COMMERCE SECRETARY GUTIERREZ VISIT TO PRAGUE

C O N F I D E N T I A L SECTION 01 OF 04 PRAGUE 000339

SIPDIS

E.O. 12958: DECL: 06/06/2018
TAGS: OVIP PGOV PREL MARR ENGR NATO PHUM CU EZ XG
SUBJECT: COMMERCE SECRETARY GUTIERREZ VISIT TO PRAGUE

Classified By: Charge Mary Thompson-Jones for reasons 1.4 b+d


1. (SBU) Summary: Commerce Secretary Gutierrez visited Prague
on June 3. His program included meetings with PM Topolanek,
FM Schwarzenberg, Deputy Minister of Trade and Industry
Hovorka, and a group of NGOs and other activists on Cuban
issues. In addition to Cuba, discussion focused on missile
defense-related economic cooperation, energy security, and
trade issues, including intellectual property rights
protection. End Summary.

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PM Topolanek
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2. (C) PM Topolanek welcomed Secretary Gutierrez and
kicked off the meeting with a reference to their February
2008 meeting in Washington and the "Cambio" bracelet which he
still
wears. While he assured Secretary Gutierrez of the Czechs'
commitment to their present policy, PM Topolanek expressed
concern that his country "will be all alone in the EU." He
noted that others in the EU were willing to accept the
"cosmetic changes" that Raul Castro has implemented as
reform and, as a result, pay less attention to human rights
issues. PM Topolanek was interested in how the U.S.
presidential elections may change the U.S. policy on Cuba
and reiterated his suggestion, which he discussed with
President Bush during his February visit to Washington,
that the United States reconsider the economic embargo.
Secretary Gutierrez thanked PM Topolanek for the Czech
Republic's support and responded on the issue of the
embargo that lifting the embargo would give Raul Castro's
regime a new lease on life. He noted that the United
States would continue calling attention to Cuba's human
rights violations in order to raise pressure on the
regime. Secretary Gutierrez also discussed briefly the
U.S. Interest Section in Havana and efforts by the Cuban
regime to discredit both the outgoing and incoming chiefs
of mission.


3. (C) Both Secretary Gutierrez and PM Topolanek welcomed
progress on missile defense. PM Topolanek stressed the
importance of the economic benefits of missile defense, and
in this regard the
need to complete soon the Framework Agreement and the
Reciprocal Defense Procurement Agreement. He noted that
Czech
companies were skeptical that they would be able to compete
successfully for contracts associated with the missile
defense system and the proposed radar site. He urged
closer coordination on this issue and noted that there were
many areas in which Czech companies and researchers could
cooperate with their U.S. counterparts. PM Topolanek also
discussed the last outstanding issue in the SOFA, namely
taxation of U.S. contractors, noting
that the compromise language proposed by the United States
could make ratification of the agreement more difficult
because it could be a pretext for the opposition to raise
new arguments against missile defense. However, he
reassured Secretary Gutierrez that the Czech government is
committed to concluding the SOFA as soon as possible so
that it could be signed during the possible visit of
Secretary Rice in July. He noted that this timing would
also fit in well with the government's ratification
strategy.


4. (C) PM Topolanek also raised what he termed as a "more
serious problem" -- energy security. He noted that he
discussed his concerns regarding Russia's influence over
Europe's energy supplies with Vice President Cheney during
his February visit. Specifically, PM Topolanek is worried
that
Russia is seeking to bypass Central Europe by developing
the Northstream and Southstream pipelines. He then focused
on the Slovak efforts to buy back the Transpetrol pipeline,
which is the Slovak portion of the Druzba pipeline carrying
oil from Russia to Western Europe (septel). PM Topolanek
acknowledged that "business should not be influenced by
politics," but he asked that the United States at least
have a conversation with the Slovak government to ensure
that the pipeline does not eventually end up in Russian
hands. He suggested that the Czech oil pipeline company
MERO would be interested in buying Transpetrol. Secretary
Gutierrez promised to contact Vice President Cheney's
office to follow up on the Prime Minister's concerns.

