. Don't ask it. Next question.  [laughter]

QUESTION:  Okay. The former AIT Chairman, Ms. Therese Shaheen, is in town with her husband on a private trip, and she had openly supported the besieged President Chen Shui-bian for his coming judicial investigation, and I am sure that she will convey the same question to President Chen herself. Because as a private citizen she is going to see former President Lee Teng-hui as well as see our current President Chen Shui-bian. I wonder, with Shaheen's unofficial capacity and her staunch support of President Chen Shui-bian, would that to some degree coincide with AIT's private position too?

DIRECTOR:  AIT doesn't have a private position. AIT's position is that of the U.S. Government.  And I made it fairly clear at my press conference a couple of weeks ago.  The United States supports its interests in Taiwan, and we also have a great respect for the Taiwan democratic process. I actually think that, as I suggested in my speech, these events have a very real possibility of strengthening of the rule of law in Taiwan, and that's a good thing. Don?

QUESTION:  Don Shapiro from AmCham's TOPICS Magazine, and my question relates directly to your remarks.  (Laughter.)  If the U.S. and Taiwan are able to conclude bilateral agreements along the lines of what you spoke [about], what would be the potential impact on a future FTA?  Would that be a hindrance in any way, or would that make it easier to move on to an FTA?

DIRECTOR:  Entirely the latter. I think as I've tried to describe today, the things that we're working on the TIFA framework are all very concrete steps to improve bilateral trade and investment. As both Deputy U.S. Trade representative Bhatia and I have said in recent months, clearing out some of these kinds of challenges that the bilateral relationship faces could create a better framework or better climate for looking at an FTA if, in fact, fast track authority and other factors fall into place in the coming months.  But nothing that we're doing now is designed to make it harder in the future to get an FTA. Frankly, I think it all stuff that is very much in both sides' interests. I think the Taiwan side agrees as well.  We've got a very good set of partners in various ministries on these issues. I very much appreciate the support of AmCham to what we're doing and, obviously, the feedback that we regularly get from you, because the overlap between your interest and ours is almost complete on this sort of issue.  

MODERATOR:  One of the areas that you mentioned in your speech that probably has not received much visibility is the potential tax agreement. It's been on and off the record (sic) for about a decade, but what do you think from your perspective that American companies here should do to vis-?vis their home offices, for example, to maybe push this along further?     

DIRECTOR: Well, my understanding is that we need to get a little more enthusiasm on the Taiwan side, so you can obviously be talking to your colleagues here, but we're ready to engage with them when they are, and we frankly think it will be beneficial to all the Taiwan businesses working in the U.S. as well as here. So for more details, you might want to see Dan Moore my ECON chief.

QUESTION: Maurice MarWood, Capital Equipment. It seems to me that the initiative to sell Taiwan more military hardware flies directly in the face of other initiatives to build stronger friendly relationships with the Mainland. How do you reconcile those two initiatives?

DIRECTOR: Thank you for the question. Actually, I find it very easy to reconcile them. Taiwan's ability to negotiate from a position of self-confidence and goodwill with the PRC -- I think it's directly related to its sense that it can take any deal it likes and reject any deal it doesn't like. An ability to defend itself against any threat or attack gives Taiwan that self-confidence. So I think, and many people in this island agree with me, that a capable and adequate self-defense gives Taiwan the ability to explore more ideas with China in a mutually conducive atmosphere.

QUESTION: William Vocke, National Chengchi University. Your comments about the Three Links make eminent sense economically. Would you care to comment about the political dimensions of the Three Links?

DIRECTOR: Well, I think that almost every the issue in Taiwan now has political context to it, as we've seen. But, frankly, with a million Taiwan businessmen living and working in China and four million traveling there each year, this seems like something that --  if we're talking about direct flights -- that is overdue. I think that there is a misperception that nothing is happening, because people obviously would like to see everything resolved right away. But the fact of the matter is, and I give credit to the government and its supporters, gradual steps to ease the restrictions are taking place. We've gone from charter flights just on the New Year holiday to now plans for charter flights four times a year. We've seen the first cargo flight of its kind go in the last few months, and we hope to see more of those. And we also have seen plans to expand tourism by PRC citizens to Taiwan, which I think is good, both for its economic impact on Taiwan, but also for the breaking down of barriers. As more and more citizens from the PRC come and see all the wonderful things that the people of Taiwan have accomplished here, some of the misperceptions about this place might be broken down. So I think that there are things going on. I do think that politics has gotten in the way of some steps. By the way, though I would like to note that there are increasing indications that a more liberalized regime toward the size of microchip manufacturing [investment] in the PRC might be in the offing. And so, quietly, things are happening, and it seems to me that the debate or the discussion about what, if any, limits there should be is actually healthy.

