The premier, a former secretary-general of the ruling rightist Chinese Nationalist Party (Kuomintang), made the comments in a meeting with reporters covering the Cabinet yesterday afternoon.

Asked for his opinion on the reports that the PRC government was pushing for an early start on political negotiations including a possible cross-strait "peace agreement," Wu stated that he had told "high-level mainland friends" during previous visits as KMT secretary-general and as a KMT legislator that "we hope our mainland Chinese friends can face the reality of divided rule."

The premier said that entering into talks on a peace agreement would be possible only after such a "recognition of reality" and after "accumulating trust and goodwill on the basis of equality and dignity."

The premier stated that Cabinet officials had reported on the MOU negotiations and its contents to the Legislative Yuan even though the MOU came under "administrative power" as authorized by an agreement signed between Taipei's Strait Exchange Foundation and Beijing's Association for Relations Across the Taiwan Strait in April.

"We felt that the MOU was important for cross-strait relations and required the trust of our citizens," related the premier, who added that "we will be even more careful on the Economic Cooperation Framework Agreement which will require the support of public opinion and legislative supervision."

"If I have adopted such a rigorous attitude on economic agreements such as ECFA, you can see that while cross-strait relations are developing from antagonism toward peace, we should not be too hasty," Wu stated.

The premier outlined three conditions for cross-strait peace negotiations, including the "accumulation of more trust and goodwill" through negotiation of the ECFA and other economic issues and "respect and not obstruction" from Beijing for Taiwan's international space and "concrete expressions of goodwill," such as withdrawal of missiles deployed targeted at Taiwan.

Wu added that Beijing leadership needs to have some "appreciation" for the gap in conditions given the continental PRC and insular Taiwan.

The premier said that in the wake of the signing of the financial services supervision MOU, seven Taiwan banks could expect to upgrade existing representative offices in the PRC into branches, but "it is impossible that we could allow seven mainland banks to set up branches here."

"If we receive respect and more mutual benefit and there is a domestic consensus and evidence of goodwill from the mainland, consultations on a peace agreement will naturally result, but now is not the time to casually discuss a peace agreement," said Wu.

The premier also denied media reports that the KMT administration had already decided to recognize the validity of diplomas from Chinese universities and said that public hearings and other methods of dialogue would be used to "meld a consensus" on the scope of such recognition and possible retroactive recognition. The premier stated that a "strict standard" should be adopted to recognize diplomas from universities whose quality is affirmed worldwide, such as Beijing University and Qinghua University and said that it would appear "discriminatory" if "the entire world recognized their diplomas and Taiwnan was the only exception." Wu added that correspondence or honorary degrees should not be recognized and that diplomas from PRC medical schools "should not be allowed for the time being."

"If we are able to secure a social consensus through public hearings and dialogue, we should recognize diplomas from universities which are recognized worldwide," said the premier, who said the number of such institutions would number about 40 of over 1,000 universities in the PRC.

Wu also stated that Taiwan should diversify its trade markets given the fact that over 40 percent of Taiwan's exports go to the China market.