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Cablegate: Future of the Spp and Nafta - Mexican Views Leading Into

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O 131347Z AUG 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8396
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE IMMEDIATE
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RHMFIUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEHC/DEPT OF LABOR WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
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UNCLAS SECTION 01 OF 04 MEXICO 004293

SIPDIS

SENSITIVE
SIPDIS

SECSTATE FOR A/S SHANNON
SECSTATE FOR WHA/MEX, WHA FOR GSPROW,
SECSTATE FOR WHA/ESP, EB/IBF/OMA
SECSTATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOD
SECSTATE PASS TO USTR (EISSENSTAT/MELLE)
SECSTATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
NSC FOR DAN FISK

E.O. 12958: N/A
TAGS: ECON PGOV ETRD SPP MX
SUBJECT: FUTURE OF THE SPP AND NAFTA - MEXICAN VIEWS LEADING INTO
THE NORTH AMERICAN LEADERS MEETING IN MONTEBELLO


MEXICO 00004293 001.2 OF 004


1. (SBU) Summary: On August 9, Econoffs met with officials from
Mexico's Ministry of Economy to discuss GOM positions for the North
American Leaders Meeting in Montebello August 20-21, and the NAFTA
Free Trade Commission meetings in Vancouver August 13-14.
Expressing concern over the downplaying of the SPP at the Montebello
meetings, they stressed the importance of keeping the SPP as a
"permanent dialog" for the U.S., Mexico and Canada to work on common
problems. They warned that a greater emphasis on the economic side
of SPP efforts was needed to counteract negative press that
threatened to undermine SPP as an effective platform for the
U.S.-Canada-Mexico partnership. Under Secretary Leycegui explained
how the "prosperity" efforts of the SPP could be strengthened by
improving coordination with efforts of the NAFTA working groups to
improve North American competitiveness. Ortega cited the recent
tour of the U.S.-Mexico border by the U.S. and Mexican Border
Facilitation Working Groups as an example of the pragmatic measures
possible under SPP auspices. He noted that the high-level attention
given by the U.S. Government was key to the success of the border
tour, and it was important that Mexico respond with similar
high-level attention. End Summary


Future of the Security and Prosperity
-------------------------------------
Partnership (SPP)
-----------------

2. (SBU) On August 9, Econoffs met with Mexico's lead agency for the
SPP and NAFTA, the Ministry of Economy, to discuss their
government's views leading into the upcoming North Americans
Leaders' meeting, and the NAFTA Free Trade Commission (FTC)
Ministerial. Alberto Ortega, Chief Advisor to Economy Minister
Sojo, Under Secretary for Trade Beatriz Leycegui and Director for
NAFTA Juan Carlos Baker expressed frustration that the Canadian
hosts of the Montebello summit were downplaying the importance of
the SPP. Ortega explained that the value of the SPP was as a
much-needed "permanent dialog" that allowed the U.S., Mexico and
Canada to work as partners on common issues rather than only dealing
at a high-level with "contentious" issues. Given the long
partnership between the three countries, Ortega explained, it was
important to maintain the SPP as a "space for dialog" to solve
common problems like lagging competitiveness in North America.
Ortega did not believe the Canadian side was thinking about the SPP
in the same practical problem-solving way that the U.S. and Mexico
were. He complained that some in Mexico's own Foreign Ministry
shared the Canadian view that the North American dialog should be
broadened beyond the SPP. Ortega expressed concern that the
practical, common problem solving through the SPP could be lost if
attention was overly diverted from the practical challenges of
security and prosperity in North America.


3. (SBU) Ortega said his government had learned from hosting the
2006 SPP Summit in Cancun that the Leaders' agenda must be balanced
between security and economics. He said this balance has become
more important since many in the Canadian and even the U.S. media
see the SPP as a "secret plot." These stories raise a negative
profile of the SPP to a level that makes practical cooperation
difficult. OrtQa called on all three sides to counteract these
negative stories by working to emphasize the partnership aspects of
the SPP through a strong "prosperity" agenda. Baker predicted that
prosperity topics would occupy a significant portion of the Leader's
agenda in Montebello, saying it was important for SPP cooperation to
show concrete deliverables. Ortega reported that President
Calderon's office (Presidencia) was drafting a report outlining the
accomplishments of the SPP, as a list of deliverables. He said this
list would likely take the form of a discussion paper. All three

MEXICO 00004293 002.2 OF 004


officials agreed that the most important part of the discussion
between the Leaders' would be about the future priorities for the
SPP.


Bilateral Cooperation Within the SPP
------------------------------------
4. (SBU) After describing progress by the U.S. and Mexico Border
Facilitation Working Groups (see below), Ortega noted that such
bilateral cooperation was key to prosperity and security for all the
countries in North America. These bilateral border efforts clearly
fell under the auspices of the SPP, he said explaining that the U.S.
and Mexico clearly benefit from advances made between the U.S. and
Canada along the northern border, as Canada benefits from progress
along the U.S.-Mexico border. Ortega believed there was a guarantee
implicit within the framework of the SPP to include bilateral
projects such as the borders.


SPP - NAFTA Interchange
-----------------------

5. (SBU) A key way to promote the prosperity side of the SPP,
according to Under Secretary Leycegui, was to treat NAFTA and the
SPP as mutually reinforcing and parallel structures. Leycegui noted
that the NAFTA Free Trade Commission (FTC) trilateral working group
is preparing a "future vision of North America." Ortega added that
the three countries were now working in two complementary
frameworks, NAFTA and the SPP. He saw a natural link between the
two processes, and said the Ministry of Economy would seek to
include that concept in any SPP Leaders' statement.

