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