Identifier
Created
Classification
Origin
06MONTEVIDEO555
2006-06-16 15:32:00
CONFIDENTIAL
Embassy Montevideo
Cable title:  

SCENESETTER FOR UPCOMING TRADE TALKS IN WASHINGTON

Tags:  ECON ETRD PREL AORC UY 
pdf how-to read a cable
VZCZCXYZ0000
PP RUEHWEB

DE RUEHMN #0555/01 1671532
ZNY CCCCC ZZH
P 161532Z JUN 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 5913
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 0417
RUEHLP/AMEMBASSY LA PAZ JUN SAN JOSE 0285
RUEHSG/AMEMBASSY SANTIAGO 2865
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
C O N F I D E N T I A L MONTEVIDEO 000555 

SIPDIS

SIPDIS

STATE FOR WHA/BSC AND EB
DEPT PASS USTR FOR EEISENSTAT AND MSULLIVAN
NSC FOR DTOMINSON AND DFISK
TREASURY FOR OASIA FOR DOUGLASS
USDOC FOR ITA/MAC/WBASTIAN
SOUTHCOM FOR POLAD

E.O. 12958: DECL: 06/14/2016
TAGS: ECON ETRD PREL AORC UY
SUBJECT: SCENESETTER FOR UPCOMING TRADE TALKS IN WASHINGTON

REF: MONTEVIDEO 00418 AND PREVIOUS

Classified By: Charge d'Affaires James D. Nealon
for reasons 1.4 (b) and (d)

C O N F I D E N T I A L MONTEVIDEO 000555

SIPDIS

SIPDIS

STATE FOR WHA/BSC AND EB
DEPT PASS USTR FOR EEISENSTAT AND MSULLIVAN
NSC FOR DTOMINSON AND DFISK
TREASURY FOR OASIA FOR DOUGLASS
USDOC FOR ITA/MAC/WBASTIAN
SOUTHCOM FOR POLAD

E.O. 12958: DECL: 06/14/2016
TAGS: ECON ETRD PREL AORC UY
SUBJECT: SCENESETTER FOR UPCOMING TRADE TALKS IN WASHINGTON

REF: MONTEVIDEO 00418 AND PREVIOUS

Classified By: Charge d'Affaires James D. Nealon
for reasons 1.4 (b) and (d)


1. (C) Summary: Following the successful Vazquez/POTUS
encounter in the Oval Office on May 4, trade talks between
GOU negotiators and USTR have been scheduled to take place at
a meeting in Washington during the last week of June. The GOU
is now much more focused on discussing a Free Trade Agreement
(FTA). This is mainly due to President Vazquez leadership,
but also to advance preparations made by Uruguayan technical
experts. The GOU is also less obsessed with its paper mill
dispute with Argentina, after a favorable preliminary readout
from the court case in The Hague. There is a palpable sense
of urgency in the GOU to move forward on an FTA, derived in
great part from the realization that this opportunity will
not present itself again and that time is running out on
Trade Promotion Authority (TPA). Embassy notes that an FTA
with Uruguay would hand a defeat to Chavez, at a time when
Venezuela is formally being inducted into Mercosur.


2. (C) In response to a barrage of misinformation by
opponents of of a trade agreement with the U.S., spearheaded
by ForMin Gargano, Post provided background information to
journalists to help educate the public and dispel
misconceptions. Emboffs also met with senior GOU officials,
representatives from all political parties and key business
leaders. Recent polling suggests that there is now greater
public support for an FTA, though there is still opposition,
particularly from hard-line Socialists and Communists. The
June 13-15 visit of WHA/BSC Director Douglas M. Barnes was
useful in furthering discussions of GOU plans for trade
talks. During his visit, a number of senior GOU officials
told Barnes that Uruguay is ready for serious trade talks and
is earnest about exploring an FTA. End Summary.


