DOMINICAN SENATORS SCHEDULE VOTE ON REPEAL OF

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 006292

SIPDIS

DEPT/WHITE HOUSE PASS USTR FOR VARGO,RYCKMAN,MALITO,
CRONIN; DEPT FOR WHA, WHA/CAR,WHA/EPSC, ED/TPP/BTA; NSC FOR
SHANNON AND MADISON;GENEVA FOR MISSION TO WTO;USCINCSO ALSO
FOR POLAD; TREASURY FOR OASIA-LCARTER; USDOC FOR
4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION AND
3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: DECL: 11/18/2014
TAGS: ETRD PGOV DR
SUBJECT: DOMINICAN SENATORS SCHEDULE VOTE ON REPEAL OF
PROTECTIONIST TAX BLOCKING CAFTA

Classified By: DCM Lisa Kubiske. Reason: 1.4 (b) and (d).


1. (SBU) Summary. Senate president Andres Bautista has
scheduled a Senate vote to repeal the 25 percent tax on
beverages sweetened with high fructose corn syrup (HFCS) for
Saturday, November 20. This move follows the Ambassador,s
delivery of USTR Amb. Zoellick,s November 16 letter to
President Fernandez, and frank exchanges between the
Ambassador, Embassy officers, and Dominican senators at a
November 18 lunch hosted by the American Chamber of Commerce.
The senators at lunch believe that they will have
sufficient votes for repeal of the tax, to break the impasse
of the past two months and forward the repeal bill to the
House of Representatives, where we expect fewer problems. We
are optimistic that the Senate will vote to repeal the tax
November 20 -- but the outcome is not assured, given the
power of the sugar sector. End Summary.

Making A Strategy for Repeal
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2. (C) Embassy Santo Domingo has worked closely over the past
three weeks with
Senate Trade Committee president Sen. Alejandro Santos and
former Under Secretary of Industry and Commerce Hugo Rivera
to coordinate a strategy for the repeal of the protectionist
25 percent tax on fructose-sweetened drinks. This has
included strategy sessions with representatives of the
American Chamber of Commerce (AmCham) and the Association of
Free Zone Companies (ADOZONA).


3. (U) Both AmCham and ADOZONA have made strong public
relations efforts in recent weeks concerning the benefits of
the Free Trade Agreement (FTA) and the imminent danger of the
exclusion of the Dominican Republic. These efforts were
greatly boosted by USAID's programming of a visit by
contractor Pete Minor with a persuasive, well-documented
projection of the country's standing as a garment exporter
-- either with or without the FTA. Minor's program in Santo
Domingo and the second city, Santiago, expanded to include
previously unplanned briefings, including one for senators.


4. (C) Sen. Santos (protect) calculated in early November
that he had an easy majority within his 12-member special
committee but that in the Senate generally he could count for
certain on only 12 votes. Another 5 would be needed to
assure passage in the event that all 32 senators were
present. Working together, Santos, Rivera and EcoPol
counselor enlisted AmCham president Jorge Ivan Rodriguez to
host a private luncheon at which the Ambassador could
influence the most likely swing votes -- the senators from
the border provinces with no sugar industry activities. The
event was planned for the week of November 8-12 but was
delayed because key senators were traveling. Since ADOZONA
was putting together a high profile event in Santiago on
November 15, after further changes the luncheon was set for
Thursday, November 18. The ADOZONA event gathered
congressional representatives from 14 provinces for a
well-publicized push in favor of the FTA at which Sen. Santos
urged that action was urgent, in order to save the agreement
(this was the theme we had chosen with him in our working
sessions).

Advising the President
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5. (C) On November 16 the Ambassador hand-delivered a letter
signed by USTR Ambassador Zoellick to President Fernandez.
President Fernandez told him he would actively encourage the
Dominican congress to repeal the 25 percent tax on
fructose-sweetened beverages and was optimistic that the
congress would act. Fernandez also firmly stated his
intention for the Dominican Republic to remain in CAFTA.

Free Trade for Lunch
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6. (SBU) At the November 18 lunch hosted by AmCham Vice
President Kevin Manning, the Ambassador had the opportunity
to speak at length with Senate President Andres Bautista and
six other senators, among them Sen. Santos. Initially,
several senators offered rationales for delaying work on the
repeal, mentioning inter alia their "patriotic duty" to
defend agriculture, the need for PRD party consultation, and
the necessity of voting their consciences. One senator
expressed frustration that the Executive Branch had an
attitude of acting as if the Dominican congress did not exist
(a long valid complaint, just as applicable to the Mejia
administration). The Ambassador urged an early vote and
Bautista responded that the time was not right because a
delegation of eight senators is leaving for a ten-day trip to
China next week.


7. (SBU) Despite the excuses, it appeared that at least some
senators had changed their views since approving the tax
package including the 25 percent measure in late September.
One senator from a heavily agricultural region said that he
had originally favored the 25 percent tax but thorough
evaluation of &what was right for the country8 had caused
him to favor repeal. Bautista said that during recent
meetings in Guatemala his Central American counterparts
appeared delighted at the prospect that the Dominicans would
be excluded from CAFTA. Another senator confirmed to the DCM
that the sugar sector was no longer lobbying as vigorously as
before.


8. (U) The Ambassador emphasized that despite many promises
over recent months of action on repeal, commitments had been
avoided and the country had positioned itself for exclusion.
AmCham VP Manning read aloud an AmCham translation of USTR
Amb. Zoellick's letter to Senator Grassley advising him of
administrative actions to remove the Dominican Republic from
the FTA. The Ambassador quoted from Senator Grassley's press
release endorsing the move and underscored the seriousness
with which Washington now viewed the situation.


9. (SBU) By the end of lunch, discussion among the senators
focused on the mechanics of arranging an early vote on the
repeal measure. They decided to schedule a highly unusual
Saturday session for November 20, because otherwise the China
trip would delay Senate consideration for at least two weeks.

Comment
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10. (C) The Saturday vote is a direct result of our
campaigning with trade-friendly associations and the
conversation at lunch. We are optimistic that the Senate
will pass the repeal in two successive readings that day.
That said, the outcome is not assured, given the power of the
sugar sector in the Dominican Republic.
KUBISKE