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FM Schwarzenberg
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5. (C) Czech Foreign Minister Karel Schwarzenberg covered a
range of topics during his time with U.S. Commerce
Secretary Carlos Gutierrez. With respect to human rights,
Schwarzenberg referenced his growing concerns about
conditions in Burma as well as the lack of access to the
country, noting that the Burmese regime "makes Lukashenko
look kind." On Cuba, Secretary Gutierrez inquired about
Czech thinking regarding Raul Castro and the "changes" he
has announced. Schwarzenberg noted that economically the
country is struggling and that unlike Fidel, Raul Castro
does not have the strong partnerships with such sympathetic
figures as Hugo Chavez. Reiterating a common theme (and
one of the few areas where our two countries agree to
disagree on Cuba),Schwarzenberg emphasized that lifting
the U.S. embargo would be a "slow killer of the regime" and
he encouraged the USG to consider the merit of such
action. On missile defense, the Foreign Minister noted
that he is looking forward to Secretary Rice's planned July
visit
and that he hopes we will be able to sign both the BMD
Agreement as well as the Status of Forces Agreement during
this visit. With respect to Parliamentary approval,
Schwarzenberg noted that this is "another matter entirely"
and that this will become "more and more difficult" as time
goes on. The Foreign Minister also referenced energy
issues, with particular reference to concerns about Russian
tactics. Schwarzenberg sees the Russians as seducing
countries and gaining leverage through energy negotiations,
which he believes we should all be watching more closely.
In closing, the Secretary and Foreign Minister acknowledged
the work that has been done so far to bring the Czechs into
the Visa Waiver Program (VWP). Czech Ambassador to the
U.S., Petr Kolar, noted that while progress has been made,
he had prepared a paper for the Foreign Minister after his
discussions with Ambassador Graber on June 2 highlighting
what additional steps the Czechs must take in order not to
fall further behind on implementation. Both sides
acknowledged that we are getting close, but that we need to
remain focused on resolving the remaining outstanding
issues.

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Deputy Trade Minister
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6. (SBU) Deputy Minister for Industry and Trade Milan Hovorka
opened the discussion with Secretary Gutierrez by giving him
a snapshot of the Czech economy, emphasizing strong growth
(6% annually) and government commitment to economic reform in
a manner that improves the business environment. Hovorka
noted that since 2000 bilateral trade (for both goods and
services) and investment between the U.S. and the Czech
Republic has been increasing and that the government would
gladly welcome additional U.S. investment.


7. (C) The Deputy Minister then raised the topic of economic
cooperation on missile defense and introduced Mr. Jiri Hynek,
President of the Defense Industry Association. Mr. Hynek
stated that the Czech defense industry wanted to deliver
technologies to Raytheon (the likely contractor for the
planned radar site) but that the lack of a Reciprocal Defense
Procurement MOU between the U.S. and the Czech Republic was a
hindrance to bilateral commerce in the defense sector. Hynek
explained that the missile defense radar was a sensitive
topic and that the Czech defense industry could be a positive
influence on public opinion but they needed successes for
their companies to support it. Deputy Minister Hovorka then
interjected that the Reciprocal Defense Procurement MOU would
allow Czech companies to do business with other U.S.
companies then just Raytheon. Hovorka also mentioned that
missile defense offered Czech companies a unique opportunity
to work with U.S. companies in the field of R&D and on
commercializing high technology products. The Deputy
Minister stated that several Czech firms that participated in
the BMD seminar in January and had meetings with U.S. defense
contractors were now nearing the conclusion of deals. He
also positively cited the ongoing collaborative effort on
missile defense-related research and development being led by
Dr. Marik of Czech Technical University.


8. (SBU) Secretary Gutierrez asked why not having a
Reciprocal Defense MOU was a problem. Mr. Hynek explained
that according to his sources a U.S. aerospace firm that had
invested in the Czech Republic several years ago expressly
for the purpose of sourcing high-tech metal parts had
recently stopped delivery because they were having difficulty
supplying the parts in a timely fashion (the implication
being the MOU would accelerate needed licenses and speed up
delivery times). Secretary Gutierrez then said that this
topic was not part of the Commerce Department,s portfolio
but that he would ask the Department of Defense about the

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status of the Reciprocal Defense MOU negotiations. Deputy
Minister Hovorka concluded the discussion on missile defense
by stating that the Czech government was working closely with
Ambassador Graber and the Embassy and that they sought a
level playing field for Czech defense companies in the U.S.
market. He emphasized that his government knew that missile
defense was a key U.S. objective and that they wanted to make
it happen.


