ARGENTINE FOREIGN TRADE SECRETARY: WHY URUGUAY

C O N F I D E N T I A L BUENOS AIRES 002061 SIPDIS SENSITIVE SIPDIS E FOR THOMAS PIERCE, WHA FOR WHA/BSC AND WHA/EPSC PASS NSC FOR JOSE CARDENAS PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE PASS USTR FOR AUSTR EISSENSTAT, SUE CRONIN AND MARY SULLIVAN TREASURY FOR ALICE FAIBISHENKO USDOC FOR 4322/ITA/MAC/OLAC/PEACHER US SOUTHCOM FOR POLAD E.O. 12958: DECL: 09/08/2016 TAGS: ETRD EFTA ECIN ECON AR SUBJECT: ARGENTINE FOREIGN TRADE SECRETARY: WHY URUGUAY CAN'T SIGN AN FTA REF: A. BUENOS AIRES 1985 ¶B. MONTEVIDEO 774 -------------- SUMMARY -------------- ¶1. (C) Charge paid a courtesy call on Ambassador Alfredo Chiaradia, Secretary of External Trade in the Argentine MFA, on August 29. The conversation ranged over prospects to re-energize the Doha Round (not optimistic),the possibility of Argentina joining the FTAA (even less so),and USTR's GSP review (ref A),but focused on Argentina's view of Uruguay's apparent desire to sign a bilateral FTA with the U.S. and its possible effect on MERCOSUR. Chiaradia was adamant that Uruguay could not both conclude an FTA (or any trade agreement which goes beyond treatment offered within MERCOSUR on services, government procurement and IPR) and remain in MERCOSUR. He downplayed earlier public comments by President Kirchner, which appeared to give Uruguay license to sign a U.S. FTA. END SUMMARY URUGUAY CAN'T HAVE THEIR MERCOSUR AND AN FTA TOO -------------- --- ¶2. (C) While covering the largest trade issues on the GoA's horizon, Secretary of External Trade Alfredo Chiaradia offered to Charge and Econoffs a clear signal that the GoA would not permit Uruguay to both sign an FTA with the U.S. and remain a member of MERCOSUR, as Uruguayan President Tabare Vazquez publicly said he would seek permission from MERCOSUR to do (ref B). MERCOSUR rules preclude Uruguay from offering trade disciplines to any country that are stronger than those agreed to within MERCOSUR (e.g. IPR) or that include disciplines not covered within the Mercosur agreement (e.g. services and government procurement). Chiaradia said that "if the U.S. wants to offer quota access or special tariff rates to Uruguay, go ahead," but that Uruguay, as a member of MERCOSUR, would not be able to reciprocate. He claimed "We understand Paraguay's and Uruguay's concerns," that they are not benefiting adequately from regional trade preferences and that MERCOSUR is "trying to make rules of origin more flexible to benefit" the two smaller countries. But Chiaradia emphasized "it would be crossing a red line" if Uruguay were to sign an agreement that offered services, government procurement and/or IPR treatment stronger than enjoyed by MERCOSUR countries. When asked about public comments Kirchner made in January, indicating that Argentina "would not block" Uruguay in its efforts to reach a favorable trade agreement, he noted that "The Presidents always talk generically," and that MERCOSUR rules were clear and inflexible on the matter. DOHA AND THE FTAA: DEAD AND DEADER? -------------- ¶3. (C) On the status of Doha, Chiaradia expressed disappointment, agreeing with the U.S. that the EU isn't opening its ag markets but noting that neither were developing countries. He noted that WTO Director General Pascal Lamy's July 17 plea to re-energize Doha talks "for us, was absolutely unacceptable" and that the GOA "questioned the special safeguards" of India's proposal. He thought the EU might be prepared to resume negotiations if progress is made by including some developing countries "like Brazil, for example, who are more constructive" because they are prepared to pay the commercial cost of access to a bigger markets. As for the FTAA, he said "our mutual interests are not convergent," even "contradictory." He stated that "we need market access, for agricultural goods in particular," saying that the U.S. proposal was more advanced - "3rd or 4th generation" - than an agreement that Argentina needs. COMMENT -------------- ¶4. (C) While Chiaradia described himself as being very pro-free trade, he carefully articulated the current GoA line. He also stressed that "the worst would be for Uruguay to leave MERCOSUR," and added that if that happened, "the action of the U.S. would have costs." He seemed to genuinely regret not being able to accommodate Uruguay, but noted that "the political margin here is bigger than the commercial margin - that is the message we will send on this matter." Note: Local analysts comment that, within MERCOSUR, there is more flexibility in negotiating political accommodations than in resolving trade frictions: Trade between MERCOSUR countries, they note, was scheduled to have been completely duty free by January 1, 2006. Instead member countries still squabble over safeguards. Twelve years after its founding with the goal to evolve into a full customs union, MERCOSUR has yet to establish a common external tariff. There are rumors that Chiaradia may be retiring soon, and be replaced by a political appointee. This would be disappointing: Chiaradia brings a wealth of experience in diplomacy and economics to the table. MATERA MATERA