LAMY AND SOJO ON THE DOHA ROUND AND THE

UNCLAS SECTION 01 OF 03 MEXICO 001484

SIPDIS

SIPDIS

STATE FOR EB/TPP/MTA
STATE PASS USTR FOR DWOSKIN/ROHDE/MELLE/SHIGETOMI
USDA FOR FAS/ONA

E.O. 12958: N/A
TAGS: ETRD WTRO EAGR KTEX ELAB ENRG MX CN
SUBJECT: LAMY AND SOJO ON THE DOHA ROUND AND THE
TRADE-DEVELOPMENT NEXUS


Summary
--------------


1. WTO Director General Lamy and Mexico's Economy Secretary
spent two hours discussing the status of the Doha round of
trade negotiations and the stake that Mexico and other
developing economies have in its successful conclusion. Lamy
said the three main challenges are getting the U.S. to offer
deeper cuts in agricultural subsidies, getting the Europeans,
Japanese, and Koreans to slash their agricultural tariffs,
and getting key developing countries like India and Argentina
to reduce tariffs on industrial goods. The two fielded a
number of questions from the audience on China's role in
global commerce, the impact of rising agricultural commodity
prices, how best to address trade in textiles, and the
advisability of closer coordination between the various
international economic institutions. End summary.

Lamy - A Deal is Close, But Failure a Real Possibility
-------------- --------------


2. At a March 23 forum hosted by Mexico's Secretariat of
Economy, Pascal Lamy (WTO DG) and Eduardo Sojo (Secretary of
Economy) gave presentations on the state of play in the Doha
talks and why a successful outcome is important to Mexico and
other developing economies. On the former topic, Lamy said a
deal was within reach but would not be easy. He said there
are three key ingredients to reaching a deal: 1) deeper cuts
in U.S. agricultural subsidies, with other countries
following the U.S. lead; 2) deeper cuts in EU, Japanese, and
Korea agricultural tariffs, with developing countries
following their lead (and refraining from abuse of the
'sensitive products' category to avoid painful concessions);
and 3) real reductions in industrial tariffs by developing
countries like India and Argentina. In addition to these
three, Lamy also noted that a number of countries, including
Mexico, had yet to table revised and improved services
offers. Aside from calling out Mexico on its lack of a new
services offer, Lamy praised the country as one of those that
could be depended on for support in pushing Doha to the
finish line. (Note: Lamy is in the middle of a road trip to
rally global support for the round. He arrived in Mexico
from Indonesia and is headed for Africa next. End note.) In
response to a question from the audience, he said that he
believed there was political will in the U.S. to make the
needed concessions (on agricultural subsidies and additional
discipline for anti-dumping measures),and that there was a
reasonable chance that the U.S. Congress would approve a
deal, since in return America would get substantially more
market access for its services and agricultural and
industrial goods in large and growing developing economies
like India, China, and Brazil. Perhaps even more important
to the U.S., he opined, was our long-standing strategic
interest in a strong global trade system. He warned,
however, that the chances for success could drop
significantly if the negotiations were not concluded before
the expiration of the President's Trade Promotion Authority
this summer.

Sojo -- More World in Mexico, More Mexico in the World
-------------- --------------


3. Sojo recited the great benefits that have accrued to
Mexico from its two-decades-long policy of market opening,
and said President Calderon was committed to further
integration into the global economy under the slogan found in
the para header above. He pledged Mexico's support for a
successful conclusion to the round, saying that a collapse
would lead to more protectionism worldwide. Success, on the
other hand, would help achieve the goals of not just Mexico,
but of most developing countries, including gaining
additional access to fellow developing country markets and
leveling the playing field with the advanced economies in
terms of agricultural subsidies and trade remedies. Lamy
amplified on this point, noting that even a country with as
many free trade agreements as Mexico had very little leverage
over its trade partners on these sorts of issues, and that
the multilateral venue was really the only way to achieve
real progress on them.

