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Cablegate: Peru Signs Fta with Canada and Moves Forward On Other Free

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INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 LIMA 000150

SIPDIS

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COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR MMALLOY
USTR FOR BHARMAN AND MCARRILLO

E.O. 12958: N/A
TAGS: ETRD ECON EFIN USTR CA CH CI EU PE

SUBJECT: PERU SIGNS FTA WITH CANADA AND MOVES FORWARD ON OTHER FREE
TRADE AGREEMENTS


SUMMARY
-------
1. (SBU) With the U.S.- Peru Free Trade Agreement, approved by the
U.S. Congress last month, in its implementation phase, the
Government of Peru (GOP) has closed its agreement with Canada, and
is actively negotiating a tariff-only deal with China. The GOP is
also looking to conclude agreements with Singapore and Mexico. On
one front the GOP appears to be gaining momentum on concluding free
trade agreements with numerous partner countries; however, the
picture is not as rosy with regard to negotiations with the European
Union, where the GOP has questioned whether it should continue to
negotiate alongside Bolivia and Ecuador, or instead seek a bilateral
agreement. While Peru and Chile signed a trade agreement in 1998
(updated in 2006), the Chilean government announced last week that
it would wait to submit the agreement to its senate. Peruvian
observers say that the delay is politically motivated and related to
Chile's pique over the maritime border dispute.
END SUMMARY.


CANADA - SIGNED AND PREPARED FOR IMPLEMENTATION
--------------------------------------------- --
2. (SBU) This weekend in Davos, Switzerland, on the margins of the
World Economic Summit, Peru and Canada signed their free trade
agreement. The negotiation process started July 16, 2007, with the
fourth and last negotiation round held in November. Peru plans for
the implementation stage to correspond with that of the U.S.-Peru
Trade Promotion Agreement so both agreements may enter into force
simultaneously.

3. (U) The Canadian-Peru trade agreement is very similar to the
U.S.-PTPA. Unlike Canada's agreement with Chile, the Peru agreement
includes provisions on intellectual property rights. The agreement
also addresses biodiversity issues in the environment chapter,
protection for consumers and safety of electronic commerce, and
strong measures for sanitary and phytosanitary protections. Canadian
government sources say the agreement would Qer into force when the
U.S. agreement enters into force.

CHINA - AGREEMENT AS APEC DELIVERABLE
-------------------------------------
4. (U) Negotiations on a limited tariff agreement with China
advanced this week with the first round of talks being held in Lima.
The next round will be held in Beijing on March 3, 2008. The GOP
hopes to conclude four or five negotiation rounds prior to November
with plans for the agreement to be signed at the Lima APEC Leaders
Summit. China is Peru's second largest commercial partner. Peruvian
exports to China also grew thirty percent from 2006 to 2007.

5. (SBU) Unlike the PTPA, the Peru-China trade agreement, is largely
a tariff-only agreement, establishing a list of products which will
be excluded from the agreement, such as some textiles and shoes.
The agreement will include safeguards to protect the Peruvian market
from a massive influx of imports. Peru's minister of Foreign Trade
and Tourism, Mercedes Aroz sees China's principal interest in
Peruvian minerals and fishmeal products, with a growing interest in
Peru's agricultural exports. Peru continues to be interested in
Chinese electronic goods and equipment.

6. (SBU) The Association of Peruvian Exporters (ADEX) provided the
Embassy with a summary and critique of the first round of
negotiations held from January 20-23 in Lima. The themes covered
during the first negotiations included market access, rules of
origin, commercial technical obstacles, dispute settlement, customs
processes, commercial defenses, sanitary and phytosanitary measures,
services, investment, and intellectual property rights. On each
topic, Peru and China submitted their proposals with plans for
further evaluation at the next round of talks. On commercial
technical obstacles, an agreement was made to create an
English-language website which will provide a central location for

LIMA 00000150 002 OF 002


information on regulations and evaluation criteria. On dispute
settlement, China proposed that all chapters in the agreement be
covered. Initially, China did not agree to include a chapter on
customs procedures in the agreement, but are now discussing
convening a special committee to address the issue. On sanitary and
phytosanitary measures, China is in agreement with the proposal
offered by Peru.

PERU AND THE EU - WITH THE ANDEANS OR ALONE?
--------------------------------------------
7. (SBU) While the Andean Community (CAN) finally reached a modus
vivendi with the EU late last year by agreeing to negotiate an
association agreement on two tracks, President Garcia questioned
again whether Peru would be better off negotiating a trade deal
bilaterally with the EU. Under the two-track system, Colombia and
Peru would advance quickly, while Ecuador and Bolivia would move at
their own pace. During Garcia's January 14-15 trip to Spain, he
told a Spanish business audience that Peru and Colombia should not
be punished because they are more committed to free trade than their
neighbors Bolivia and Ecuador. Foreign Trade Minister Araoz
suggested the President was expressing the government's frustration
with these neighbors, but said the government was still committed to
the Andean Community for now.

CHILEANS POSTPONE FTA VOTE IN PIQUE
-----------------------------------
8. (SBU) In an event unrelated to trade policy, the Chilean
government announced yesterday that it would no longer submit the
Chile-Peru FTA to a vote in the Chilean Senate on a special approval
(fast-track equivalent) procedure during the Congressional recess.
Instead, the bill would be submitted when the Congress returns in
March. Chilean Embassy contacts told us the reasons for this move
were largely technical, but Peruvian observers speculate it was
intended as a political gesture to indicate Chile's displeasure at
Peru's having initiated a legal process at the International Court
of Justice in The Hague to resolve the bilateral maritime border
dispute. (SEPTEL TO FOLLOW).

CONCLUSION
----------
9. (SBU) The Government of Peru sees free trade agreements as a
means for sustained economic growth and reduction of poverty. In
addition to concluding negotiations with Canada, Singapore, and
Mexico, and beginning negotiations with China and South Korea, Peru
has approached Japan to explore opportunities for a trade agreement.
Trade agreements are just part of that outreach effort. Hosting
APEC will also provide Peru with worldwide visibility, as will the
May 2008 European-Union - Latin America and Caribbean (EU - LAC)
Summit. Both trade agreements and summits in 2008 will enable Peru
to position itself to become an active partner in worldwide economic
relationships in the years to come.
NEALON

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