Identifier
Created
Classification
Origin
05OTTAWA3511
2005-11-28 17:45:00
CONFIDENTIAL
Embassy Ottawa
Cable title:  

WTO DOHA ROUND - CANADA: LOOKING TOWARD HONG KONG

Tags:  KIRC KPAO EAGR ECON ETRD OIIP WTRO 
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C O N F I D E N T I A L SECTION 01 OF 02 OTTAWA 003511 

SIPDIS

PASS USTR FOR DDWOSKIN, SCHANDLER

E.O. 12958: DECL: 11/28/2015
TAGS: KIRC KPAO EAGR ECON ETRD OIIP WTRO
SUBJECT: WTO DOHA ROUND - CANADA: LOOKING TOWARD HONG KONG

REF: A. (A) SECSTATE 211956

B. (B) OTTAWA 3484

Classified By: Econ MinCouns Brian Mohler; reasons 1.5(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 OTTAWA 003511

SIPDIS

PASS USTR FOR DDWOSKIN, SCHANDLER

E.O. 12958: DECL: 11/28/2015
TAGS: KIRC KPAO EAGR ECON ETRD OIIP WTRO
SUBJECT: WTO DOHA ROUND - CANADA: LOOKING TOWARD HONG KONG

REF: A. (A) SECSTATE 211956

B. (B) OTTAWA 3484

Classified By: Econ MinCouns Brian Mohler; reasons 1.5(b) and (d)


1. (SBU) Summary: Despite differences on the details,
notably over the future of Canada,s single desk Canadian
Wheat Board, Canadian WTO negotiators see themselves as
working in close cooperation with the U.S. on the elements of
a package for Hong Kong. They stress that they have not
given up on the original Hong Kong objective of achieving
full agreement on modalities for agriculture and
non-agricultural market access. End Summary.


2. (SBU) Econ MinCouns and econ officer met with Assistant
Deputy Minister John Gero and Director General for Trade
Policy Terry Collins-Williams of International Trade Canada
to share points in ref (A) and discuss Canada,s views of
prospects for Hong Kong. Gero noted the continuing close
cooperation between U.S. and Canadian negotiators and
stressed that we share the same broad objectives. He said
that Canada,s main ambition for a Hong Kong outcome is, in a
word, ambition: achievement of the original objective of full
agreement on modalities for all three pillars in agriculture,
as well as on nonagricultural market access. Canadian
officials see Hong Kong as the last chance for a political
deal that would set the stage for a timely conclusion of the
agreements. In their view, even if political leaders reach
agreement, at least nine months, worth of technical work
will be needed to deliver a package by December 2006. In
practical terms, therefore, the political agreement must come
by February at the latest. Gero observed that &ministers
are really engaged now8 and that the desire for a result is
clearly there among key participants. He expressed anxiety,
however, over the lack of intensive negotiation in the runup
to Hong Kong, citing the fact that he is still in Ottawa and
not in Geneva at this point in the proceedings as clear
evidence of &process lacunae8 that may make it impossible

to arrive in time at a workable package for ministers. As to
Canada,s role in the negotiations, he said that Canada,s
chief advantage is in being &fleet of foot8; because
Canadian negotiators are not trying to speak for large blocs
of other countries, they retain flexibility that may help
them move the negotiations forward. In response to a
question from EconMincouns, Gero speculated that the EU,s
Trade Commissioner Mandelson probably has more room to
maneuver on some of these issues, and hoped that he would not
commit Lamy,s mistake at Cancun of waiting too long to move.



3. (SBU) Gero and Collins-Williams offered the following
snapshot of Canada,s positions on key issues:

Agriculture

Canada wants to see specific, large reductions in domestic
support. In this context, he characterized the U.S. offer as
a serious one but urged a little more movement ) the U.S.
should be offering cuts that go below actual spending, not
just our legal ceiling. On blue box measures, Canada
supports a reduction to 2.5% of total spending but wants to
see additional rules limiting what can be transferred into
the blue box, e.g. countercyclical payments. Gero described
this as a key objective for Canadian farmers. Predictably,
our interlocutors offered a strong defense of the Canadian
Wheat Board, complaining that efforts to include restrictions
on state trading operations were outside the scope of a
negotiation on export subsidies.

