NEW MINISTER OF TRADE: "ECUADOR TO CONTINUE FTA

UNCLAS QUITO 000943

SIPDIS

DEPT FOR WHA/AND AND EB
DEPT PASS USAID/LAC
DEPT PASS USTR:HARMAN

E.O. 12985: N/A
TAGS: ETRD ECON PGOV ELAB EINV EC
SUBJECT: NEW MINISTER OF TRADE: "ECUADOR TO CONTINUE FTA
NEGOTIATIONS"



1. Summary: In our first meeting new Ecuadorian Minister
of Trade Oswaldo Molestina stated that Ecuador would
continue to pursue free trade negotiations with the U.S. He
said that, given that the negotiating team was fundamentally
technical rather than political in nature, he intended to
make no changes in the team for the time being. The same
was true of the ministry as a whole, he said. "Of course,
the government may have different views of Ecuadorian
national interests, which may affect negotiating positions,"
he said. Molestina is leaning toward hosting the
negotiating round in June, but has not yet made a final
decision. End Summary.


2. Econcouns requested the meeting with Molestina in order
to establish a relationship and gather initial impressions.
After exchanging pleasantries, Molestina said he had always
enjoyed good relations with the U.S. He was a good friend
of one former ambassador and has an apartment in New York
where his wife has family.


3. Molestina said the GOE will continue to negotiate an
FTA, and that he has decided to make few or no changes in
the Ecuadorian negotiating team. Of course, he said, the
new government may have different views of Ecuadorian
interests and thus may take different positions in the
negotiations than the previous government did.


4. Econcouns took advantage of the very positive atmosphere
to mention the need to work together on labor reform and
resolution of commercial disputes, and particularly the Oxy
problem. Molestina agreed, and said he had requested a
report on the Oxy issue in order to bring himself up to
speed.


5. As Econcouns waited outside the Minister's office,
Ecuadorian Chief negotiator Cristian Espinosa and his close
advisors came out of the office. They said Molestina had
just told them they would continue in their positions. They
seemed quite upbeat. Espinosa told USAID later in the day
that he considered himself "on a trial basis" with the
government. The government would be looking hard at whether
it wanted to keep him on, but he would also be looking at
whether it was worth staying, given the positions the GOE
would take.

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Comment
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6. We are not so sanguine. Molestina's statements to the
press certainly raise concern. He is saying that Ecuador
may wish to open issues which have already been closed in
the negotiations, that Ecuador cannot allow subsidized U.S.
products to compete with Ecuadorian products without tariff,
that the U.S. will have to show more flexibility on IPR,
that Ecuador may wish to delay negotiations or put them on
hold, and that, in the final analysis, Ecuador will get
ATPDEA renewal if it doesn't sign a FTA. Minister of
Finance Rafael Correa, a determined enemy of the FTA, has
announced that any FTA will be submitted to the people for a
vote (an idea most people believe would kill the FTA).


7. Of course, Molestina's public stance may be nothing more
than that. Further, he is new to the issues, and may change
his positions as he becomes more familiar with them.
Nonetheless, it is clear that the Palacio government is less
committed to free trade than was the Gutierrez government.
We are concerned that Ecuador will now adopt untenable
positions in the negotiations and then be unable or
unwilling to move back from them. Some are even expressing
the opinion that that may be the plan -- to take impossible
positions and then bl