ARGENTINA: GOA DOWNBEAT ON DOHA SERVICES "SIGNALING"

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E.O. 12958: N/A
TAGS: ETRD WTRO ECON EAGR EINV PREL AR
SUBJECT: ARGENTINA: GOA DOWNBEAT ON DOHA SERVICES "SIGNALING"
EXERCISE

Ref: (A) STATE 18370

(B) 07 BUENOS AIRES 1558

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Summary
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1. (SBU) In a sharp response to Ref A letter from USTR Schwab on
upcoming WTO Doha Development Round (DDR) services negotiations,
Foreign Ministry Trade Secretary Alfredo Chiaradia argued that
Schwab's linking the USG's ability to agree to modalities on
Agriculture and NAMA to our confidence in an equivalently ambitious
services outcome was an example of U.S. "imperiousness" that
"inverts the accepted hierarchy" of DDR Ag and NAMA priorities.
Progress on linked Ag and NAMA modalities will remain the GoA's
"benchmark" to measure DDR progress. Chiaradia called current Ag
and NAMA draft proposals "unbalanced," with agriculture commitments
significantly less ambitious than NAMA -- and developing country
Swiss coefficients in the NAMA draft more than Argentina can handle
given domestic political constraints. Chiaradia did offer that the
GoA has "room to maneuver" on services, and promised a formal reply
to USTR Schwab's letter shortly. End Summary.

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GoA: Services Signaling "Inverts" DDR Priorities
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2. (SBU) CDA, Econ Counselor, and Trade Officer met February 27 with
Ambassador Alfredo Chiaradia, Secretary of Trade in the Foreign
Ministry and lead multilateral trade negotiator for the GoA, and
Luis Niscovolos, Director of Multilateral Economic Negotiations in
the Argentine Foreign Ministry to pass USTR Schwab's request (Ref A)
that the GoA participate in an upcoming series of signaling meetings
to advance WTO services negotiations. Chiaradia called the USTR's
direct linkage of USG ability to agree on Agriculture and NAMA
modalities to our confidence of an equivalently ambitious services
outcome an example of U.S. "imperiousness" that "inverts" the
accepted DDR negotiating hierarchy of Agriculture and NAMA as
priorities. While paragraph 24 of the 2004 DDR Hong Kong
Declaration calls specifically for "comparable" levels of
Agriculture and NAMA ambition, Chiaradia recalled no consensus
statement from prior DDR Ministerials making an equivalent statement
on levels of ambition in services. The U.S., he concluded, is
attempting to raise DDR service sector negotiations to a level of
importance not "consecrated" in prior DDR consensus documents.

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GoA DDR Priorities: Agriculture First and Foremost
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3. (SBU) Chiaradia called agriculture negotiations the "locomotive"
for broader DDR progress from the GOA's perspective, and stressed
repeatedly that the manner in which the 170-plus unresolved issues
in the latest Agriculture modalities text are dealt with would set
Argentina's "benchmark" for level of ambition in NAMA. He called
the latest NAMA modalities draft tabled by committee chair
Stephenson "unacceptable" and insisted that "disequilibria" between
the latest Ag and NAMA texts be addressed. Only when agricultural
issues are clarified, Chiaradia said, could the same level of
ambition be applied to NAMA and eventually, perhaps, to services.
Chiaradia explained that, from Argentina's perspective, the level of
ambition in the NAMA negotiating text is significantly higher than
that in Agriculture, with bound tariff rate cuts Argentina is being
asked to make on the order of 65%, while proposed agriculture cuts
are in the 40% range and riven with loopholes. Failing to deal
promptly and substantively with Agriculture and NAMA discrepancies,
he concluded, could sour the entire DDR round.

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Drawing the Line on NAMA
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4. (SBU) The GoA is not prepared to make NAMA bound tariff cuts of
65%, Chiaradia said, adding "we'd like to receive an indication from
the U.S. that it recognizes and respects our sensitivities in NAMA.
I want to transmit a clear message to the USG that you cannot push
us so hard on NAMA tariffs. It simply won't work."


5. (SBU) Chiaradia concluded that the GoA would be "attentive to how
the (services) situation develops," that Argentina does not want to
be perceived as either protectionist or negativist, and that the GoA
truly wants to see the DDR negotiations conclude successfully.
After CDA emphasized the growing importance of services to the
Argentine economy and the GOA's own stake in an ambitious DDR
services outcome, Chiaradia offered that the GoA has "room to
maneuver" on services, and promised a formal reply to USTR Schwab's
letter shortly. Niscovolos later expressed doubts to Econ Counselor
and TradeOff that the GoA would be at all forthcoming at upcoming
Services signaling meetings and said that any Argentine/U.S. bilats
on the margins of those service sector discussions might be a "waste
of time."

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Comment
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6. (SBU) Trade Secretary Chiaradia's message was an unambiguous
rejection of any effort to link levels of Services ambition to those
being proposed in Ag and NAMA texts. This is, perhaps,
understandable in light of Argentina's increasing reliance on
agricultural commodity exports and the GoA's laser-like focus on
protecting, promoting, and diversifying its industrial base. But it
is disappointing given Argentina's competitive advantage in service
sector exports and the role this dynamic and innovative sector is
playing in mobilizing world-class Argentine human capital.
Employment in Argentina's software and information services industry
alone is up 300%, and service exports in these sectors is up 500%
since 2002.


7. (SBU) Post will continue to emphasize the U.S. and Argentina's
common interest in benefiting from freer global markets in services.
A successful conclusion to WTO trade negotiations with ambitious
openings in Argentina's services offer will help ensure that
Argentina's service sector continues to be an engine of GDP growth,
employment, and national pride.

WAYNE