PERU VIEWS COLOMBIA FTA AS VIRTUALLY THE SAME

C O N F I D E N T I A L LIMA 000811 SIPDIS SIPDIS DEPT FOR WHA/AND, WHA/CEN, EB/TPP/BTA/ANA DEPT PASS TO USTR - B. HARMAN USDA FOR FAS/ITP/GRUNDENDFELDER E.O. 12958: DECL: 03/01/2016 TAGS: ETRD EAGR EINV ECON PE SUBJECT: PERU VIEWS COLOMBIA FTA AS VIRTUALLY THE SAME Classified By: DCM Phyllis Powers for reasons 1.4 (b) and (d) ¶1. (C) Summary. The Peruvian Government has gone on record supporting the U.S.-Colombia free trade pact, emphasizing that neither Peru nor Colombia obtained a better deal. Initial information about the U.S.-Colombia trade agreement has allayed GOP fears that concluding negotiations first with the United States would enable Colombia to strike a better trade accord. Local press accounts underline that while the agreements have some differences, they are essentially the same. Some press and analyst reports have pointed out that Peru negotiated a better preference clause than Colombia, though the agricultural differences are minute. End Summary. GOP Approves of Colombia Deal -------------- ¶2. (C) The Ambassador spoke to Vice Minister of Trade Pablo de la Flor, Peru's lead negotiator, and Cecilia Blume, Chief of Staff for Prime Minister Kuczynski, on February 27 about the conclusion of the U.S.-Colombia free trade agreement. Both De la Flor and Blume said they were grateful for the late Saturday night calls from Deputy USTR Susan Schwab to Kuczynski and Trade Minister Alfredo Ferrero. De la Flor said that the Prime Minister was originally concerned that the Colombia and Peru agreements might be different in ways that would create political difficulties here. Based on the information received to date, however, that concern has been allayed. De la Flor said that the U.S.-Colombia agreement is positive in that it does not leave Peru out on its own in the Andean region. Press: Peru Has Better Agreement -------------- ¶3. (U) Recent press coverage of the U.S.-Colombia trade agreement has compared it to the U.S.-Peru agreement, noting that despite some differences, the agreements provide for equal treatment of both countries. On February 28, "Gestion," Peru's business newspaper, highlighted how Peru obtained a better preference clause. If Peru signs an FTA with another country with more favorable conditions, instead of granting the U.S. equal treatment for all products, Peru must do so for only a few products. Colombia, on the other hand, must grant the same treatment to the United States for all products. ¶4. (U) Additionally, the press compared quotas and tariff elimination periods for sensitive agricultural products. For example, while Peru must eliminate tariffs in 17 years compared to Colombia's 18 years for chicken hind quarters, Colombia has a higher quota, at 26,000 metric tons versus Peru's 17,000 metric tons. In the case of corn, where both Peru and Colombia have the same tariff elimination period of 12 years, Colombia has a higher quota at 2 million tons compared to Peru's 500,000 tons. Testimony Before Congress -------------- ¶5. (SBU) Trade Minister Ferrero, Health Minister Pilar Mazetti and Agriculture Minister Manuel Manrique testified in front of the Congress' Permanent Commission on February 28 to explain the U.S.-Peru Trade Promotion Agreement. In analyzing the agreements, Minister Manrique informed the Congress that in the case of rice, while Colombia obtained a longer phase out of tariffs, Peru's quota was smaller. He responded to concerns that Colombia got a better deal than Peru on sugar and corn syrup by pointing out that Colombia is a large exporter of sugar while Peru is a net importer. Manrique also highlighted that corn syrup is a low value commodity and is thus freight sensitive, making it more costly for the United States to export to Peru. ¶6. (SBU) During his testimony, Minister Ferrero emphasized that neither country got a "better deal", but rather that the deals for both were customized to reflect different sensitivities in their domestic market. He also highlighted the importance of obtaining duty-free access to the U.S. market, particularly for ethanol. Ferrero took the opportunity to apologize for his comments last week, when he stated that the current Peruvian Congress should debate the trade agreement or else they should "go home." March 1 media reports on the Congressional testimony have focused primarily on Ferrero's mea culpa rather than on the agreements. Obtaining U.S. Congressional Approval -------------- ¶7. (C) De la Flor informed the Ambassador that he hoped the Peru agreement, since it is further along, would go to the US Congress first. President Toledo, who will meet with President Bush on March 10, is likely to emphasize this point. Comment -------------- ¶8. (SBU) Free trade critics have been relatively silent on the issue the U.S.-Colombia agreement and have thus far declined to compare publicly the two agreements. Several Peruvian anti-FTA organizations, including ForoSalud and Conveagro, are planning seminars and conferences for later in March. We expect that they may attempt to highlight flaws in the U.S.-Peru agreement and argue that the GOP made a mistake to move forward without the Colombians, allowing Colombia to obtain additional benefits for sensitive agricultural products. STRUBLE