US cancels defense meet with Taiwan

'POISONOUS ATMOSPHERE': Fears of Chinese displeasure prompted Washington to terminate this year's mini-summit with Taiwanese defense officials, sources said

BY MAC WILLIAM BISHOP

STAFF REPORTER

Seeking to placate Beijing ahead of next month's visit to the US by Chinese President Hu Jintao, the Bush administration has canceled high-level annual defense talks with Taiwan, sources told the Taipei Times yesterday.

The talks, known in defense circles as the "Monterey Talks" because they take place in Monterey, California, were scheduled to be held on Sept. 13 and 14, a well-placed local source with access to the information said.

The source requested anonymity, saying that the information he was disclosing was "a bit sensitive."

The reason that the talks had been canceled was because of pressure from the Chinese leadership, which said that holding the talks would "poison the atmosphere" for Hu's trip to the US early next month, the source said, citing conversations with US officials.

Hu is scheduled to meet with US President George W. Bush on Sept. 7 in the White House. It will be the first trip Hu has made to the US since he replaced former president Jiang Zemin as China's supreme leader.

The Monterey Talks are the highest-level security dialogue between the US and Taiwan, and have taken place every year since 1997. It is "the primary forum for addressing strategic concerns associated with the defense of Taiwan," according to one US defense expert.

"The last two meetings included bilateral war-gaming intended to facilitate coordination and reduce response time in the event of Chinese military aggression against Taiwan," the expert said.

The talks, which Taiwan's defense officials describe as "routine," are part of increasing if low-key military cooperation between the US and Taiwan. Some aspects of this cooperation -- such as Taiwan's purchase of advanced weaponry from the US -- attract a lot of political and media attention, but the bulk of US-Taiwan military ties are conducted in a more mundane and low-profile manner.

For example, hundreds of Taiwanese military personnel have -- and continue to be -- trained in the US in a variety of programs, including advanced fighter-jet combat training, special-forces qualification and a wide array of technical and specialty training regimens.

Still, the Monterey Talks are only one part of what Wendell Minnick, the Taiwan correspondent for Jane's Defence Weekly and an expert in cross-strait military affairs, described as an increase in security cooperation between Washington and Taipei in the last five years.

Minnick pointed to the existence of an "emergency hotline" between Taiwan's Ministry of National Defense and the Pentagon as an example of increasingly robust military-to-military ties between the two countries.

Nevertheless, the Bush administration's cancelation of the Monterey Talks clearly angered some US defense experts.

"This is just another example of the Bush Administration's spineless policy on Taiwan, and its disregard of Congressionally mandated obligations to maintain the capacity to respond to Chinese aggression," said one academic, who asked not to be named due to his ongoing ties with US officials.

This would not be the first time that the Bush administration has bowed to Chinese pressure with regard to Taiwan.

In 2003, during the last visit to Washington by senior Chinese officials, the US president issued a public dressing-down to President Chen Shui-bian, warning him not to try to change the "status quo" in the Taiwan Strait. Coming as they did during the run-up to Taiwan's presidential election, many analysts interpreted Bush's comments as a direct slap at Chen, and a warning to the Democratic Progressive Party to tone down its campaign rhetoric.

It is not clear if Bush plans to publicly comment on cross-strait matters during Hu's visit, but Chinese and US officials have long used an array of standard phrases to address the issue during high-level meetings, and it seems likely that this will again be the case next month.

GIO unveils latest PR campaign for Taiwan UN effort

AP , TAIPEI

Taiwan kicked off its annual media campaign to overcome China's opposition to its UN membership bid yesterday, by wishing the organization an "UNHappy 60th birthday.''

This is the 13th consecutive year Taiwan has tried to gain admission to the UN, but the effort is likely to be quashed by China.

Beijing says Taiwan has no right to join international organizations because it, not Taipei, is responsible for Taiwan's foreign relations. In past years it has put heavy pressure on UN members considering support for Taiwan by threatening diplomatic or other sanctions.