MFA's Economic Affairs Director General Amorin
-------------- -

3. (C) On June 14, WHA/BSC Director Doug Barnes and EconCouns
met with the MFA's Director for Economic Affairs Carlos
Amorin. Amorin was open and forthcoming. He confirmed that
the Uruguayan Embassy in Washington and USTR were close to
finalizing dates for a meeting in Washington during the last
week of June. He explained that the dates had gone back and
forth because of the need for the Uruguayan negotiating team
to attend WTO meetings in Geneva, where he was optimistic
that progress was in the making.


4. (C) Amorin said the purpose of the Washington meeting will
be to focus on working groups and areas/chapters to be
discussed. While it may not be possible to define at this
meeting whether the final agreement would be an FTA, he
noted, such a decision would not take much longer. He said
other ways to address market access --i.e. through the WTO--
were much more complicated than an FTA, thus implying that
the only way forward was an FTA. Amorin then reviewed the
chapters to be discussed. He commented that the BIT had
taken care of the investment chapter and that the GOU should
have "no problem" with services and IPR. He added that the
GOU had forwarded WIPO internet treaties to Parliament for
ratification. Market access and governmental purchases would
require more work, Amorin noted. He did not expect
resistance from local industries, but mentioned possible
issues with small farmers, rice, pork and wool textiles. On
the positive side, he noted that computer and capital goods
currently benefit from an exception to the Mercosur Common
External Tariff (CET),with a tariff of only 2%, something
that could easily be eliminated. Turning to the
Uruguay-Mexico FTA, Amorin said it was quite similar to a
typical U.S. FTA, but mentioned that the mechanism used by
Uruguay in this instance to comply with Mercosur rules was
through an ALADI agreement.


5. (C) Barnes then asked how the GOU intended to handle
Mercosur --and in particular Brazil-- if it were to move
forward on FTA talks with the U.S. Amorin replied that the

issue would be defined long before the Mercosur Summit in
Argentina on July 20-21. "We are preparing documents for our
friends," he said, and noted that Brazilian ForMin Celso
Amorin will visit Montevideo the week of June 19 (June 23,
according to media reports) to meet with the five ministers
involved in trade talks with the U.S. and with President
Vazquez. He was optimistic: "We have a case for an
exception", adding that "what we have now in Mercosur is a
customs union without the benefits." In an obvious reference
to the favorable conditions for accession being granted to
Venezuela, Amorin said "if we are talking about flexibility
on the part of our partners, then let's talk about
Venezuela." He noted "flexibility" within Mercosur, taking
into account the "new reality of Mercosur", which he thought
worked in Uruguay's favor. In a related development, Carlos
"Chacho" Alvarez, ex-Argentine Vice-President and current
President of the Permanent Commission of Mercosur, declared
in full-page interview published on June 16 by left-leaning
Uruguayan daily La Republica that "I believe what President
Vazquez and Uruguay are asking is just, in that Mercosur must
be flexible to allow Uruguay to enter into commercial
agreements with the United States, in the same way that
Brazil, Argentina and Uruguay signed agreements with Mexico
(...) I am convinced that Mercosur must be flexible and allow
such agreements, so that countries can find better
opportunities in the international markets."

EconMin Trade Policy Director Sarachaga
--------------

6. (C) Barnes and the Charge then met with Dario Sarachaga,
Trade Policy Director at the Economy Ministry. Sarachaga was
very clear as to the purpose of the Washington meeting.
"What we have to do," he said, "is define what we are
negotiating, how often we will meet and what the time frame
is." He said the GOU team will propose negotiation of an
"ATUM" ("Acuerdo tipo Uruguay-Mexico" or "Agreement of the
Uruguay-Mexico type") as a starting basis. He added that
there is no mystery that what is being talked about is an
FTA, but that he was using this name to take care of current
"political sensibilities."


