THAI PM APPROVES "INTERIM" RESUMPTION OF

UNCLAS SECTION 01 OF 02 BANGKOK 001170

SIPDIS

SENSITIVE

DEPARTMENT PASS USTR FOR BWEISEL AND TPOSNER
COMMERCE FOR ITA/JBENDER AND JKELLY

E.O. 12958: N/A
TAGS: EINV ETRD TH US FTA
SUBJECT: THAI PM APPROVES "INTERIM" RESUMPTION OF
AER-COVERED SERVICES INVESTMENTS


1. (SBU) Summary. MFA informed the Ambassador that Thai
PM Thaksin has agreed to resume AER-covered services
investments in exchange for US willingness to renegotiate the
language in the proposed State/MFA exchange of letters. The
renegotiation aims to provide the RTG with greater "legal
comfort" in the event of a WTO challenge. Resumption of
AER-covered approvals will be for three months, renewable for
additional 3-month periods. The RTG stresses that the
renewal of approvals will be governed by the perception that
the US is willing to "join hands . . . to fend off any threat
of Thailand being subject to litigation at the WTO."
Commerce must now implement this decision -- septel will
detail the RTG's intentions in this regard. End Summary.


2. (SBU) On February 24 the Ambassador (accompanied by
Embassy Economic Counselor) met with MFA PermSec Krit
Garnjana to be briefed on the RTG's proposed approach on the
Treaty of Amity and Economic Relations (AER). Krit was
accompanied by MFA Americas D-G Nongnuth Phetcharatana and
MFA Legal Affairs Director Virachai Plasai.


3. (SBU) Krit reported that the Prime Minister's "Kitchen
Cabinet" had discussed this issue in its February 23 meeting
and had agreed on an approach to the AER issue. Krit
provided us with the following points:

Begin RTG Paper

-- A small group meeting with the Prime Minister regarding
the AER on 23 February 2006 has produced quite a positive
outcome.

-- Overarching concept: The Prime Minister underlined that
Thailand join hands with the US to fend off any threat of
Thailand being subject to litigation at the WTO. Working
assumption on this is one of Thailand and the US being on the
same side -- not on opposite sides.

-- The Prime Minister endorsed the following package
consisting of three elements:

1) Thailand is ready to undertake interim measure to
resume granting benefits under
the AER to US persons;

2) A renegotiation of the Exchange of Notes such that
adequate legal comfort is
provided for Thailand vis a vis possible WTO
litigation;

3) Interim measure will be in force for renewable
periods of three months duration.

-- We need to set a timeframe for the interim measure because
a new, previously uncontemplated factor has emerged, that is,
the possibility of FTA negotiations being left pending for an
open-ended period, which in turn entails an equally
open-ended prolonged exposure of Thailand to the risk of
being litigated against at the WTO.

-- We would like to stress that the above safeguard action
will be governed solely by considerations related to our
quest for adequate cover against exposure to litigation at
the WTO.

End RTG Paper


4. (SBU) Krit stressed that, for the PM, the "overarching
concept" would guide the RTG's actions, that is, as long as
Thailand and the US were working together toward the same
goal (helping Thailand fend off a WTO challenge),Thailand
would be forthcoming on maintenance of the interim measure.
Krit added that Thailand is encouraged by the fact that, by
its actions thus far, the US has displayed this common
interest. "Your willingness to the exchange of notes is a
sign of this," he said.


5. (SBU) The PermSec stated that the AER is being treated
separately from the FTA. "This is not a negotiating gambit,"
he said. "Mixing this with the FTA will result in crossed
wires and a short circuit."


6. (SBU) Krit conceded that the current actual threat of a
WTO challenge has diminished. "A year ago," he said, "the
threat was greater -- the FTA with Japan was not completed."
He appealed for the US to exhibit an attitude consistent with
the "overarching concept." "Let's try to find a soft
landing," he said. Alluding to certain Cabinet members who
may previously have used the AER issue as a possible
negotiating lever in the FTA talks, or may have taken a hard
line for other reasons, he said, "We need to find a graceful
exit for the Cabinet; we hope to find a ladder for the
Cabinet to use to climb down (from previous positions)." We
expect the RTG to provide us with proposed alternate language
for the exchange of letters shortly.

Next Steps

7. (SBU) Krit made it clear that the interim measure can be
effected immediately, i.e., it is not conditional on
agreement on the exchange of letters language. Authority to
resume AER-covered services investments now rests with
Commerce PermSec Karun Kittisataporn. (Note: We are not 100
percent clear on the legal status of "Kitchen Cabinet"
decisions -- it may be necessary for the full Cabinet to
authorize sending a note to Karun that endorses the "Kitchen
Cabinet" decision (this possibility was alluded to by Krit).
The full Cabinet is expected to meet on February 28.) We are
meeting with Karun on February 27 and will report on how he
intends to proceed, specifically, when approvals will resume.
BOYCE