"Taiwan has no way of participating [in the U.N.'s 60th birthday on Sept. 13] even though it has more inhabitants than 140 UN members,'' said Pasuya Yao, minister of the Government Information Office (GIO).

Yao unveiled a series of posters meant to underscore the logic of the new campaign. One showed a black-and-white image of a birthday cake entitled "UNHappy 60th birthday'' with the question "Can a family be happy with one member missing?"

The posters form the backdrop for newspaper and magazine ads debuting in New York, Washington, Tokyo and Brussels on Monday, Yao said.

He said he hoped world leaders attending next month's UN General Assembly session would take notice.

Earlier this month, the government announced that 11 allies had filed a request asking the General Assembly to consider Taiwan's latest bid for admission.

Tu Cheng-sheng says China is not the best answer

CNA , HUALIEN

"Taiwanese students studying there may not be able to enjoy quality services."－　MOE statement

Minister of Education Tu Cheng-sheng urged Taiwanese students yesterday to understand the real reason behind China's offer of tuition incentives, noting that tuition in China may in fact not be cheaper than in Taiwan.

Tuition at some Chinese universities exceeds 20,000 yuan (NT$80,000) a semester -- almost double what a Taiwanese student pays at a national university -- so people in Taiwan had better wake up from the dream of low education costs in China, he said.

He said he would not claim that the quality of education in Taiwan is better than in China, but he would like people to "see clearly" for themselves.

Tu made the remarks one day after Beijing announced that Taiwan students can pay the same tuition and boarding fees as their Chinese counterparts starting next semester, which begins in the fall. Hong Kong and Macau students are not eligible for the preferential treatment.

He did not specify what China's "real purpose" was in making the announcement, saying "we all know in our mind."

Media handouts given by ministry officials show the number of students attending China's higher education institutes rose rapidly from 1.08 million in 1998 to 4.2 million last year, indicating that the quality of education "varies from school to school in such a wide range that Taiwanese students studying there may not be able to enjoy quality services."

Chen calls on Ma to abandon KMT's `one China myth'

PROMOTING IDENTITY: The president yesterday said that unity in Taiwan would ensure that everyone enjoyed freedom and democracy, while the opposition called him divisive

BY CHIU YU-TZU

STAFF REPORTER , WITH CNA

President Chen Shui-bian yesterday called on the Chinese Nationalist Party (KMT) and its chairman, Ma Ying-jeou, to abandon the "myth of `one China'" to prevent a future crisis that would jeopardize not only Taiwan, but also the KMT's existence.

When receiving a delgation of Taiwanese businesspeople yesterday at the Presidential Office, Chen said that the growth of Taiwanese business overseas can be attributed to a strong sense of Taiwan consciousness.

"Taiwan is our country, and its 23 million people are the real masters. We are definitely not `guests,'" Chen said, apparently referring to the debate over the term "Taike" which some academics have denounced as derogatory.

Chen's championing of Taiwan consciousness yesterday was an apparent bid to criticize Ma's vision of a "Taiwan discourse" -- or Ma's belief that creating unity in Taiwan was a step toward strengthening links with China.

"Unity in Taiwan should be based on putting Taiwan's interests first and promoting Taiwan's identity," Chen said.

Taking the history of the Democratic Progressive Party (DPP) as an example, Chen said the spirit of Taiwan consciousness that the DPP has promoted was meant to protect Taiwan's interests. Chen said that he hoped the KMT could also adopt similar values.

"At this very moment, for the KMT, which has a complicated history longer than 100 years [Ed. note: The KMT was founded on Aug. 25, 1912, after being reorganized from the Chungkuo Keming Tungmeng Hui, or Revolutionary Alliance] the new leader has to be resolved to entirely abandon the myth of `one China,' to break away from political struggles, and to sincerely face its unsolved assets problems," Chen said.

Chen said that he would never deny the KMT's contribution to Taiwan's development in the past. Chen added, the KMT should not combine the competition among political parties in Taiwan with cross-strait issues.