7. (C) Sarachaga then outlined in detail the preparations of
the GOU team, which appeared to be well underway. He
explained that five working groups had been formed: 1) goods
(to deal with 18 groups of products, access issues, SPS,
technical barriers),2) services (e-commerce, monopolies; he
noted that some work has already been done in services with
the BIT),3) IPR issues, 4) government purchases, and 5)
institutional issues. Sarachaga commented that the GOU has
contracted outside expertise to prepare itself for
negotiations. The World Bank is currently providing an
advanced trade statistics course, Chilean experts will be
invited on July 11-12 to discuss IPR issues, and Costa Rican
ex-Trade Minister Alberto Trejos has been invited for
consultations.


8. (C) Asked about Mercosur, Sarachaga confirmed the upcoming
visit of Brazilian ForMin Amorim. He said that the issue of
an FTA with the U.S. had already been broached with the
Brazilians a week ago and that GOU EconMin Astori would meet
with Amorim. As for private sector reaction to an FTA,
Sarachaga pointed out that the EconMin and Industry Ministry
were in consultations with the Chamber of Industry, to
determine "offensive" and "defensive" areas. (Note: The four
major private sector chambers, including the Chamber of
Industry, recently published an open letter supporting the
negotiation of an FTA with the U.S. and calling on the GOU to
approach its Mercosur partners in this regard. End Note.)
Sarachaga did not expect much friction with the issue of
monopolies either, noting that in telecommunications, the
entire cellular sector is free and only fixed-line telephony
is a state monopoly. As for governmental purchases, he
commented that all FTAs reserve some space for national
companies. Sarachaga closed the meeting by pointing out that
the average Uruguayan tariff on U.S. goods is 4 percent,
while the average U.S. tariff on Uruguayan exports is 14
percent. That is why we are talking about an FTA, he said.

What's in a Name?
--------------

9. (C) Sarachaga's inclination to find an alternate name for
an FTA was echoed at practically every other meeting with
Uruguayan officials. They suggested it would be useful to
change the name from that of a Free Trade Agreement to
something more politically palatable to the left-leaning,
"anti-neoliberal" elements in Congress. Especially egregious
to the Left is the word "agreement", which has been
translated into Spanish as "treaty", thus carrying heavy
political overtones. One interloctutor pointed out that
Chavez's own alternative to FTAA (ALCA in Spanish) for
Venezuela, Cuba and Bolivia is termed with the catchy acronym
of "ALBA", meaning "Dawn." (ALBA stands for "Bolivarian
Alternative to the Americas".) Embassy recommends that USG
interlocutors in Washington be sensitive to the issue and
open-minded to alternative names for an agreement whose
substance would essentially be an FTA. We note, for example,
that Peru's FTA with the U.S. is called a Trade Promotion
Agreement (TPA).

Presidential Chief of Staff Gonzalo Fernandez
--------------

10. (C) On June 14, the Charge met one-on-one with President
Vazquez's Chief of Staff Gonzalo Fernandez. The Charge began
by congratulating him on his appointment as the head of
Uruguay's team for upcoming trade negotiations. Fernandez
said that President Vazquez is "completely committed" to
deepening trade relations with the U.S. He said that his
appointment as lead negotiator was a sign that Vazquez wanted
to "keep the reins in his own hands" in order to avoid
bickering among ministers and to maintain political control.
While Fernandez admitted that he was not an expert on trade
negotiations, he said that Ambassador to the U.S. Carlos
Gianelli, the MFA's Carlos Amorin and the Econ Ministry's
Dario Sarachaga were well up to the task. Fernandez said the
GOU was still looking at three options: an FTA, an expanded
Bilateral Investment Treaty (BIT) and possible "sectoral or
unilateral agreements." (Note: Unlike the technical experts
from the MFA and EconMin, Fernandez still seemed to believe
that something other than an FTA was possible to achieve
Uruguay's goals. End Note.) Fernandez confirmed that
Uruguay wants to emulate Chile and said that at present
Uruguay and Chile are the only "serious " countries in the
region.

