ECUADOR SUPPORTS AN EU-CAN ASSOCIATION AGREEMENT

C O N F I D E N T I A L QUITO 001478 SIPDIS SIPDIS TREASURY FOR SGOOCH USTR FOR BENNETT HARMAN E.O. 12958: DECL: 06/28/2017 TAGS: ECON ETRD EC SUBJECT: ECUADOR SUPPORTS AN EU-CAN ASSOCIATION AGREEMENT Classified By: DCM Jefferson Brown. Reason: 1.4 B and D ¶1. (C) Summary: Ecuador's President Correa supported the European Union (EU) - Andean Community (CAN) association agreement talks launched June 14 and reportedly played a mediator role in moving them forward, even though he opposed a free trade agreement (FTA) with the U.S. as it was negotiated. The GOE considers the agreement more comprehensive, cooperative, and asymmetrical than a U.S.-style FTA. It would contain political and cooperation sections in addition to a commercial section, and would allow additional flexibility for Ecuador and Bolivia in the form of chapter and product exclusions. End Summary. ¶2. (C) The CAN and the EU officially launched negotiations for an association agreement during the CAN summit in Tarija, Bolivia on June 14. Emboff met with Ecuadorian MFA Director for Integration Humberto Jimenez June 20 to discuss the accord. Ecuador as Mediator -------------- ¶3. (C) The launch of the EU-CAN negotiations had been stalled due largely to objections by the government of Bolivia. The GOB reportedly opposed negotiating intellectual property rights (IPR),among other issues. Colombia and Peru, having recently signed FTAs with the U.S., appeared ready to move forward quickly with the talks. Jimenez and another trade insider alleged that Colombia and Peru had been threatening to leave the CAN over the issue (and would likely have sought to negotiate with the EU on their own). Ecuador stepped in as mediator, Jimenez said, urging Bolivia to be more flexible. According to Jimenez, Bolivia asked to be excluded from the agreement's commercial chapters on IPR, investment, government procurement, and services and the EU agreed to discuss the exclusions. He noted that Ecuador only asked to be excluded from the government procurement chapter (but it is willing to negotiate transparency in government procurement). Jimenez mentioned that the first official round would be held in Brussels in July. An Association Agreement is Not Free Trade -------------- ¶4. (C) Jimenez explained the key differences between a U.S. free trade agreement and the association agreement that make the latter acceptable to Ecuador. He claimed the EU agreement would provide "special and differential treatment" for all CAN partners, and additional asymmetry and flexibility for Ecuador and Bolivia due to their "lesser-developed" status. It would also provide for "cooperation" to include capacity building assistance from the EU. The additional flexibility for Ecuador and Bolivia would take the form of less stringent disciplines in certain areas and exclusions for sensitive products, Jimenez said. However, he also noted that the EU would be seeking their own exclusions, particularly for sensitive agricultural products. ¶5. (C) Structurally, the agreement would contain three parts - a commercial section (similar to an FTA),a political section, and a cooperation section. The commercial section would include rules covering topics such as IPR, investment, market access for goods and services, and government procurement. The political section would provide for a formal dialogue between the Ministers of the CAN and the EU, and the cooperation section would aim to increase cooperation between EU and CAN countries through capacity building and cooperation on fighting drugs, "social cohesion," and other issues. To fund the cooperation efforts, Jimenez said the agreement would draw on 50 million euros that the EU has already committed to cooperation efforts over the next 6 years (it is unclear if the money is just for Ecuador or for the entire CAN). As lesser-developed partners, Ecuador and Bolivia would receive enhanced cooperation treatment. Will the Private Sector Have a Role? -------------- ¶6. (SBU) Jorge Illingworth, Executive Director for the Guayaquil Chamber of Industry, said that the GOE has told the private sector that government will not closely involve them in the EU-CAN negotiations, and rather than consulting the private sector will simply inform the private sector of developments. Comment -------------- ¶7. (C) Although President Correa has said he opposes the free trade agreement with the U.S. as it was negotiated, in this instance he sided with Colombia and Peru rather than Bolivia in moving forward with the EU-CAN negotiations, possibly influenced by fear of a breakup of the CAN. The GOE is portraying the accord as comprehensive and cooperative, emphasizing the agreement's assistance aspects and its asymmetry. As such, this model as perceived by the GOE offers a sense of what they would likely hope to pursue with the U.S. in their recent references to wanting to explore with us some kind of "long-term commercial agreement." Jimenez reports the GOE plans to negotiate all commercial chapters except government procurement and does not have a problem negotiating IPR (which had been a problematic chapter for Ecuador in the U.S. FTA talks). As negotiations move forward, it will be interesting to see whether the EU proves to be a tougher negotiator than Ecuador expects and whether Ecuador continues to side with Colombia and Peru or follows Bolivia's protectionist lead. JEWELL