9. (C) Hovorka thanked the Secretary for recognizing the
progress the Czech Republic had made on IPR and noted that it
is a government priority to improve IPR protection and get
their name off the Section 301 Watch List. He stated that
the Czech Republic wants IPR protection for its own economic
development and that they were implementing their IPR Action
Plan and moving forward. The Secretary pointed out that the
border areas were the real challenge. The Deputy Minister
acknowledged this and said that this is a serious issue and
that the government was taking steps to rectify the
situation. The Secretary said that he would follow up with
USTR to see where things stand.


10. (SBU) Hovorka raised the topic of the EU Presidency
which the Czechs assume on January 1, 2009. He said the
Czech theme would be Europe Without Barriers, emphasizing
that the focus would be on eliminating barriers to trade with
all countries. Secretary Gutierrez said that there is still
work to do on eliminating trade barriers and that the
Transatlantic Economic Council (TEC) could institutionalize
this effort. However, he said that both the U.S. and EU
sides had push for results from the TEC.


11. (C) The conversation then shifted to the Doha Round.
Deputy Minister Hovorka said that they were not so happy with
the new text but that he remained cautiously optimistic if
some adjustments were made. He said agriculture was a
problem and that access to the new emerging markets was key,
noting that Brazil, India and China have to do more.
Secretary Gutierrez replied that the U.S. wants a deal but
not a bad deal. Hovorka said that the Czech Republic remains
committed and that high-level agreement was needed on new
market openings. The Secretary said that we needed to be
realistic and to go slower and do it right but that it needs
to be done before the Bush Administration leaves office.


12. (SBU) Deputy Minister Hovorka discussed how the Czech
Republic wants to diversify away from its heavy dependence on
trade with the EU. He mentioned that Latin America was a
priority area and that having Czech firms join with U.S.
firms to enter third country markets was a goal. Secretary
Gutierrez talked about the success of the U.S.-Chile FTA and
how this had created an integrated supply chain that allowed
for third country cooperation. He observed that the U.S.
competes heavily with Asia but that it has a more
complimentary trade relationship with Latin America. He told
the Deputy Minister that his approach to expanding trade in
Latin America through countries like Chile was a smart
strategy. Secretary Gutierrez asked about the role of SMEs
in the Czech economy and was told that Czech Trade (the
government trade promotion agency) was working hard to
support SMEs to export. Deputy Minister Hovorka mentioned
that he would be traveling to the U.S. soon and that he would
report to Minister Riman on the rich agenda of this bilateral
discussion. Secretary Gutierrez thanked the Deputy Minister
for making him feel at home and encouraged him to visit
Washington.

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Czech NGOs and Think-tanks on Cuba
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13. (SBU) Over lunch Secretary Gutierrez met with
representatives of Czech NGOs and think tanks as well as
Czechs who have gone to Cuba as couriers to meet and assist
Cuban dissidents. On practical matters, Igor Blazevic of
People in Need (PIN) highlighted that while our two nations
have not recognized Raul Castro's reforms as anything other
than a measure for publicity, there has been fairly
widespread international recognition of these steps, meager
as they might be, and Blazevic believes this
acknowledgment has had a fairly disheartening effect on
the Cuban public. The NGOs also noted that the
surveillance of the dissidents and foreigners complicates
their work, but this is nothing new. While discussing
access to political prisoners, it was clear that while PIN
is in regular contact with the families of the political
prisoners arrested in March 2003, the NGOs would like to
see the international community press the regime to allow
Red Cross access to the prisoners.


14. (SBU) In response to the Secretary's inquiry as to how

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he could help support their work, the NGOs highlighted two
areas. They noted that of the EU member states, very few,
other than the Czech Republic, provide funds for NGOs to
initiate projects related to Cuba. This has a dampening
effect on what can be done on the island and by default it
also means that for NGOs interested in this issue, the main
source of funding is the U.S., but this also serves to
undercut the credibility of these NGOs, which are then
simply seen as American proxies. The NGOs encouraged the
Secretary and other USG high-level officials to press EU
member state government to make funding available to NGOs
interested in initiating projects related to Cuba. As a
second suggestion, they noted that USAID restrictions on
providing cash to recipients often hampers their
effectiveness in Cuba. They commented that while it is
relatively easy to provide cash, which would then allow
people to purchase items on the island, it is not so easy
to discreetly provide objects (cameras, communication
equipment, computers, etc.) given the Cuban regime's
tracking of NGO movements.
ThompsonJones