On agricultural market access, Canadians are highly critical
of the European position on sensitive products, describing it
as a &false debate.8 In their view, the tariff formula and
negotiations on sensitive products should be approached as
separate issues; European conflation of the two is resulting
in unproductive &mixing and matching8. They are trying to
convince the Europeans to divorce the two issues; our
objective should be a methodology for overall reductions and
a separate request-offer type negotiation on sensitive
products. This approach would allow the EU to move further
on overall reductions while protecting sensitive products.
Gero observed that, in the Canadian view, increases in
tariff-rate quotas would yield the most measurable market
access gains. He noted that the U.S. and Canada are
cooperating closely on this issue.

Nonagricultural market access (NAMA)

Canada and the U.S. are closely aligned on these issues.
Canadians would like to see more sectoral initiatives; they
also want to see Brazil and India, in particular, offer more
cuts in applied rather than bound tariff levels. They are
also concerned that negotiations on non-tariff barriers are
less advanced than they should be, and that we need some
practical resolutions in this area.
Services
Gero commented that &we haven,t come very far8 on this
portfolio and said that Hong Kong should define both an
overall level of ambition and complementary bilateral
mechanisms. He described the European approach as ¬
saleable8 and supported the concept of &plurilateral8
(e.g. sectoral) negotiations. Predictably, he flagged the
issue of Mode 4 - movement of professionals ) which has also
been a difficult issue in the US-Canada-Mexico Security and
Prosperity Partnership (SPP) talks. While expressing his
understanding of the Congressional position on inclusion of
immigration issues in trade packages, he observed that &we
won,t get India without this.8

Rules

Also predictably, Gero focused on our differences on rules,
another bilateral sore point in light of the continuing
softwood lumber dispute. Canada wants to see greater
predictability and better definitions. He called for more
movement from the U.S. in this area, particularly on
compliance, describing the U.S. position as outside the
mainstream and saying that a total package will not be
possible without something on rules. (Comment: a recent WTO
ruling upholding a USITC finding of threat of injury in the
softwood dispute, effectively countering a NAFTA panel ruling
on the issue, put a notable crimp in Canadian government
claims to have "won every case8 in its multi-pronged
litigation against U.S. countervailing duties. End Comment.)

Finally, Canadian officials praised continuing work on trade
facilitation, which they see as a &sleeper issue8 of more
practical importance to exporters than many of the
higher-profile issues under negotiation.

Hong Kong in the Canadian Political Context
--------------


4. (C) Embassy Comment: The GOC is in the process of falling;
the Prime Minister is expected to dissolve Parliament on
Monday, November 28. Trade Minister Jim Peterson,
Agriculture Minister Mitchell, and development minister
Aileen Carroll remain ministers until after the next
election, expected for January 2006. While Peterson and the
rest of the Liberal leadership, now in full campaign mode,
have chided the opposition for irresponsibly weakening
Canada,s negotiating position on the eve of Hong Kong, (ref.
B) permanent officials appeared unconcerned about any real
repercussions. 30% of Canada,s GDP comes from trade (with
the vast majority of its exports going to the U.S.) and the
country is running a healthy trade surplus thanks to rising
energy prices. Despite periodic anti-globalization
demonstrations, particularly in Quebec, public support for
trade liberalization has been consistently in the 70 percent
range since the key debate in the 1980s about the U.S.-Canada
Free Trade Agreement; if anything, Canadians see multilateral
liberalization as an effective hedge against overdependence
on the U.S. market.


5. (SBU) The relatively decentralized Canadian government
structure may be more of a hurdle for Canadian negotiators if
they come under pressure on issues such as the Canadian Wheat
Board and federal supply management schemes. Canada lacks
the equivalent of the U.S. interstate commerce clause;
provinces remain responsible not only for large parts of
government procurement, but also for key services such as
securities regulations, and interprovincial trade barriers
remain a headache for Canadian business. Minister Peterson
met with provincial trade ministers on November 22 (ref. b)
to discuss Canada,s approach to Hong Kong. While Gero said
that the group had placed &no more8 emphasis on supply
management than at previous meetings, provincial ministers
made it clear in the press that they expect the government to
stand its ground on supply management in the dairy and egg
sectors. The Canadian delegation, in addition to ministers
and federal officials, will include not only representatives
of Canada,s provinces, but also municipal officials.
However, the expected Parliamentary delegation to Hong Kong
is now unlikely to materialize; campaigning will have begun
in earnest by early December. End Comment.




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