"National defense and cross-strait tensions are crucial issues we have to deal with carefully ... A dialogue between the ruling party and the opposition has to be carried out as soon as possible to smooth the Legislative Yaun's passage of important bills, including the special arms procurement budget," Chen said.

Chen said that the difficulty Taiwan is facing is disunity in Taiwan, rather than the rise of China.

"As long as we can unite to defend the sovereignty of Taiwan and the freedom and democracy we enjoy now, international society will never allow China to adopt `non-peaceful means' to solve the Taiwan Strait controversy," Chen said.

In response to Chen's remarks to Ma urging him to end the party's "one China" mythology, the KMT urged Chen yesterday to honor his oath to the Constitution of the Republic of China, which asserts the "one China" principle.

Cheng Li-wen, KMT spokesperson, said that since Lien Chan was chairman, the KMT has done its best to handle the party assets issue, and "an absolute majority of the party assets" have already been "taken care of."

Cheng said the power struggle in the legislature actually originated from "President Chen's style" -- Chen's lack of respect for the Constitution, lack of respect for the majority in the legislature and his penchant for inciting ethnic strife.

"The ethnic strife that has been generated before and after President Chen obtained power is a problem that he must face candidly," she said.

She said Ma does not feel flattered by Chen's advice, which was conveyed through the media.

"If the president continues this mode of communication, the KMT will refuse to respond," she added.

Musharraf confirms that North Korea's nuclear technology came from Pakistan

NY TIMES NEWS SERVICE , ISLAMABAD

Pakistan's president, General Pervez Musharraf, confirmed Tuesday for the first time that a Pakistani nuclear scientist had provided North Korea with centrifuge machines that could be used to make fuel for an atomic bomb, a Japanese news agency reported.

In an interview here with the agency, Kyodo News, Musharraf said the former head of his country's nuclear program, Dr. Abdul Qadeer Khan, had sent "centrifuges -- parts and complete" to North Korea. The Pakistani leader did not divulge the number of centrifuges that arrived in North Korea, saying, "I do not exactly remember the number."

Musharraf also said Khan might have sent North Korea uranium hexafluoride, which can be enriched in centrifuges and then processed into fuel for civilian nuclear reactors or atomic warheads.

The president's statements are likely to bolster American contentions that North Korea has a covert uranium enrichment program and complicate the six-nation talks over North Korea's nuclear program that are scheduled to resume next week.

Musharraf reiterated his long-held position that that he and other members of Pakistan's powerful military had not known that Khan was shipping nuclear hardware abroad. But American experts on the spread of nuclear weapons said the disclosure raised new questions about the Pakistani military's possible role in nuclear proliferation.

Khan publicly confessed in January 2004 to having provided nuclear weapons technology to Iran, North Korea and Libya, but he gave few details. Musharraf pardoned the scientist, citing his status as a national hero. Pakistani officials are investigating Khan, but Musharraf has barred American or UN investigators from directly questioning him.

The general's comments were Pakistan's first official acknowledgment of nuclear technology transfers to North Korea. Khan, who is under virtual house arrest in Islamabad, is believed to have run the largest nuclear smuggling ring in history.

American nonproliferation experts said the disclosure was not a surprise, since American officials had long suspected that Pakistani centrifuges had been shipped to North Korea.

North Korean officials have denied having a uranium enrichment program -- one of the issues that have deadlocked the six-nation talks -- but say they have made nuclear weapons fueled with plutonium. The parties have continued discussions this week and are trying to make headway on a "statement of principles" to guide future negotiations.

One method North Korea may have used to make a bomb would have involved extracting plutonium from spent fuel rods at its main nuclear complex at Yongbyon. But American officials have also accused it of mounting a separate, covert effort to use a second, more easily hidden method, that of using centrifuges to enrich uranium.

