MEXICAN TRADE NEGOTIATOR ON NAFTA MINISTERIAL

UNCLAS SECTION 01 OF 02 MEXICO 000764 SIPDIS SENSITIVE SIPDIS FOR EB/TPP, WHA/MEX, AND WHA/CAN COMERCE FOR NAFTA OFFICE/ARUDMAN PLEASE PASS USTR FOR JMELLE E.O. 12958: N/A TAGS: ETRD MX SUBJECT: MEXICAN TRADE NEGOTIATOR ON NAFTA MINISTERIAL AGENDA Sensitive but unclassified, entire text. Summary -------------- ¶1. (SBU) Mexican trade negotiator Ken Smith Ramos told us February 2 that Mexico expected the upcoming proposed March NAFTA Ministerial would cover the relationship between NAFTA and the SPP, regulatory cooperation, development of a list of panelists as set out in NAFTA Chapter 20, increased flexibility rules of origin provisions, sectoral initiatives in areas including steel and textiles, and development of a a legal bridge between CAFTA and NAFTA to allow Central American content in Mexican goods bound for the U.S. These more technical issues would likely complement a ministerial discussion of the WTO and the Doha Round, as well as NAFTA's future. Smith noted Mexico's pleasure at recently resolving issues like bone-in beef, cement, and pork, and noted that these successes would help diffuse pressure on presidential candidates to raise NAFTA renegotiation as a campaign issue. End Summary. ¶2. (SBU) We met February 2 with Ken Smith Ramos, Director General for International Trade Negotiations at the Secretariat of the Economy, to pulse Mexican views on the SIPDIS agenda for the March 23 NAFTA ministerial in Acapulco, a snapshot of current trade issues, and a look ahead to his own future. NAFTA Ministerial -------------- ¶3. (SBU) On the NAFTA ministerial, Ministers would certainly deal with "systemic issues" such as the WTO and Doha, as well as the future for the NAFTA relationship. Procedurally, Smith noted that Canada has suggested holding two NAFTA Deputy Ministers meetings per year to continue working through technical details. Canada may also wish to make specific proposals on modification of NAFTA dispute resolution mechanisms that would not require textural changes. ¶4. (SBU) On the practical side, Smith suggested the Ministers would open with a discussion of "pending programs" like the SPP. He was most focused on how various NAFTA groups relate to work being done under its auspices. He noted that the GOM would try to push concepts of regulatory cooperation and mutual recognition. Smith said that the Mexicans would seek to use the Committee on Standards Related Measures within the NAFTA context to push this idea. He expected a document from the Department of Commerce shortly outlining specific projects. He added that the National Bureau of Standards is working with COFEMER (Commission on Regulatory Improvement) in Mexico. Smith understood the difficulties of making significant progress on mutual recognition with the U.S., given the complexity of regulatory structures on both sides. ¶5. (SBU) Smith suggested the ministers and their staffs could work on developing a list of panelists under Chapter 20 of NAFTA. Article 2009 of the NAFTA calls for a consensus roster of persons acceptable to all member countries. Panelists must have expertise or experience in law, international trade, other matters covered by NAFTA or the resolution of disputes arising under international trade agreements, and will be chosen strictly on the basis of objectivity, reliability and sound judgment. Currently there is no approved list of panelists. Smith added that there were political issues to consider on all sides. He added that both sides needed to advance in this area. ¶6. (SBU) On rules of origin, he suggested the ministers could discuss "packages" for providing increased flexibility on rules of origin for goods to be exported back to the U.S. He offered that this would not provide the "big bang" result from the ministerial that Mexico and the U.S, were seeking, but would be welcome. ¶7. (SBU) On sectoral initiatives, Smith suggested that draft policy papers be drafted on strengthening various sectors including steel (putting together a newer steel strategy) and textiles. The papers would form the basis for a series of presidential recommendations, both offensive and defensive, within the region. They could also deal with smuggling and transshipment problems. MEXICO 00000764 002 OF 002 ¶8. (SBU) Ministers would also want to discuss a "bridge" to join Mexico and CAFTA for the purpose of exports back to the U.S. (i.e. goods from Mexico to be exported to the US can have CAFTA content to make up rules of origin provision). Currently there is no legal mechanism to join the two agreements. Smith suggested that there would need to be some U.S. system to verify and authorize CAFTA content in Mexican goods exported to the U.S. under NAFTA. He added that the Mexican Senate would have to approve such a scheme, as it deals with NAFTA. Furthermore, any Senate approval would be politically tough. At the same time, Mexico would have to develop its own procedures with Central America. Agricultural Trade -------------- ¶9. (SBU) On other issues, Mexico's National Organization of Basic Grains Farmers (ANEC) had pressed Mexico to raise corn and beans exports to the U.S. with an eye to relief from the 2008 border opening. Agreement between both sides to put the issue into the existing NAFTA cooperation mechanism, according to Smith, would provide "armor plating" for NAFTA going into the 2008 final implementation, shifting away pressure that had come from political campaigns (AMLO) to stop short of opening the border in 2008. He added that many on the U.S. side want to show progress, and that Mexico had gotten rid of pork as an issue and had recently promulgated a (albeit flawed) ruling to resolve the bone-in beef ban. The long-standing anti-dumping case on cement had also been largely resolved. ¶10. (SBU) Sugar, however, remained "hard." He had hoped for further access to the U.S. market, and was ready for further work, "hoping that the smoke cleared soon." With movement on sugar, Smith was optimistic on further Mexican moves access for fructose (HFCS). The window for action was closing quickly with the coming election. With the election period approaching a continued stream of positive announcements would be helpful in moderating public opinion, and continued creativity on both sides could help avoid more serious problems. ¶11. (SBU) Still, he predicted that Mexican trade policy would remain relatively constant even with an AMLO victory. NAFTA had become part of Mexican political "fundamentals," and despite political rhetoric was unchangeable. Smith did caution that both sides should work to ensure that trade questions do not become linked to other "border issues." Those that opposed full liberalization on the NAFTA schedule were not above using the current discontent over the Sensenbrenner legislation to support their anti-free trade positions. Still, he remained optimistic that Economia could keep trade from becoming a political football in the run-up to July 2. Successes in the trade area underscored this idea. The Future -------------- ¶12. (SBU) As for his own future, given the different views of the candidates, Smith said that while his job was not in jeopardy, and despite the protection offered by the recently reformed civil service law, he would be unlikely to remain in place in an AMLO administration, though he was more sanguine about remaining in his position after a PRI or PAN win. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity KELLY