Trade Necessary but Insufficient to Tackle Poverty

MEXICO 00001484 002 OF 003


-------------- --------------


4. In response to a question from the audience, Lamy gave an
eloquent description of the three necessary conditions for
combating poverty in developing countries. Of the three, the
WTO plays the lead role on the first, a supporting role on
the second, and no role on the third. 1) Economies must open
up. We know that economies that close themselves off see
increased poverty, and we know that greater openness at least
provides the opportunity for greater wealth. The WTO was
established precisely to open up the economies of its
members, thus its lead role on working to achieve this
condition. 2) Economies must have the capacity to benefit
from the opportunities presented by greater openness.
Without the ability to meet health, security, and safety
standards of target markets, without the infrastructure
necessary to move products and people across its borders, a
country will profit little from openness. Lamy said that if
the Doha round is successful, trade capacity building for
developed countries will be a major component of the WTO's
future responsibilities. 3) Only domestic political choices
can assure that additional wealth actually makes its way into
the pockets of the poor, making this condition the
responibility of each country's government. Picking up on
this point, Sojo said that Mexico is a country in which the
third condition has not yet been met. He said the Calderon
administration was cognizant of the country's huge
disparities in wealth and the consequent need to democratize
economic opportunity. He said the government would intervene
selectively to ensure that small and medium-sized
enterprises, poorer regions of the country, and other
marginalized groups would be able to plug into the national
and global economies. Along these same lines, the private
sector participant on the panel -- Cesar de Anda, head of
Mexico's Poultry Association -- emphasized that Mexico needed
to undertake deep structural reforms to prepare itself to
compete internationally, especially if the Doha talks result
in a new deal that further lowers world trade barriers.

China, Corn, Textiles and ILO
--------------


5. Several questions from the audience asked about dealing
with the commercial rise of China, in particular its
compliance (or lack thereof) with its WTO obligations and its
use of allegedly unfair trade practices. Lamy replied that
China did not have a perfect compliance record, and that it
was prone at times to "innovative" interpretations of its
obligations, but that in general it had implemented its
commitments in good faith. With regard to unfair trade
practices, Lamy said the whole point of getting China into
the WTO (for which Beijing paid a high price in terms of
market access) was to subject it to the same enforceable
rules that all other WTO members are supposed to abide by.
Sojo pointed out that Mexico has recently joined a case
against China for fiscal incentives and domestic content
rules that Mexico feels unfairly discriminate against foreign
products.


6. One questioner asked whether rising prices for
agricultural commodities like corn might disrupt
international trade. Lamy responded that market
circumstances sometimes lead to unpleasant situations, but
that distortions always make them even worse, referring
specifically to U.S. subsidies for corn production, U.S.
tariffs on ethanol imports, and Mexican restrictions on corn
imports. Sojo pointed out that high agricultural commodity
prices might make it politically easier for the U.S. to make
Doha concessions on cutting its domestic farm support
payments. De Anda added that these high prices were raising
costs in the milk, meat, and egg industries, and were yet
another reason why Mexico's agriculture sector needed to
upgrade its technological and productive capacities.


7. In response to a suggestion that textiles and apparel be
dealt with separately from other industrial goods (implying a
preference for slower tariff reductions for these products),
Lamy noted that countries like Mexico, Turkey, and Morocco,
which benefit from and want to maintain preferential tariff
treatment in the U.S. and EU markets, have requested a review
of the 2005 elimination of global quotas on textiles and

MEXICO 00001484 003 OF 003


clothing, which forced them to compete somewhat more directly
with the Chinese, Indians, and Bangladeshis. However, he
pointed out that integrating the rag trade into the
mainstream of global commerce was exactly the result that
developing countries had sought and won in the Uruguay Round.
He warned that countries with a competitive advantage in
this industry, like Pakistan, would be hardpressed to sign on
to a Doha agreement that would deny them access in their most
promising market sector.


8. Finally, asked about coordination (or lack thereof) among
the separate international economic institutions, Lamy said
it was important that these organizations respect the
boundaries between their respective areas of competency.
That said, he highlighted a recent study that the WTO had
co-sponsored with the International Labor Organization on the
effect of trade liberalization on job markets, two issues
that are clearly and closely linked in the public's mind,
regardless of the bureaucratic division of labor in Geneva.
He said there was room for improved coordination among all
international institutions.


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