The disclosure of a centrifuge shipment appears to strengthen but also complicate the American position. The presence in North Korea of centrifuges sent by . Khan would increase the need for a final agreement to guarantee the removal of the machines. But locating them all, and confirming that others are not being hidden, could prove difficult. Pakistani and American experts have said it is plausible that Khan successfully smuggled nuclear bomb designs and other small items out of Pakistan. But they said it would be virtually impossible for him to have removed large centrifuge machines from the country's tightly guarded nuclear labs and ship them out of the country without the military knowing.

"I think it would be absolutely shocking that they not have some idea," said George Perkovich, a nonproliferation expert at the Carnegie Endowment for International Peace in Washington. "There were planes flying back and forth."

In the interview, Musharraf played down the significance of the shipments, saying Khan was not an expert in other techniques and technologies needed for developing a bomb.

"Dr. A.Q. Khan's part is only enriching the uranium to weapons grade," Musharraf said. "He does not know about making the bomb. He does not know about the trigger mechanism. He does not know about the delivery system."

US opts for cents and insensibility

The news that Washington has canceled the highest level US-Taiwan defense talks that take place each year is a reminder of the inability of the Bush administration to conduct sensible foreign policy, as well as brazen hypocrisy when it comes to questions of principle.

When Washington abandons pragmatism and ideology in its diplomatic affairs, then what is left? Unfortunately, the answer seems to be "damage control."

Even diehard Republican US officials have acknowledged that President George W. Bush is quickly becoming a lame-duck president due to his mishandling of Iraq, his inability to make progress on the North Korean nuclear standoff and his frequently divisive domestic agenda.

Bush desperately wants to avoid any more crises. This now includes even minor rows with Beijing over what has been an eight-year tradition -- the yearly US-Taiwan security forum in Monterey, California.

The problem with such reactive diplomacy is that it is shortsighted and sends the wrong message to Washington's allies, as well as its enemies -- or "strategic competitors" as the politically correct call them.

The tension between China and Taiwan is neither a minor trade dispute nor a diplomatic gaffe that can be papered over. A conflict could involve the world's largest economies -- the US, China and Japan -- in a direct confrontation over vital strategic interests.

Yet the Bush administration once again demonstrates its lack of imagination as it sacrifices what is clearly in the US' interest -- support for a democratic state on the periphery of its security frontier -- just so that Bush can have a nice, quiet photo-op with a tyrant.

Certainly, increased US engagement with China is in everyone's best interests, and if millions of impoverished Chinese can be lifted out of abject destitution, then all of humanity will benefit. And, of course -- as the platitude-purveyors at the US State Department love to chant -- the US has an interest in maintaining a healthy, stable relationship with China.

But this does not mean that Washington has to cower in the face of an oppressive authoritarian regime simply because the latter offers promises of cheap consumer electronics.

The White House is making a grave mistake allowing itself to be influenced by Chinese President Hu Jintao's visit next month. After all, the trip is an exercise in fluff, and the most substantial thing that is likely to come of it is hours of TV coverage of two men in suits sitting in chairs with half-smiles on their faces.

Few people believe that a conflict between Taiwan and China is likely; fewer still believe it to be imminent. This is probably so, and so long as cool heads and good sense prevail, it will never happen.

But the lessons of history are clear, and it is foolish to put one's faith in the good sense of politicians -- especially politicians who are rarely accountable to anyone for anything, such as China's leaders.

Before it decides to sacrifice necessary security preparations, the US would do well to remember that everything it achieved in East Asia came at the price of blood.

The shattered husks of fighters and warships that litter the ocean floor from the Solomons to Okinawa -- and rivers of blood from soldiers and civilians -- mark the last time an ultra-nationalist, militant state had to be brought to heel in the region.

Does anyone want to see that happen again?

China's key problem: over-focusing

By Robert Shiller

The Chinese economy has been growing at such a breathtaking annual pace -- 9.5 percent in the year ending June -- that it is the toast of the world, an apparent inspiration for developing countries everywhere. But is China getting too much of a good thing?