6. (SBU) Leycegui noted that the August 13-14 NAFTA-FTC meetings
will include a discussion between the Ministers on the future of
NAFTA and North American competitiveness. With the final tariff
cuts about to be implemented, she explained, the U.S., Canada and
Mexico are looking for ways to deepen economic integration to
enhance North American competitiveness. This effort could be
significantly helped by improved coordination between the NAFTA
Working Group and SPP efforts. Such coordination would benefit the
SPP by allowing it to take advantage of the 15 years of experience
the NAFTA Working Groups have in working on issues affecting
competitiveness, and make the SPP more effective in advancing its
prosperity agenda.

7. (SBU) As an example, Baker added that the Working Group on Rules
of Origin under the NAFTA-FTC has been particularly effective
because, while they are largely a technical group, they see the
larger political picture through the SPP, which can help to move
issues. Leycegui said that progress in some NAFTA Working Groups
stops when the experts reach an impasse. NAFTA Working Groups under
the SPP umbrella have an avenue to resolve disputes through SPP
Ministerial and Leaders' meetings. After noting the ongoing effort
to determine which NAFTA Working Groups can continue with useful
mandates, Leycegui said that linking those NAFTA Working Group
efforts to an SPP umbrella could provide an avenue to ensure that
progress is not stopped merely because of an impasse at the
technical (or even ministerial) level. Ortega concluded that the
SPP process should move in parallel with NAFTA-FTC work to allow
this mutual reinforcement. The FTC was clearly an implementing
group, and the SPP should look to see which working groups under
NAFTA need to be revived.

8. (SBU) All three officials noted that only Mexico had the same
actors working in both the NAFTA and SPP fora. Unlike Canada and
the U.S., Mexico had the same agency, the Ministry of Economy,
responsible for both the SPP and NAFTA. Ortega said he understood

MEXICO 00004293 003.2 OF 004


why the United States had the Department of Commerce and Department
of Homeland Security responsible for the SPP, but all three
officials argued that the U.S.-Mexico-Canada relationship would
benefit if USTR joined the SPP process so that the SPP's prosperity
pillar and NAFTA efforts were better coordinated.

9. (SBU) On other FTC issues, Leycegui said she was optimistic about
the effort to analyze FTA's that the three countries had signed
with other nations following NAFTA, and hoped something positive
would come out of the effort given the urgent need to improve North
American competitivness in the face of Chinese and Indian
competition. Leycegui stressed the importance of the FTC effort to
develop terms of reference to hire a consultant to look at ways to
improve NAFTA. She noted the importance of the FTC's efforts to
look beyond deepening NAFTA to broadening it by considering more
"cumulation of origin" mechanisms not only for textiles, but for a
wide range of products and with additional partners beyond Central
America, such as Peru, Colombia, and even Korea.


Border Tour a Practical Success
-------------------------------

10. (SBU) Ortega said a key deliverable to report to the Leaders' in
Montebello was the success of the July 30-August 2 border tour by
the U.S. and Mexican Border Facilitation Working Groups, which
advanced the Bush-Calderon initiative to improve the flow of
legitimate commerce across the U.S.-Mexico border. Ortega said it
was key that the U.S. side had "the right high-level people
involved." He singled out the contributions made by General
Services Administrator Lurita Doan and DHS Assistant Secretary Al
Martinez-Fonts as showing their strong interest in seeking practical
ways to improve the flow of legitimate trade. He stressed that it
was important for Mexico to show the same high level involvement.
When Econoff asked about the absence from the border tour of Mexican
officials responsible for infrastructure at the Ministry of
Transport and Communications (SCT), Ortega replied that SCT's
infrastructure officials were very much involved in the border
facilitation effort.

11. (SBU) Ortega said the border tour had been very useful for the
U.S. and Mexican Border Groups to see and discuss specific,
practical measures that could be taken. He gave the example of U.S.
bound trucks being scanned with a gamma ray device on the Mexican
side of the border, then scanned again with a similar device on the
U.S. side of the border. He said there was a suggestion that if the
Mexican screening could send data to be read instantaneously on the
U.S. side, two X-ray screenings might not be needed. Another
example was the two-hour line of empty trucks at San Diego that were
waiting to cross into Mexico. Ortega claimed these empty trucks
waited up to six hours at times. He attributed the length of the
wait to the requirements of a U.S. Customs inspector to check each
empty truck. Saying the large volume of empty trucks was tied to
the operating requirements of maquiladoras on the U.S. and Mexican
sides of the border, Ortega hoped that business and customs
officials on both sides of the border could find practical ways to
resolve this and other challenges.

12. (SBU) Comment: Mexican trade officials are clearly energized to
address what the view with alarm as a serious competitiveness gap,
and they see the SPP, NAFTA, and greater economic integration in the
Americas as tools to help make up for lost ground. Their enthusiasm
for taking meaningful actions in these areas is most welcome, even
if not all of their ideas are feasible in the short-term.
Nonetheless, we should do what we can to encourage their
constructive inclinations. Concrete deliverables under the SPP and
NAFTA structures advance specific U.S. interests, and the proposal

MEXICO 00004293 004.2 OF 004


to more closely link the two is at least worth examining. More
broadly, it is in our strategic interest to strengthen a key partner
who we want to see play a more prominent leadership role in
promoting free trade in Latin America. End comment.


BASSETT

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