C O N F I D E N T I A L SAN SALVADOR 000116

SIPDIS

E.O. 12958: DECL: 01/12/2016
TAGS: ETRD PREL ES CAFTA
SUBJECT: NO GOOD OPTIONS ON CAFTA FOR EL SALVADOR:
IMMEDIATE DELIVERY OF SYSTEMS EQUIVALENCE AND DELAY BEYOND
FEBRUARY 1 BOTH RAISE RISKS

REF: A. A) SAN SALVADOR 109


B. B) SAN SALVADOR 65

Classified By: AMB. H. DOUGLAS BARCLAY. REASON: 1.4 (D)


1. (C) Foreign Minister Francisco Lainez and Minister of
Economy Yolanda de Gavidia met the Ambassador in the evening
of January 12 to continue the discussion of CAFTA
implementation, in anticipation of a January 13 morning call
from President Bush to President Saca. De Gavidia repeated
that the problem El Salvador has in issuing a finding of
equivalence between the U.S. and Salvadoran
sanitary/phytosanitary (SPS) systems before January 16 (the
deadline in order to permit a February 1 entry into force) is
a legal one, not a political one. Salvadoran law required
the GOES to walk through certain steps in order to promulgate
a regulation that defined how to implement systems
equivalence. De Gavidia said that the Legal Advisor in the
Presidency, Luis Mario Rodriguez, had determined that a
finding of equivalence would be illegal if the GOES did not
follow this process. To illustrate GOES sincerity on this
point, she commented that the GOES had had political problems
in revising its proposed system for tariff rate quota (TRQ)
administration, but had worked through this to make the
necessary changes for entry into force.


2. (C) The Ambassador presented de Gavidia and Lainez a
copy of Ambassador Susan Schwab's letter response to a
communication from De Gavidia dated January 12 in which she
laid out an argument about legal requirements the GOES must
meet. The Ambassador told her that the USG believed that
such requirements did not exist. De Gavidia raised the
concern that any legal misstep by the GOES in rulemaking or
execution would open the door to an FMLN (the far left
political opposition) suit against CAFTA in the Supreme Court
which could hang up the whole CAFTA agreement in the
Salvadoran legal system; she and Lainez believed that the
FMLN would have no grounds to pursue this course if the GOES
were to follow the correct procedures in working out SPS
systems equivalence. The risk of a lawsuit was
unacceptable. As a result - if the legal opinion about a law
governing rulemaking is correct - the GOES will miss Feb 1
entry into force whether the regulatory process they define
is lengthy or brief.


3. (C) If El Salvador misses a February 1 entry into force
date, we expect that the U.S. disagreement with El Salvador
and other CAFTA signatories over the legal status of the
commitment in the SPS Working Group to systems equivalence
will come out in the open. It will come out because de
Gavidia said she will have to tell the public that the GOES
missed the February 1 date because the USG insisted on
obtaining a benefit that was not in CAFTA. Such a tack by
the GOES would put the USG on the defensive and raise the
profile of an underlying concern that current practices in
allocating economic opportunity in the Salvadoran economy may
be exclusionary. We cannot predict what impact a public
discussion of this issue would have on our trade relations
elsewhere. De Gavidia also said that the GOES would have to
go back to the Legislative Assembly to reform the December
legal reforms undertaken for CAFTA implementation, since
these reforms could not go forward without CAFTA.


4. (C) Comment: we recognize how difficult it would be
technically to find a solution to allow February 1 entry into
force, as Foreign Minister Lainez sought, in particular the
necessary assurances that a finding of equivalence would be
forthcoming. Any solution for El Salvador may elicit a
backlash in Central America and in other trade negotiations.
It is hard to envision an exception for El Salvador that did
not extend to all of Central America. Still, the political
arguments for finding a solution for February 1 are
compelling. We do not know the specific legal citation that
de Gavidia believes applies and await that information.
However, the FMLN has made statements in the past that it
would mount a legal challenge to CAFTA. Our experience with
the Salvadoran courts (in cases involving contract
enforcement with McDonald's and AIG, or telecommunications
regulation) tells us that the court could well take on such a
challenge and that the case could take years to work out.
Barclay