C-AL8-01467 ANDEAN-EU TRADE DEAL STALLED

Código Fecha Clasificación Origen
08LIMA1335 12 August 2008 Confidencial / No para extranjeros Embassy Lima

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TO RUEHC/SECSTATE WASHDC PRIORITY 9135
INFO RUEHLP/AMEMBASSY LA PAZ AUG CARACAS 1207
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C O N F I D E N T I A L LIMA 001335

NOFORN
SIPDIS

E.O. 12958: DECL: 08/12/2018
TAGS: ETRD, PREL, PINR, ECIN, PE
SUBJECT: C-AL8-01467 ANDEAN-EU TRADE DEAL STALLED

REF: STATE 84489

Classified By: Ambassador P. Michael McKinley, Reasons 1.4 b&d

SUMMARY


1. (C/NF) Senior Peruvian Trade Ministry officials are
pessimistic that the Andean Community of Nations (CAN) will
reach agreement on its communication to the European Union
(EU), due August 14-15, on the proposed mechanisms for
continuing EU-CAN trade agreement discussions. The EU is
only willing to proceed at different speeds with different
CAN members if the CAN members jointly agree to such a
mechanism. If the deadline lapses, Peru may formally
approach the EU for a separate trade deal. An EU official in
Peru explained that Bolivia has not accepted the minimum
requirements for participating in the trade pillar of the
agreement, but has not opted out of that pillar. He is
hopeful, but not optimistic, that the CAN communication will
clarify Bolivia’s position.

2. (C/NF) In addition to the EU issue, the intellectual
property rights provisions of Peru’s (and Colombia’s) trade
agreement with the US are dividing the CAN. Bolivia
maintains its refusal to allow Peru to go beyond CAN IPR
norms, as required by the US trade agreements. This issue
will again come to a vote during the August 13-14 CAN trade
ministers meeting in Lima. Peru’s contingency plan is to
change its status from the CAN from "full member" to
"associate member" (like Chile), which would allow continued
participation in CAN dialogue and Peru’s trade agenda to move
forward. End Summary.

TRADE MINISTRY:
CAN’S TRADE DEAL WITH THE EU GOING NOWHERE


3. (C/NF) Econ Counselor discussed the stalled European
Union (EU) - Andean Community of Nations (CAN) trade
negotiations with Peru’s Vice Minister of Trade Eduardo
Ferreyros and two other key advisors to Trade & Tourism
(MINCETUR) Minister Mercedes Araoz on August 6. The MINCETUR
officials said that, per agreement with the EU, the CAN needs
to submit a joint response to the EU by August 14-15, 2008 on
a range of issues related to the negotiations. These issues
include whether different CAN members would proceed at
different speeds in the negotiations and which sectors would
be included in tariff reductions. The MINCETUR officials
said that the EU was firm in demanding the CAN reach
agreement on these issues before continuing trade talks.

4. (C/NF) As noted in reftel, Peru and Colombia are eager to
negotiate a meaningful trade agreement with the EU, but
Bolivia and Ecuador are not seeking as comprehensive a deal.
The MINCETUR officials were pessimistic that the CAN would
reach agreement on the way forward before the deadline. They
said Peru and Colombia may write letters to the EU after the
deadline passes, formally requesting to move forward without
Bolivia and Ecuador.

EU: BOLIVIA SEEKING TO PARTICIPATE PARTIALLY


5. (C/NF) On August 12, the head of the EU’s Economic and
Regional Cooperation Office in Peru told Poloff that the EU
proposed to the CAN that individual Andean countries (e.g.
Bolivia) could opt out of the trade pillar of the
three-pillared Association Agreement. Henning said that when
the Andean countries took up the discussion, the original
proposal became muddled and different delegations left the
meeting with a different idea of what the EU had proposed.
Henning also clarified that the EU has offered limited
flexibility to individual Andean countries within the trade
pillar, but that no country that opts into the trade pillar
can choose to opt out of a section of that pillar, such as
services or IPR. Nor can that country ask for standards that
fall below WTO requirements.

6. (C/NF) According to Henning, the ongoing problem is that
Bolivia has neither opted out of the trade pillar nor
accepted every aspect of that pillar — including the minimum
WTO standards — leaving the entire negotiation in limbo.
Henning believes that the Morales administration does not
want a trade agreement for ideological reasons, but also does
not want to opt out. Henning said the EU hopes, but is not
optimistic, that the CAN report this week will resolve
Bolivia’s stance.

BOLIVIA STILL OPPOSES PERU’S PTPA IMPLEMENTATION


---

7. (C/NF) Perhaps a greater irritant to Peru and MINCETUR is
Bolivia’s refusal to allow flexibility of the CAN’s
intellectual property rights (IPR) regime to allow Peru (and
Colombia, if the US-Colombia trade agreement advances) to
meet its US-Peru Trade Promotion Agreement (PTPA)
commitments. The MINCETUR officials said that Bolivia has
repeatedly blocked Peru’s request for permission to
strengthen its IPR regime. Ecuador has agreed not to vote
"no." This issue is expected to again come to a vote during
the August 13-14 CAN trade ministers meeting in Lima. While
the GOP maintains that in this voting round, a 3-1 or 2-1
(with Ecuador abstaining) vote with only Bolivia opposing
would be enough to allow the IPR changes, the MINCETUR
officials said Bolivia interprets the rules differently. The
MINCETUR officials expect Bolivia to vote "no," despite all
of the high-level attempts to resolve this impasse.

8. (C/NF) Peru has already passed most of the IPR laws
necessary to comply with the PTPA. If the CAN does not allow
Peru the requested flexibility, Peru will be in violation of
CAN norms and potentially subject to trade sanctions. The
MINCETUR officials said that Peru has made clear that it
would choose the PTPA over the CAN if it comes to that.
Short of a full withdrawal, Peru’s contingency plan is to
change its status in the CAN from "full member" to "associate
member" (like Chile). This would allow Peru to remain
engaged in CAN discussions and attend CAN meetings, while at
the same time allowing Peru’s trade agenda to move forward.
A full withdrawal from the CAN is not in Peru’s interests, as
it wishes to remain engaged with its neighbors and also hosts
the CAN secretariat.
MCKINLEY