PRESIDENT VAZQUEZ MOVES FORWARD ON US TRADE AGENDA

C O N F I D E N T I A L MONTEVIDEO 000774 SIPDIS SIPDIS DEPT ALSO FOR A/S TSHANNON, WHA/BSC AND EB DEPT PASS USTR FOR EEISSENSTAT AND SCRONIN TREASURY FOR OASIA FOR DDOUGLAS COMMERCE FOR ITAITA/MAC/WBASTIAN NSC FOR DFISK AND DTOMLINSON SOUTHCOM FOR POLAD E.O. 12958: DECL: 08/22/2016 TAGS: PREL ETRD PGOV ECON AORC UY SUBJECT: PRESIDENT VAZQUEZ MOVES FORWARD ON US TRADE AGENDA REF: MONTEVIDEO 0746 AND PREVIOUS Classified By: Charge D'Affaires James D. Nealon for reasons 1.4 (B) and (D) ¶1. (C) Summary: Since the August 7-10 visit of senior USTR officials to Uruguay (reftel),President Vazquez has been assiduously preparing his domestic constituency for deeper trade ties with the United States. He has publicly stated that the feasibility of a Free Trade Agreement (FTA) could be decided at the next meeting of the Joint Commission for Trade and Investment (JCTI) in early October. Meantime, he has provided his interlocutors with a sound, balanced and comprehensive paper that examines key issues on trade ties with the US, including impact on Mercosur. The US trade "debate" taking place here is more ideological than economic and the main detractors predictably hail from hard-left and anti-US sectors. However, Vazquez' recent engagement and information sharing has also allowed a wider audience to more thoughtfully examine the issue of an FTA and weigh the challenges it poses. Still, the overall momentum in Uruguay is positive towards an FTA and Vazquez seems to be expending considerable political capital to make this happen. Below are some salient highlights on the matter. THE PRESIDENT AS SOLE SPOKESMAN -------------- ¶2. (SBU) Following a cabinet meeting on August 14, President Vazquez issued the following press release indicating that he will be the sole spokesperson on the issue of a trade deal with the U.S. (Unofficial translation) "As a result of the controversies within the Administration, on negotiations to explore a possible agreement to expand trade with the United States, the President of the Republic resolves that of this date he, or in his absence the person designated by him will be the only spokesman on this subject. Secondly, the President of the Republic will invite all Uruguayan political parties to discuss the issue in depth within their own organizations. For this purpose, the President of the Republic will call the highest authorities of the Frente Amplio, National Party, Colorado Party, Independent Party and the Civic Union to provide them with the information developed by the bilateral technical groups working on this issue. At the same time, the President will invite the Ambassadors of the People's Republic of China and of the Republic of India to confer through them with their respective governments on the possibilities of setting up bilateral committees to study the mechanisms to improve trade between each one of these countries." (Comment: It is widely believed that he issued this statement to silence Formin Reinaldo Gargano, the most outspoken critic of an FTA. End Comment.) ¶3. (SBU) True to his word, Vazquez invited the opposition parties to the Suarez Residence on August 21 to share his thoughts on the sensitive issues surrounding an FTA and trade with the US. He presented them with an 11-page paper entitled "Preliminary Evaluation of a Possible Agreement with the US." Some of its highlights appear below; Embassy will transmit a full translated copy of this document when available. -- Of the six working groups, the Ministry of the Economy will head three (goods, services and government procurement.) The Ministry of Industry (another ally) will manage Intellectual Property Rights, perhaps the most sensitive area. The MFA, under Reinaldo Gargano is tasked with institutional affairs and capacity building -- areas of less import. -- The document clearly spells out that a potential agreement should be framed as a comprehensive Free Trade Area. -- It leaves the door open for negotiating either a Free Trade Agreement (FTA) or another kind of agreement to deepen the trade relationship with the US. -- The largest benefits for Uruguay would stem from removing current US barriers on beef, dairy products, food stuffs, textiles and apparel. The GOU does not see an "invasion" of US products that could hurt its market. -- It reiterates the need to stay within Mercosur but indicates that "as long as Mercosur remains stagnant" and does not improve integration mechanisms, Uruguay's development strategy requires boosting exports through third country bilateral trade agreements and states, "In this respect, it is of paramount importance to seek a higher degree of flexibility in negotiation schemes within Mercosur with respect to other countries," and cites the Andean Community of Nations (CAN) as an example of this. -- It cites the FTA Uruguay has with Mexico as a precedent for a trade deal with the US. MORE ON MERCOSUR -------------- ¶4. (U) Days earlier, the Brazilian embassy issued the following statement in the weekly "Busqueda" (Unofficial translation) "The Embassy of Brazil is willing to express itself on this matter (Uruguay's bid to negotiate trade agreements outside the Mercosur bloc) with the clear understanding that it is not contradicting any Uruguayan official. Uruguayan officials have the complete and sovereign right to seek what is most beneficial to their country. In this regard, Brazil continues to seek regional integration and the strengthening of Mercosur and has demonstrated this through its many businesses in Uruguay. The Uruguayan government knows how to defend its own interests without compromising its international commitments, and without damaging Mercosur. (This policy) has been reiterated by the highest authorities of Uruguay." ¶5. (U) At a press conference on August 21 following the meetings with the political parties, Vazquez addressed this issue when he responded to a reporter's question and said, "We'll see. In the next few days I'm going to try and have a conversation with, at least by telephone if not in person, President Lula, who you all know is the Pro Tempore President of Mercosur, to talk about these things. There already was an occasion in Brasilia at a meeting with the Presidents of Brazil and Argentina -- and you know that they expressed themselves publicly saying that they would not put obstacles in Uruguay's quest to improve its commercial relationship with the United States and other countries." COMMENT -------------- ¶6. (C) The "FTA debate" remains the overwhelmingly dominant issue here, with the media portraying every nuance with front-page banner headlines. Vazquez has taken a considerable political risk, alienating important sectors of his governing coalition, by clearly and publicly committing himself to "the deepest possible" trade agreement with the United States, which is his code for an FTA. Two weeks ago, in the presence of senior USTR officials, he said that "sometimes, the train only comes by once." He immediately launched a comprehensive public diplomacy campaign to build tri-partisan support for a trade deal. He has now stated publicly that he will work the issue of compatibility with Mercosur with Lula, either by phone or in person, though Vazquez and various members of his inner circle have told us repeatedly that Uruguay already has the right to expand its trade with third parties. Vazquez appears confident that he can deliver on his goal of reaching a trade agreement with the United States, and in fact he has half of the Frente Amplio and all of the opposition backing him. He also appears confident that the United States will reciprocate by grasping his outstretched hand. End Comment. Nealon