CWC: INDUSTRY CLUSTER MEETINGS, SEPTEMBER 8, 2009

UNCLAS THE HAGUE 000549 SENSITIVE SIPDIS STATE FOR ISN/CB, VCI/CCA, L/NPV, IO/MPR SECDEF FOR OSD/GSA/CN,CP> JOINT STAFF FOR DD PMA-A FOR WTC COMMERCE FOR BIS (BROWN, DENYER AND CRISTOFARO) NSC FOR LUTES WINPAC FOR WALTER E.O. 12958: N/A TAGS: PARM PREL EIND CWC SUBJECT: CWC: INDUSTRY CLUSTER MEETINGS, SEPTEMBER 8, 2009 REF: A. FERGUSON-ISN/CWC-DEL EMAIL (09/04/09) ¶B. STATE 89818 ¶C. THE HAGUE 436 ¶D. THE HAGUE 244 ¶E. 2A/2A* FACILITATOR'S DRAFT DECISION (07/08/09) This is CWC-51-09 ¶1. (U) SUMMARY: There were meetings on September 8 of the two ongoing Industry Cluster consultations. The consultation on enhancements to declarations for other chemical production facilities (OCPFs), facilitated by South African Delegate Marthinus van Schalkwyk, was uneventful and made no progress on reaching agreement on the issue. The consultation on low concentrations for Schedule 2A/2A* chemicals, facilitated by Italian Delegate Giuseppe Cornacchia, also ran as expected until the Canadian Delegation made a surprising last-minute proposal that could mean future progress. Cornacchia scheduled his next consultation for October 6 to give delegations sufficient time to react to the Canadian proposal. END SUMMARY. -------------- 2A/2A* LOW CONCENTRATIONS -------------- ¶2. (SBU) Prior to the consultation, Delreps met with the Japanese and UK delegations, per refs A and B. Kanji Iwata, Deputy Director of the CW Control Policy Office in the Japanese Ministry of Economy, Trade and Industry (METI),reiterated the reasoning behind his "Road Map" proposal, which is to have a clear explanation of the process in the end to facilitate discussions with their industry. Delrep assured Iwata that many States Parties would need to have such a discussion with their industry and that this could be done through the facilitator's current process. The Japanese Delegation seemed willing to step back from their proposal if the response in the consultation indicated preference for a different direction. The UK Delegation confirmed their preference for no decision on the issue rather than one that may weaken the Convention. UK Delegate Karen Wolstenholme said that a decision had been made at the ministerial level not to accept a decision which would create an unlevel playing field and disadvantage UK industry. The UK Delegation raised the former facilitator's 2006 proposal (combination of quantity and concentration thresholds) and asked if something similar might now be acceptable to the United States. Delreps reviewed the general areas of concern in light of our legislative constraints but noted that, considering the information recently gathered about U.S. industry, we would be willing to review the 2006 approach again. When asked, the UK Delegation said they were not yet ready to make such a proposal to the wider consultation audience. ¶3. (SBU) As an introduction to the consultation, Facilitator Giuseppe Cornacchia (Italy) reminded delegations of the "Road Map" the Japanese Delegation had offered at an earlier meeting (refs C and D) and asked the Japanese Delegation to explain it further. Iwata acknowledged that he had not made a good explanation previously; however, his attempt to improve upon that during this consultation was only marginally better. Iwata questioned some of the generally-held assumptions about the risk of Schedule 2A/2A* sites and the Qabout the risk of Schedule 2A/2A* sites and the need for "visibility"; he discussed various scenarios and the relative risk associated with them; he stated that there must be some "optimal point" at which these concerns can be addressed; and, he spoke to the decision process and its schedule. In the end, no delegation responded in favor of the Japanese proposal, and the facilitator took this as a sign to put it aside and move on with his process. ¶4. (U) Cornacchia next addressed the recent Russian proposal to consider the three Schedule 2A/2A* chemicals separately (ref C),and he again put the Russian Delegation on the spot to explain more fully their proposal. The Russian Delegation explained that they had only proposed this as a potential time-saving measure, as they felt that delegations were ready to support previously discussed levels for BZ and Amiton and could later spend the required time to reach consensus on PFIB. Those delegations who responded to this Russian proposal were in favor of a unified approach to the three chemicals, particularly in light of the current effort being a regulatory or political solution, rather than technical. In response to a question, the Technical Secretariat (TS) stated that, to their knowledge, all States Parties who have a Schedule 2A/2A* threshold in their legislation/regulations currently have a unified threshold for all three chemicals. ¶5. (SBU) South African Delegate Marthinus van Schalkwyk made several interventions in which he insinuated a linkage between this solution and inspection numbers for other chemical production facilities (OCPFs) in the upcoming budget consultations. Van Schalkwyk questioned why a "section of the room" that is vocal about non- proliferation and "safety and security" cannot come to a solution to this problem. He asked what these countries were afraid of, if the number of additional declarations and inspections represented a trivially minor increase. Delrep was the only voice to challenge van Schalkwyk's comments, stating that the United States has no fear of verification of U.S. industry generating PFIB, although the numbers are very small. (Del Comment: During his intervention, van Schalkwyk stated South Africa's current regulatory threshold is 10%. After the consultation, he told Delrep