USTR AND ASEAN SECRETARIAT DISCUSS TIFA AND ASEAN

UNCLAS SECTION 01 OF 03 JAKARTA 013316

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR EAP/MTS AND EB/IFD/OMA
TREASURY FOR IA-SETH SEARLS
DEPARTMENT PASS USTR FOR DKATZ

E.O. 12598: N/A
TAGS: ETRD ASEAN ID
SUBJECT: USTR AND ASEAN SECRETARIAT DISCUSS TIFA AND ASEAN
TRADE AGREEMENTS


1. (SBU) Summary. Assistant United States Trade
Representative (AUSTR) for Southeast Asia and the Pacific
Barbara Weisel and Director for Southeast Asia and Pacific
Affairs David Katz met on November 6 with Anna Robeniol,
head of the Free Trade Agreements (FTA) Section of the
Bureau of Economic Integration and Finance at the ASEAN
Secretariat to discuss ongoing work related to the ASEAN-US

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Trade and Investment Framework Arrangement (TIFA) and the
status of ASEAN trade negotiations with other countries.
AUSTR Weisel encouraged ASEAN Secretariat staff to work with
USTR to move the ASEAN-US TIFA process forward and urged
ASEAN officials to improve the channels of communication
with the United States on ongoing work related to the TIFA,
especially projects related to sanitary and phytosanitary
standards, pharmaceuticals, and the ASEAN Single Window.


2. (SBU) Robeniol provided a detailed readout of ongoing
ASEAN trade agreement negotiations with China, Japan, Korea,
India, Australia, New Zealand and the EU. Pakistan has also
approached ASEAN seeking to start discussions on a trade
agreement, but ASEAN declined for now citing resource
constraints. ASEAN also is considering whether to seek FTA
negotiations with the Gulf Cooperation Council (GCC). End
Summary

ASEAN and China Negotiating Multiple Agreements
-------------- --


3. (SBU) Robeniol noted that ASEAN and China finalized their
FTA on trade in goods in mid-2005. The agreement requires
ASEAN countries to reduce all tariff lines to 5 percent or
less by 2010 (although Cambodia, Laos, Myanmar and Vietnam
(CLMV) were given two additional years to phase out
tariffs),with the exception of a `sensitive list' of
products for which countries will have until 2018 to cut
tariffs to 5 percent or less. In addition, the agreement
includes a list of about 260 tariff lines classified as
`highly sensitive products,' including such products as
automobiles, rice, sugar and garments. Robeniol noted that
ASEAN countries made no commitments to lower tariff rates on
these items, but would consult in the future on possible
reductions.


4. (SBU) Robeniol noted that China and ASEAN expect to sign
a services agreement, based on the GATS framework, this
December during an ASEAN Ministerial meeting in Cebu,
Philippines. The agreement will include only initial
services offers. Robeniol asserted that the final agreement
will be `GATS-plus.' According to Robeniol, the current
plan is to negotiate and conclude the final ASEAN - China
services agreement in 2007. Robeniol acknowledged that
there had been challenges in the run up to the agreement to
launch, including disagreements over the definition of
juridical person, the scope of substantial business
operations, residency requirements and establishing a carve-
out for taxation.


5. (SBU) Robeniol also noted that ASEAN and China had also
agreed to negotiate an investment agreement. However, she
lamented that disagreements between ASEAN and China and
disagreements among ASEAN countries have created
difficulties in the negotiations. For example, ASEAN and
China have failed to agree on the use of a negative or a
positive list. According to Robeniol, ASEAN looks to the
1998 Framework Agreement on the ASEAN Investment Area as
addressing threshold issues in both the services and
investment agreements it would pursue with China.

Japan Pursues Bilateral EPAs as Part of ASEAN Strategy
-------------- --------------


6. (SBU) Japan is pursuing a strategy of negotiating a
series of bilateral economic partnership agreements (EPA),
their version of an FTA, with ASEAN countries, Robeniol
said. She noted that Japan had completed EPA negotiations
with Malaysia, Singapore and the Philippines and was
currently negotiating an EPA with Indonesia. Japan had also

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completed its agreement with Thailand and intends to sign it
early next year, the recent military coup notwithstanding,
Robeniol reported. She added that Japan intends to launch
EPA negotiations with Vietnam during 2007 and also plans in
the near future to open EPA negotiations with Brunei. Japan
sees Cambodia, Laos and especially Burma as on a slower
track toward EPAs, she concluded.