QUESTION: Paul Cassingham, Senior Counsel, Yangming Partners. One of the arguments that Taiwan put forward for an FTA that you mentioned is that, if Taiwan has an FTA with the United States, it will be easier for Taiwan perhaps to negotiate FTAs with other jurisdictions in the region. And we've heard this argument presented as something of a political argument. My question is, is there an economic dimension to that we ought to be focusing on, that is, is there something in it for US business for a Taiwan FTA with the US to then lead to other Taiwan FTAs around the region? Our companies have operations around the region as well, and maybe we're missing an angle on this question.

DIRECTOR: Well, you know I'm not really sure, Paul, if there's a direct connection between the possibility of an FTA between Taiwan and the US and the willingness of others to explore that. And I think that the key point that we've always tried to focus on has been the economic benefit. We don't want to negotiate an FTA for some rather simplistic political purposes. Taiwan has to present an argument based primarily on economic ties, and I think that, should an FTA be negotiated with the United States, and I think that I've caveated that there are a number of challenges that we face, at this time, with going forward on that, it may serve as a template for some other countries. Certainly, I think, one reflection of the great interest in Taiwan is the dozens of very major representative offices in Taiwan. I know that my Canadian colleague is here today and that there are just dozens of the most important countries in the world who are very significantly advancing their trade and investment interests through their presence on the island and who are boasting rapidly growing two-way trade and other contacts. So people like that will always watch the lay of the land.  But you know, as I discussed in my remarks, the Hanoi summit really tried to turn the spotlight on in different issue, and that is this long-discussed idea of trying to get the Doha Round completed, and if that were to succeed, I think that that would be a great example of where all of the members of WTO -- I think there are over a 130 of them by now and the newest one is Vietnam, which just concluded its package in the last week -- can equally benefit in a liberalized trade regime which can particularly address some nettlesome agricultural barriers that a number of countries, including my own, have kept up. So, there are a lot of dynamics going on here and there is also a discussion of an APEC trade-related agreement at the Hanoi summit. I think all of these things are aimed at the same basic goal, and that is to make trade barriers come down everywhere and give people like yourselves a level and a fair playing field on which to do your business, whether you're in Taiwan or Thailand or Tunisia. 

MODERATOR:  We've got time for one long question and a short answer, or a short question and a long answer. 

QUESTION:   Eric Siddons from Yangming Partners.  I am wondering what the U.S. official position is on the discussions that have occurred between the Kuomintang, or the KMT, and the current Chinese leadership on the mainland?

DIRECTOR:   Well, in short, the United States has no problem with dialogue like that, and in fact we encourage it.  But the point we underscore again and again is that the PRC should also talk to the democratically elected leadership of Taiwan.  That has unfortunately not been something they have seen fit to do thus far.  I think, actually, going back to the earlier question, that the inability to have that kind of contact between the two sides of the Strait has been an impediment to advancing cross-Strait relations in general and direct links in particular.  That's a short one.  You can ask one more.

MODERATOR:  Okay. One more question.

QUESTION:  [Raymond Wu, Amulaire Thermal Technology] Trying to be quick. My question has nothing to do with President Chen.  I just want to echo the importance of the IP.  As you know, I'm on behalf of the Amulaire Thermal Technology, the IP is certainly important and is the only way for U.S. companies to sustain the business.  However, I'd like to highlight the transient aspect and complexity aspect of the IP issue.  Technically --

DIRECTOR:  Intellectual property, guys.  For those of us who are not IP gurus.

QUESTION:  Taiwan to operators to a large extent pay the royalty in the industry -- in the pre-recorded industry.  And because on the other side of the Strait, the operators don't pay for it, therefore, there is a big push for the operator here to move to mainland China to prevent the payment of royalties.  And that presents quite a complexity of the state of the IP.  The State Department should look at it.  Thank you.

DIRECTOR:  There wasn't a question there, was there?  But if you are saying that we'd like to see China respect intellectual rights more, you are absolutely correct.  And I guess I'd like to underscore that when I was here eight years ago as deputy director, the IPR issues that we faced with Taiwan were extraordinarily more complex than they are now. So, this is an area where we've really seen a lot of progress.  I won't say it's all solved all the way.  Pharmaceutical copyright infringements is one case I discussed.  But really Taiwan has been taking a very serious and responsible international approach to IPR protection. I think it shows in the way Taiwan's industries have advanced, and we've got to work together with places like the PRC which have not got there yet. I know that Secretary Paulson is going in a couple of weeks to the PRC to continue high-level economic talks, and I'm sure IPR will be one of the things on his agenda.

(END)