Since he became president in 2003, Hu Jintao has repeatedly warned that China's economy is overheating, and his government has recently acted accordingly, raising interest rates last October, imposing a new tax on home sales in June and revaluing the yuan last month.

But claims that China is overheating don't seem to be based on observations of inflation. While China's consumer price index rose 5.3 percent in the year ending July last year, this was due primarily to a spike in food prices; both before and since, inflation has been negligible.

Nor are these claims based on the Chinese stock market, which has generally followed a downward path over the past few years.

Instead, those who argue that the Chinese economy is overheating cite the high rate of investment in plant equipment and real estate, which reached 43 percent of GDP last year. On this view, China has been investing too much, building too many factories, importing too many machines and constructing too many new homes.

But can an emerging economy invest too much? Doesn't investment mean improving people's lives? The more factories and machines a country has, and the more it replaces older factories and machines with more up-to-date models, the more productive its labor force is. The more houses it builds, the better the private lives of its citizens.

A number of studies show that economic growth is linked to investment in machines and factories. In 1992, Bradford DeLong of the University of California at Berkeley and Lawrence Summers, now president of Harvard University, showed in a famous paper that countries with higher investment, especially in equipment, historically have had higher economic growth. One of their examples showed that Japan's GDP per worker more than tripled relative to Argentina's GDP from 1960 to 1985, because Japan -- unlike Argentina -- invested heavily in new machinery and equipment.

In short, the more equipment and infrastructure a country is installing, the more its people have to work with. Moreover, the more a country invests in equipment, the more it learns about the latest technology -- and it learns about it in a very effective, "hands on" way.

It would thus appear that there is nothing wrong with China continuing to buy new equipment, build new factories and construct new roads and bridges as fast as its can. The faster the better, so that the billion or so people there who have not yet reached prosperity by world standards can get there within their lifetimes.

And yet any government has to watch that the investment is being made effectively. In China, the widespread euphoria about the economy is reason for concern. Universal human weaknesses can result in irrational behavior during an economic boom.

Simply put, China's problem is that its economic growth has been so spectacular that it risks firing people's imaginations a bit too intensely. At times like these, people can easily imagine that an apartment in Shanghai will be worth some enormous amount in 10 or 20 years when China is vastly more prosperous than it is today.

And if it will be worth an enormous amount in 10 or 20 years, then it should be worth a lot today, too, since real interest rates -- used to discount future values to today's values -- are still low in China. People are excited, and they are lining up to buy.

To be sure, their reasoning is basically correct. But when the ultimate determinants of values today become so dependent on a distant future that we cannot see clearly, we may not be able to think clearly, either.

Since the true value of long-term assets is so hard to estimate, it is human nature to focus on the rate of increase in their observed prices, and to allow one's attention to become fixated on these assets just as their value is increasing very fast. This can lead people to make serious mistakes, paying more for long-term assets than they should, even assuming that the economy will perform spectacularly well in the future. They can overextend their finances, fall victim to promotions, invest carelessly in the wrong assets and direct production into regions and activities on the basis of momentary excitement rather than calculation of economic fundamentals.

So, maybe the word "overheated" is misleading. It might be more accurate to say that public attention is over-focused on some recent price changes, or over-accepting of some high market values. Whatever one calls it, it is a problem.

Fortunately, people also tend to trust their national leaders. For this reason, it is all the more important that the leaders not remain silent when a climate of speculation develops. Silence can be presumed to be tacit acceptance that rapid increases in long-term asset prices are warranted. National leaders must speak out, and they must match their words with concrete action, to help signal to the public that the speculative bubble cannot be expected to continue.

That is what the Chinese government has begun to do. The real-estate boom appears to be cooling. If the government continues to pursue this policy, the salutary effects in terms of public trust in the country's businesses and institutions will help ensure stable and sustainable economic growth for years to come.

Robert Shiller is professor of economics at Yale University and a director at Macro Securities Research.