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