COSTA RICA WILL NOT PASS THE LAST CAFTA-DR BILL BY DECEMBER

UNCLAS SAN JOSE 001194 SENSITIVE SIPDIS DEPT FOR EEB/TPP/BTA DGROUT AND RMANOGUE, WHA/EPSC SGARRO, EBB/TPP/IPE LHUGHES AND JURBAN PLEASE PASS TO USTR AMALITO AND DOLIVER PLEASE PASS TO TREASURY SRALSTON AND ENEPHEW PLEASE PASS TO COMMERCE E.O. 12958: N/A TAGS: ETRD KIPR ECON CS PREL PGOV SUBJECT: COSTA RICA WILL NOT PASS THE LAST CAFTA-DR BILL BY DECEMBER 31 DEADLINE REF: SAN JOSE 969 ¶1. (U) SUMMARY The Ministry of Foreign Trade (COMEX) informed us that Costa Rica will not meet the December 31 deadline for passing the 14th CAFTA-DR law regarding technical corrections to intellectual property rights (IPR) laws. COMEX pressed for a 5 to 6 month extension to avoid withholding a CAFTA-DR sugar quota benefit. Meanwhile, COMEX has been unable to reach agreement with USTR on agro-chemical regulations and is considering taking the issue to a CAFTA-DR disputes panel. End summary. -------------- ANOTHER GOCR EXTENSION REQUEST? -------------- ¶2. (U) On December 11, COMEX Minister Marco Vinicio Ruiz told Charge Peter Brennan that the GOCR will not meet the December 31 deadline for obtaining passage of a law regarding technical corrections to IPR legislation. This is the 14th and final law that Costa Rica agreed to pass in order to align its legislation with the U.S.-Central America-Dominican Republic free trade agreement (CAFTA-DR). Minister Ruiz presented a case for an "extension" of the deadline for withholding the CAFTA-DR quota benefit for sugar. USTR designed the quota holdback to take effect by default if the GOCR did not meet the December 31 deadline. The GOCR and USTR had agreed on this issue on December 8, 2008. Post understands that Minister Ruiz made a similar appeal to AUSTR Everett Eissenstat. ¶3. (SBU) Charge Brennan responded that an extension was unlikely. Costa Rica has had a year to complete the work, and the current mood in Washington favored strict enforcement of trade agreements. That said, he noted that Costa Rica's 2010 CAFTA-DR quota would only be delayed until it passed the law. -------------- HOW TO JUSTIFY AN EXTENSION -------------- ¶4. (U) COMEX Director Esteban Aguero made a similar case to Econoff and linked the GOCR's argument for an extension to two issues: (1) Practicality -- the technical IPR corrections do not affect the day-to-day trade relationship. (2) Presidential Politics -- Aguero painted a scenario where opposition candidates would use the failure to obtain passage of the 14th law to attack National Liberation Party (PLN) presidential candidate Laura Chinchilla and current President Oscar Arias. Chinchilla was Arias' Vice President until she resigned in October 2008 to run for president. (Comment: We do not anticipate this being a significant political issue. If it were brought up in the campaign, the opposition would also receive its share of blame, as it obstructed passage of all legislation related to CAFTA-DR.) -------------- ARE THERE OTHER COMPLICATING FACTORS? -------------- ¶5. (SBU) Aguero also described to Econoff COMEX's desire to use a USG-granted extension to gain leverage within the GOCR. COMEX has been unable to reach agreement with USTR on agro-chemical regulations, due to resistance from the Ministries of Economy and Agriculture. The GOCR is confident of its interpretation and is considering taking the issue to the CAFTA-DR disputes panel. According to Aguero, if the USG granted an extension, COMEX could raise the regulatory issue to President Arias and persuade him to accept USTR's position. A presidential decision would obviate the need to take the issue to a disputes panel. Adding another complication, the language in the 14th bill needs to be changed to link with the agro-chemical regulations currently under negotiation. ¶6. (SBU) Both Aguero and Minister Ruiz also shared with the Embassy that a major shipment of sugar was scheduled to depart from Costa Rica on December 26 bound for U.S. delivery after January 1. The holdback of the sugar quota -- effective January 1 without a 14th law and regulations -- will jeopardize the pricing of this shipment and likely result in the U.S. buyers canceling the contract. BRENNAN