WTO DEMARCHE - U.S./EC TAFT GOODS PROPOSAL

UNCLAS SECTION 01 OF 02 SAN SALVADOR 000185

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DEPT FOR EEB ASCHEIBE
DEPT PLEASE PASS USTR BNORTON & JWEISS
COMMERCE FOR EBRZYTWA

E.O. 12958: N/A
TAGS: ETRD ECON WTRO ES
SUBJECT: WTO DEMARCHE - U.S./EC TAFT GOODS PROPOSAL

REF: SECSTATE 12905


1. (U) SUMMARY. Deputy Econ Counselor and European Union Head
of Mission Wouter Wilton jointly delivered reftel demarche to
Francisco Lima, El Salvador's Ambassador to the WTO, on
February 13. Lima was accompanied by staff from the Ministry
of Economy's CAFTA-DR office. Lima also raised El Salvador's
concerns about small, vulnerable economy (SVE) provisions,
the erosion of preferences, and the preservation of bilateral
gains in a multilateral context. END SUMMARY.

DEMARCHE DELIVERED
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2. (SBU) Lima said that El Salvador is always very supportive
of initiatives like the textile, apparel, footwear, and
travel goods (TAFT) proposal, which are in accordance with El
Salvador's internal standards and involve textile items that
are very important for El Salvador. He emphasized that the
TAFT proposal needs to facilitate the flow of goods, not
create additional requirements. Some parts of the current
proposal appear to create additional requirements and/or are
difficult to see how they facilitate trade. Lima thought
that these will be addressed in due time in Geneva; if they
are clarified, El Salvador could then be in a position to
co-sponsor the proposal. Lima also stressed that El Salvador
views the TAFT proposal as a part of the broader
non-agricultural market access (NAMA) negotiations and it
needs to be considered in that context.

ES: STUCK BETWEEN BILATERAL AND MULTILATERAL DEMANDS
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3. (SBU) Beyond the TAFT proposal, Lima asked for two broader
points to be conveyed to Washington and Brussels. First,
Lima said that El Salvador was very grateful for US/EU
support for small, vulnerable economies (SVEs),since the
provisions for SVEs are what allows El Salvador to contribute
in multilateral negotiations. He thought progress had been
made for SVEs on the agricultural side but more needs to be
done on NAMA, especially "with the numbers." El Salvador
views bilateral and multilateral negotiations as two
different worlds -- El Salvador is "on offense" in bilateral
negotiations but "on defense" in multilateral. In bilateral
agreements, El Salvador benefits from contingent rules, time
tables, and phase-ins for opening its market, and El Salvador
wants to preserve its bilateral achievements and move at its
own pace. Lima cited El Salvador's poultry sector, which has
been difficult to open even under CAFTA-DR, as one that would
be extremely difficult to open in a multilateral context.


4. (SBU) Second, Lima emphasized El Salvador's concerns about
erosion of preferences. Some NAMA proposals list specific
products, like textile/apparel and fish products, for special
and differential treatment. These are precisely El
Salvador's export profile under CAFTA and the proposed
EU-Central American association agreement, and El Salvador
wants to preserve its FTA benefits. Lima also specifically
referenced strict rules of origin and the Hong Kong
Declaration, since El Salvador is dependent on certain
unilateral preferences on rules of origin. This is a major
concern for El Salvador, he noted, and they have not seen
much support from the US or EU.


5. (SBU) Lima stated that El Salvador understood it was not
the "goal" for the US or EU in WTO negotiations, but "we are
in the middle." He noted that "small issues" may not be the
breaking point for the US or EU, but they are for El
Salvador. El Salvador will continue to "work constructively"
but its concerns need to be addressed. If El Salvador has
US/EU support and its interests are properly covered, it
doesn't need to "raise its voice," but if it doesn't, El
Salvador will speak out "so you're aware."

COMMENT
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6. (SBU) The meeting with Lima confirms Post's sense --
shared by the EU -- that the primary responsibility for El
Salvador's WTO policy has been delegated to him in Geneva. In
addition to CAFTA-DR, which El Salvador still considers its
most important trading agreement, two other bilateral
agreements may affect El Salvador's WTO negotiating position
going forward. The first is the Central American-European
Union Association Agreement, which starts its second round at
the end of February in Brussels. The second is a possible

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Brazil-El Salvador FTA, which is rumored to be in very early
stages of negotiation.
GLAZER