MFA's Director General Jose Luis Cancela
--------------

11. (C) In the late afternoon, WHA/BSC Director Barnes and
the Charge met with Ambassador Cancela, the MFA's Secretary
General. Cancela began by reporting a favorable assessment
of Uruguay's prospects at the International Court of Justice
in The Hague regarding the paper mill dispute with Argentina.
When the conversation turned to trade, Cancela said he
understood that "important advances had been made" including
that the GOU's negotiating team was in place and that the
dates for the next meeting had been agreed upon. He said he
expected that A/USTR's Everett Eisenstat would visit Uruguay
before October of this year. The Charge responded that he
could not confirm Eisenstat's travel but would inquire about
it with USTR. With respect to obtaining Mercosur's
"permission" to allow Uruguay to engage in a trade deal with
the U.S., Cancela thought that Brazil was apt to be
"flexible", but observed that "it would not be unusual for a
customs union to debate such an issue."

Media Reactions
--------------

12. (C) In response to a barrage of disinformation by
opponents of a trade agreement with the U.S., spearheaded by
ForMin Gargano, Post provided background information to
journalists to help educate the public and dispel
misconceptions. Emboffs also met with senior GOU officials,
representatives from all political parties and key business
leaders. A full-page interview with the Charge in the June 8
issue of the respected business weekly "Busqueda" received
excellent reviews, and we heard from many supporters that the
USG's silence had been taken as ambivalence. Then media
picked up the Charge's talking points in pro-FTA editorials
that followed the Busqueda interview. Recent polling suggest
increasing public support for an FTA, though there is still
opposition within the Frente government, particularly from
the Socialists and Communists. The private sector came out
recently with an open letter supporting an FTA with the U.S.
and urging the GOU to discuss it with its Mercosur partners.
Trade talks with the U.S. remain front-page news, and we get
asked about them every day. Post would welcome robust,
usable talking points as we continue to fight Minister
Gargano's disinformation campaign.

Meeting with MFA Officials
--------------

13. (C) At a dinner on June 14, WHA/BSC Barnes met with the
Acting Director General for Political Affairs, Alvaro
Gallardo, the Director for Multilateral Affairs Gustavo
Alvarez and the Deputy Director for the Americas, Mario
Liori. Liori thought that Brazil was not likely to oppose
Uruguay's bid for an FTA with the U.S. His reasoning was
that Brazil knew that sooner or later it also would enter
into an FTA with the U.S., because both countries are natural
partners facing the same competition from the Far East. This
meant, he said, that an Uruguayan FTA was no threat to Brazil
or to Mercosur. Liori also believed that Brazil's
"cooperation" with Argentina within Mercosur was a "marriage
of convenience" based largely on Brazil's need to garner
support for its own bid for a permanent UNSC seat.

Comment: An Opportunity to Send a Clear Message
-------------- ---

14. (C) WHA/BSC Barnes' visit to Uruguay confirmed the GOU's
focus on concrete decisions and timetables for serious trade
talks. It appears that the GOU understands the challenges
involved in negotiating an FTA with us and seems willing and
prepared to undertake serious efforts towards this objective.
There is a palpable sense of urgency within the GOU and a
realization that there will not be another opportunity for an
FTA any time soon, with time running out on Trade Promotion
Authority (TPA). Our interlocutors kept repeating that the
June meeting is crucial and cannot be delayed. Constant
encouragement and monitoring by the USG will still be
required, however, both here and in Washington, to ensure a
positive outcome.


15. (C) The table is set for a renewed dynamic on free trade
in the Southern Cone, in the wake of the deadlock with
Mercosur at the Mar del Plata Summit. As Mercosur prepares
to welcome Venezuela at the July Summit, FTA talks with
Uruguay could deliver a strong signal to Venezuela's Chavez
that left-of-center "serious" countries do not buy into his
grand scheme. The formal approval of Uruguay's "FTA
exception" to Mercosur rules could occur at the same July
Mercosur Summit in Argentina when Venezuela's entry into the
bloc as a non-voting member will be formalized. The message
could not be clearer. WHA/BSC Director Barnes cleared on
this cable before his departure. End Comment.
Nealon