HONDURAN TRADE POLICY IN CAFTA, FTAA AND WTO

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 000549 SIPDIS STATE PASS TO USTR FOR ANDREA GASH DURKIN STATE FOR WHA/CEN, WHA/EPSC, AND EB SENSITIVE E.O. 12958: N/A TAGS: ETRD EAGR EAID PGOV HO WTRO SUBJECT: HONDURAN TRADE POLICY IN CAFTA, FTAA AND WTO NEGOTIATIONS - A PROJECT IN PROCESS REF: a) SECSTATE 36401 b) SECSTATE 15027 c) SECSTATE 50753 d) SECSTATE 26895 ¶1. (SBU) Summary. The Honduran government remains overstretched by the efforts to simultaneously establish a new trade team and participate actively in its new and ongoing trade negotiations. Melvyn Redondo is emerging as the key figure in forging a congruent Honduran trade policy, but CAFTA by necessity will take up most of the GOH's attention in the trade arena. Until the Ministry is able to staff up, develop fully a new organizational structure and get a clear picture of its overriding trade policy interests, it will be difficult to obtain clear Honduran positions on WTO Doha agenda and FTAA issues (except perhaps for high profile political issues such as the TRIPS moratorium for certain pharmaceuticals). In CAFTA, the GOH objectives are to maintain the U.S. market access they already have, obtain duty free treatment for textiles and apparel made of regional product, protect sensitive agricultural products, look for opportunities in the services negotiation, obtain expedited sanitary- phytosanitary procedures that allow additional agricultural export to the U.S., and improve the ability of Honduras to attract foreign investment. End Summary. ¶2. (SBU) Embassy has delivered several demarches (see reftels) in recent months on WTO negotiations on agriculture, industrial market access and the financial services negotiations, as well as the TRIPS moratorium. To date, it has been difficult to obtain clear enunciation of Honduran policy in these areas. After Econcouns in January 2003 emphasized the importance of Honduran support for the U.S. position on agriculture and the TRIPS moratorium with Trade Minister Norman Garcia, we were told that supportive instructions were being sent to Geneva, but no details have been available to date. Garcia informed us he intends to rely on Melvyn Redondo, a former member of the Honduran mission to the WTO in Geneva and current chief negotiator for the Central American free trade talks (CAFTA),to develop WTO positions. In a February 21 meeting, Redondo told Econcouns that he has not been following the issues lately but would do so after he gets back from the second CAFTA round in Cincinnati. ¶3. (SBU) The FTAA negotiations have also been lost in the shuffle. GOH trade ministry contacts indicated bafflement at being left out of El Salvador's market access offer for the region in February (El Salvador, Guatemala, Nicaragua and Honduras generally participate jointly) and indeed were unaware that an offer had been made by the other three countries until receiving an inquiry from AUSTR Vargo - in fact, we aren't sure the GOH was even aware that FTAA offers were due. Honduras' market access negotiator in CAFTA's first round (where it was made clear by the U.S. side that FTAA offers were necessary to proceed in CAFTA) is from the Finance Ministry and perhaps did not pass the information along. We understand that a stand-alone offer by Honduras was prepared hastily. Redondo now plans to coordinate the GOH position for the FTAA as well. ¶4. (SBU) In CAFTA, Redondo said the GOH's principal objective is to maintain the U.S. market access they already have. He noted disappointment that the USG is seeking to start off market access negotiations from the MFN tariff level, but indicated understanding that this was an initial (and not final position). Textiles is a vital sector of opportunity for the GOH. Hondurans are hoping that the agreement will allow them to compete with Asia after elimination of quotas in 2005 by providing duty free treatment for textiles and apparel made of regional product. The GOH seeks to protect sensitive agricultural products (mentioning yellow corn, poultry and rice). Honduran negotiators are looking for opportunities in the services negotiation; they expect pressure from the private sector to protect certain professional services. Redondo emphasized that the GOH would like CAFTA to be Honduras' principal forum for negotiation with the USG on services. The GOH is putting strong emphasis on obtaining expedited sanitary- phytosanitary procedures that will allow additional agricultural export to the U.S. ¶5. (SBU) In the trade capacity building arena, the GOH is asking if it is feasible to request help with creation of a mechanism to attract foreign investment. Emboffs have drawn the trade officials' attention to existing U.S. programs, such as the Trade Development Agency, the Overseas Private Investment Corporation and Eximbank, and USAID's programs in country. In addition, we have discussed the positive effect of lower tariffs and other trade restrictions on generating interest by foreign investors. Finally, the Embassy at all levels continuously emphasizes the need for the GOH to improve the investment climate. ¶6. (SBU) Comment: The GOH is rightly putting its priority on the CAFTA negotiations. Unfortunately, the extremely limited depth of the trade team makes it difficult for the USG at this time to address effectively our broader trade agendas. We continue to work closely with the Ministry to improve its trade negotiating capacity (with a variety of USAID, USDA and PAS programs) and to emphasize the complementary nature of the negotiations in the WTO, FTAA and CAFTA. Hopefully, as the GOH team gets more experience, USG requests for support in the WTO and FTAA will be met more promptly. End Comment. Palmer