that they could make a change to their regulations but do not feel that a lower threshold is absolutely necessary. End Comment.) ¶6. (U) Near the end of the consultation, after the TS had addressed a number of delegations' questions, the Canadian Delegation made a surprise last-minute proposal. Working from the facilitator's draft decision (ref E),the Canadian Delegate proposed the following text as the first operative paragraph: "Declarations are not required under Part VII of the Verification Annex for mixtures of chemicals containing 10% or less of a Schedule 2A or Schedule 2A* chemical provided the annual amount produced, processed or consumed is less than the relevant verification thresholds in Part VII of the Verification Annex." ¶7. (U) While most delegations thanked the Canadian Delegation for offering a constructive proposal, all said that they would need to seek guidance from their capitals. Some delegations said this would be a "quantum leap" for them (e.g., India and Ireland),noting the shift from 1% to 10%. France spoke to the potential difficulty to reflect the Qspoke to the potential difficulty to reflect the proposal's provisions is their regulations. In the end, Cornacchia announced his intention to meet again on October 6, and he insisted that delegations provide him with their reactions as far in advance of the next meeting as possible. ¶8. (SBU) Following the consultations, Delreps met with Cornacchia to discuss initial reactions to the Canadian proposal. Cornacchia told Delreps that he has spoken to a range of delegations (including Iran, Germany, France and Japan) and is optimistic that key players will accept the Canadian proposal. He intends to contact delegations within two weeks to gauge reactions with a view to moving toward a decision by EC-58 (October 13-16). Cornacchia said that, if agreement is not reached by EC-58, he will continue intensive consultations between then and the Conference in early December. ¶9. (SBU) COMMENT: In light of the next meeting on October 6, as well as expected discussions during the upcoming meetings in Berlin (ref B),the need for a quick analysis of the Canadian proposal and its implications is needed. To that end, the following brief analysis is offered. As a result of the recent industry survey, we now know that, in addition to the U.S. plant site (PFIB) that is currently declared, another U.S. plant site (also PFIB) would be required to declare at a concentration threshold as high as 10%. We know of no plant sites that are producing Amiton or BZ nor of any other PFIB-producing plant sites would be captured at any lower concentration threshold. With that in mind, the current Canadian proposal is effective in requiring declarations for the two known PFIB plant sites at the concentration level that has been reflected in U.S. guidance for some time now: 10%. The regulatory change to address these declarations at the 10%-level also would be fairly simple. However, there is a theoretical danger in accepting this proposal and making this simple regulatory change without a broader legislative change. If a new plant site were to appear in the future that produced PFIB at some low concentration level (i.e., below 10%) and at quantities above the verification threshold, they could avoid declaration consistent with our regulatory change but inconsistent with the letter of the draft decision. This eventuality seems extremely unlikely, given the continual shrinking of the U.S. fluoropolymer industry and the likelihood that Asia will continue to be the focus of future growth of this industry. However, the legal and regulatory ramifications need to be examined and potentially addressed with close allies before moving forward. END COMMENT. -------------- ENHANCING OCPF DECLARATIONS -------------- ¶10. (SBU) After Facilitator Marthinus van Schalkwyk (South Africa) gave a brief introduction to open the meeting, TS Senior Industry Officer Peter Boehme made a presentation giving an overview of the R-factor and the A-14 algorithm, followed by a presentation on a simulation of the possible global effect of applying the R-factor to the TS's current site selection methodology for other chemical production facilities (OCPFs). The presentation was very thorough but tediously technical and too detailed for the audience. There were very few clarifying questions, which only served to demonstrate the lack of understanding of many of Qdemonstrate the lack of understanding of many of the delegates regarding declaration and inspection procedures. Industry Verification Branch Head Bill Kane pointed out that these potential declaration modifications would allow for better short-term use of inspection resources, giving shorter-term priority to sites of greater relevance but not eliminating any sites from consideration and not shortening the number of years it will take to visit all OCPF sites. All of this information seemed to play well into the hands of India and others who oppose additional declaration requirements. ¶11. (U) Van Schalkwyk remains pessimistic about progress and did not commit to a next meeting. He pointed to the fact that some States Parties intend to provide additional information voluntarily and that the TS is free to use it if they like. India reacted strongly to van Schalkwyk's comments, referring to them as a "threat", and China noted that its position remains unchanged and stated that the facilitator is trying to move to a decision too quickly. In closing, van Schalkwyk announced his intention to meet with interested delegations individually over the next month or two with the intention of preparing a proposal paper to include a draft decision. ¶12. (U) BEIK SENDS. GALLAGHER