U.S.-PANAMA FTA NEGOTIATIONS - THOUGHTS ON TIMING

C O N F I D E N T I A L SECTION 01 OF 02 PANAMA 000648

SIPDIS


USTR PLS PASS TO RVARGO AND JWOLFE
STATE FOR WHA FOR DFISK, DLINDWALL, JWAGNER, JBRIGHAM
USDOC4332/ITA/MAC/WH/OLAC/WBASTIAN, MGAISFORD
TREASURY FOR JJENKINS


E.O. 12958: DECL: 03/19/2014
TAGS: ETRD PM ECONOMIC AFFAIRS
SUBJECT: U.S.-PANAMA FTA NEGOTIATIONS - THOUGHTS ON TIMING
AND ISSUES


REF: A. BOWEN/GASH TELCON 3/5

B. BOWEN/WOLFE TELCON 3/16

C. PANAMA 452

D. PANAMA 492


Classified By: Economic Chief Andrew N. Bowen, for reason 1.5(d)



1. (C) Summary: Minister of Commerce and Industry Joaquin
Jacome and VM for Trade Romel Adames will be traveling to
Washington next week for the March 23 TPSC Panama hearing at
USTR and to press for moving forward expeditiously with FTA
negotiations. The upcoming November U.S. elections and the
political environment regarding FTAs have not been lost on
them. Both will press for holding a negotiating round or
meeting in April -- before the May 2 national elections --
and concluding the negotiations before the Moscoso
Administration leaves office on September 1 or shortly
thereafter. Their expectations are that the agreement will
have aspects of both the CAFTA and Singapore FTAs. Post sees
no down-side with holding an April negotiating round or
meeting, schedules permitting. Presidential candidates
support an FTA with the United States (three of the four very
strongly),and we believe they will want discussions to move
forward provided the winner's representatives have "a place
at the table"(read: are consulted closely). The Panamanians
view the FTA as a vehicle to eliminate uncertainty related to
unilateral benefits such as CBI, improve market access for
goods and services (e.g. sugar, banking, and maritime),but
most importantly, to attract investment (or not lose
investment to CAFTA). Showing his talent for one-liners,
Adames told Econ Chief, this (U.S. investment) will represent
the return of the U.S. without the military bases. Both
Jacome and Adames also argue that the FTA will reinforce
stability and strengthen democratic forces for the long-term
in a country where the U.S. still has strategic interests.
End Summary.



2. (C) During a wide-ranging conversation with ECON Chief,
on March 8, VM Adames, Panama's Chief Negotiator, shared his
thoughts on the upcoming bilateral FTA negotiations with the
United States. (Note: the Panamanians are studying the CAFTA,
Chile, and Singapore texts.) Like his bosses, President
Moscoso and Minister Jacome, Adames would like to make as
much progress as possible on the bilateral before the Moscoso
Administration leaves office September 1. He has argued that
starting the negotiations in April before the May 2 national
elections would send the right signal that this is a "state
project rather than a political one (Ref C)." (Comment: While
this is most likely to gain pre-electoral political
advantage, we see no down-side with holding a first round or
meeting prior to May 2. President Moscoso told Codel Weller
in February that she would like to see the negotiations
concluded before leaving office, even if she didn't sign (Ref
C). Clearly the Panamanians have one eye on the U.S. November
elections and the expiration in 2005 of TPA. End Comment.)



3. (C) For Adames, the FTA represents a vehicle to lock in
the status quo or better (CBI, GSP),improve market access
for Panama in niche areas (e.g., banking, maritime, and
sugar),and most importantly to attract "good U.S.
investment." Adames also expressed concern that investment
might now be diverted to "CAFTA low wages -- our China", and
the uncertainty of the EU's counter-drug driven GSP program.
He said that he has met with representatives from the
sensitive sectors (rice, dairy, pork, and professional
services) and forewarned that he will "have to make tough
decisions." He noted that Panama exports very little to the
United States (approximately $301 million in 2003) and that
Panama must compete in niches -- banking, maritime, sugar,
etc. He quipped that Panama may not initially be looking to
give as much on agriculture since Costa Rica didn't give much
to the U.S. on services, "only around the edges." Another
defensive interest for Panama will be treatment of the Colon
Free Trade Zone. One area that he believes Panama can be
forthcoming is government procurement, and coverage of the
Panama Canal, given the probable decision to move forward
next year on a multi-billion dollar expansion project.



4. (C) Adames proved very adept at making the larger
strategic arguments about the importance of this FTA. For
Panama he believes that by attracting "good U.S. investment,"
and "consolidating the U.S. way of doing things" the
agreement will help create greater stability, and strengthen
democratic forces for the long-term (i.e., mitigate against
future leftist-populist tendencies). He declared that this
would mark "the return of the U.S. without the bases." With
an obvious allusion to the Canal and Panama's strategic
location, he said that if things go bad in some countries in
the hemisphere "no problem" but "if things go bad here,
you're affected."



5. (C) Comment: The Panamanians have been doing their
homework and with the assistance of the U.S. law firms Arnold
and Porter and Sandler,Travis & Rosenberg, appear prepared to
begin negotiations. Adames is a strong proponent of this FTA
and also a strong believer in the benefits of trade
liberalization. He obviously believes that if the U.S. can
accommodate Panama's interest in selected "niche" areas that
this can be a very high-standard agreement; he also
recognizes Panama doesn't have much leverage. With respect
to the presidential candidates, all three (Torrijos-PRD and
current front-runner),Aleman-Arnulfista, and Martinelli -
CD) strongly support the FTA with the United States. Endara
(Solidarity) also supports an FTA; however, he and he and his
advisors have shown that they may be more sensitive to
Panama's rural agricultural interests.
WATT