Korea FTA with ASEAN Completed, Thailand Opts Out
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7. (SBU) ASEAN and Korea completed negotiations for an FTA
earlier this year and they expect to sign it by the end of
2006, Robeniol said. However, she continued, Thailand has
effectively opted out of the FTA with Korea, at least for
now, primarily over disputes on market access for rice.

Australia/New Zealand FTA
--------------


8. (SBU) Australia and New Zealand are negotiating an FTA
with ASEAN as a single undertaking, with a target to
complete the deal within the next 18 months to two years,
Robeniol reported. She acknowledged that the agreement does
not contain chapters on labor, environment, or on government
procurement. She added that in addition to the ASEAN-wide
negotiation, Australia is negotiating bilateral FTAs with
Malaysia and Thailand, although Australia suspended the
latter as a result of the coup. Robeniol noted that the
fact that Australia is conducting both the multilateral and
bilateral negotiations simultaneously has complicated
Australia's ability to advance the ASEAN negotiations.
Australia apparently is reluctant to make concessions in the
ASEAN negotiation that would undermine outcomes it is
seeking in the Malaysia negotiations.

India Looking to Defensive Equities in ASEAN FTA
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9. (SBU) ASEAN officials do not expect to conclude the ASEAN-
India FTA negotiations in the near future because of ongoing
disagreement over India's insistence on significant
exclusions, currently at 560 tariff lines and a significant
share of trade, Robeniol said. She noted that the excluded
items include palm oil, coffee, black tea, pepper and many
other items where ASEAN countries would expect to be
competitive. India, she said, wished to exclude all these
items and to instead offer preferential tariff rate quotas
on a bilateral basis. She continued that in addition to
this extensive exclusion list, India sought to include a
long `sensitive list' that would phase down tariffs until
2022, but then only to a level 20 percent to 30 percent
below the Most Favored Nation (MFN) rate.


10. (SBU) Robeniol reported that India has expressed concern
that an FTA with ASEAN would open the door to transshipment
of commodities from China and others in the region. For
example, she noted concerns that goods, such as tea from
China and Sri Lanka, would enter India's market through
ASEAN countries under the preferential basis of the ASEAN
FTA. As a result, she said, reaching agreement on rules of
origin was proving to be quite difficult.


11. (SBU) Robeniol also said that India is seeking to
negotiate investment and services agreements along with the
goods agreement currently under negotiation. According to
Robeniol, ASEAN intends to complete the goods agreement
before moving on to negotiate services and investment.

EU FTA Negotiations with ASEAN Slated for 2007
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12. (SBU) Robeniol reported that European Union Trade
Commissioner Peter Mandelsohn planned to attend the ASEAN
Leaders Summit in the Philippines this December and announce
the EU's launch of FTA negotiations with ASEAN. She said
that negotiations would not actually start until sometime in

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mid- or late 2007. She indicated that the EU would use a
dual track approach, given EU sensitivities in dealing with
some ASEAN member countries, which attendees understood to
mean Burma. Under this dual track approach the EU would
first negotiate with the more developed ASEAN economies and
leave lesser developed economies, such as Cambodia and Laos
along with Burma, for later.

Pakistan Comes Knocking and GCC a Possibility
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13. (SBU) Pakistan earlier this year had approached ASEAN to
seek exploratory FTA discussions, Robeniol said. She stated
that due to limited capacity in the ASEAN Secretariat, which
only has around eight staff to manage all FTA negotiations,
and the very large number of ongoing FTA negotiations, ASEAN
had politely declined. However, she did not dismiss future
prospects for such exploratory FTA discussions with
Pakistan. ASEAN also has been considering a possible FTA
with the GCC. These discussions are at a very preliminary
stage.


14. (SBU) USTR Comment. ASEAN would seem to be in midst of
or about to begin FTA negotiations with virtually every
major trading nation or group or nations. The United States
should continue to actively engage the ASEAN region, both as
a group and bilaterally, to maintain and advance our
commercial and strategic interests in the region. End
Comment.


15. (U) USTR Director for Southeast Asia and Pacific Affairs
David Katz drafted this report.

PASCOE