ECONOMIC MINISTER TELLS AMBASSADOR SPS SYSTEM NOT

C O N F I D E N T I A L SAN SALVADOR 000065 SIPDIS E.O. 12958: DECL: 01/08/2016 TAGS: ETRD PREL ES CAFTA SUBJECT: ECONOMIC MINISTER TELLS AMBASSADOR SPS SYSTEM NOT READY FOR FEB. 1 CAFTA IMPLEMENTATION REF: 2005 SAN SALVADOR 3567 Classified By: Ambassador H. Douglas Barclay. Reasons 1.4 (B) and (D) ¶1. (C) Salvadoran Minister of Economy Yolanda de Gavidia, accompanied by Ambassador to the United States Rene Leon, told Ambassador Barclay in a January 6 meeting that El Salvador would not be ready by February 1 to recognize U.S. sanitary and phytosanitary standards (SPS) systems as equivalent to Salvadoran SPS systems. De Gavidia said that December 15 legislative changes, not yet signed into law because of an FMLN procedural delay, give them the legal authority to recognize the U.S. SPS systems. The regulatory framework to put the law into effect, drafted by the Ministry of Agriculture and Livestock (MAG) and being reviewed by the Ministry of Economy, is also nearly finished. However, that framework only sets out the procedures to follow to recognize the U.S. system and does not specifically recognize it as equivalent. The Minister said implementation--and eventual recognition--would require additional time. Leon suggested that in five months they could complete the process and suggested that his government could commit to that time-frame. On tariff-rate quota administration, de Gavidia was more positive and said her Ministry had submitted a proposal to USTR on Thursday and that they were waiting for comment. ¶2. (C) Leon explained to the Ambassador that El Salvador could not simply declare the U.S. SPS systems equivalent without first understanding it and having in place a regulatory framework to accept U.S. inspections in the course of actual trade. Domestic agricultural interests--concerned for example, about the impact of certain strains of avian influenza, would expect the government to demonstrate that it followed due process in finding SPS systems equivalence. Leon emphasized that the government was not looking to use SPS as a non tariff barrier and was willing to help the USG meet a political commitment. Minister de Gavidia added that El Salvador was willing to help the USG meet a commitment it made with its Congress to get CAFTA passed, but that implementing the regulations to find equivalence would take time. She said the government was prepared to provide MAG with $2 million in supplemental funding to move along the process. She also noted some concern that the USG was requiring SPS systems equivalence only in terms of Salvadoran recognition of the U.S. system, not the other way around. ¶3. (C) Leon outlined the political implications of linking CAFTA implementation to SPS systems equivalence. On the domestic front, the communist-dominated FMLN would claim that this last minute renegotiation demonstrated that Saca's cozy relationship with the United States had borne no fruit. He cautioned that this issue would deadlock debate in the Costa Rican Legislative Assembly and that other countries would also face serious issues in tying SPS systems equivalency to CAFTA implementation. He also pointed to the chilling effect it would have on efforts to secure a hemispheric free trade agreement. Finally, he pointed to the economic costs associated with waiting to implement in terms of lost opportunity. ¶4. (C) Minister de Gavidia indicated she would communicate these concerns directly with USTR as soon as possible. Barclay