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Cablegate: Colombia Hopes to Increase Exports Via

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BOGOTA 004476

SIPDIS

STATE PLEASE PASS TO USTR

E.O. 12958: N/A
TAGS: ECON ETRD CO FTA
SUBJECT: COLOMBIA HOPES TO INCREASE EXPORTS VIA
CAN-MERCOSUR DEAL

1. (U) SUMMARY: A liberalization trade agreement between
trading blocks Mercosur and the Community of Andean Nations
(CAN) will go into effect July 1. The deal gives Colombia
increased market access to 216 million consumers in Mercosur
countries. Key agricultural goods will receive 15 years of
protection, while intellectual property, government
procurement and investment were not addressed. The GOC
succeeded in protecting sensitive sectors in the agreement,
capitalizing on the strong desire of Brazil for a South
American trading block. Though smaller in impact and less
ambitious than a U.S. FTA, the negotiations have helped gird
GOC negotiators for trade talks with the U.S. END SUMMARY

2. (U) Trading blocks Mercosur (which operates as a customs
union) and the Community of Andean Nations (CAN) agreed to
open trade July 1 in a deal that will increase Colombia's
access to 216 million consumers in Mercosur countries. The
agreement with Mercosur was approved April 3 following
negotiations that began in 1996. Tariffs on some goods will
be dropped immediately, while key agricultural products,
automobiles and other sensitive goods will continue under
tariff protection for periods of between 6 and 15 years. The
agreement does not address intellectual property, government
procurement or investment.

3. (U) According to GOC Trade Minister Jorge Humberto Botero,
the deal is "highly asymmetric in favor of the Andean
countries, especially Colombia." Colombia will have
tariff-free entry to Brazil and Argentina in 8 to 10 years,
but Mercosur will have to wait 12 to 15 years for similar
access to Colombia. Colombian goods must include 50 percent
regional content in the first seven years and 55 percent
thereafter, while Mercosur goods require 60 percent regional
content.

4. (U) Colombian agricultural goods won continued protection
for the next 15 years, with immediate non-tariff access
granted for tuna, bananas, flowers and shrimp. The
negotiators set aside benefits for sugar and derivative
products like chocolates, powdered drinks and alcohol until
the signatories determined that market conditions for
liberalization improved (i.e. not for the foreseeable future.)

5. (U) Automotive products, footwear, furniture and electric
appliances are also granted protection over 15 years. All
parties agreed to apply phytosanitary standards which meet
WTO transparency and equivalence principles, and to give
national treatment to each other's laboratories. The GOC sees
the pact as an opportunity for growth in value-added export
products like textiles, finished goods, leather products,
soft drinks, tobacco and printed publications.

6. (U) Some 1,150 categories of goods will be duty free, with
each country making separate offers in the negotiation.
Brazil, which has been eager to form a stronger Latin
American trading block with which to face U.S. trade
negotiators, offered the most generous terms. Brazil agreed
to drop tariffs on a quarter of Colombian exports
immediately, including pharmaceuticals, cut flowers, coal and
tires. Brazil offered to take up to double Colombia's
current world exports of surgical equipment. Nearly 100
percent of Colombian exports will be tariff free by 2012,
while Brazilians will enjoy similar access four years later.

7. (U) Argentina will drop tariffs immediately on Colombian
flowers, printing products, shrimp, asparagus and cocoa
products, totaling nearly 12 percent of imports.
Approximately 77 percent of Colombian exports to Argentina
will be tariff free in 12 years. Argentina also agreed to
open import licenses to Colombian pharmaceutical producers.

8. (U) Currently, Mercosur economies enjoy a significant
trade surplus with Colombia. Colombian exports to Mercosur
in 2003 amounted to US$116 million while Colombia's imports
totaled US$1.1 billion. Trade ministry officials have said
they hope exports will increase as much as tenfold over the
long term.

9. (U) Colombian business leaders spoke in favor of the pact,
but pressed for the establishment of a national industrial
policy to advance the development of transportation
infrastructure and the promotion of direct foreign
investment. The agricultural sector was very happy with the
very limited access Colombia gave for sensitive products.

10. (U) The GOC sees the pact as a precursor to FTA
negotiations with the U.S., which are scheduled to begin May
18. Botero said the successful Mercosur negotiations have
given his negotiating team a lift of confidence as FTA
negotiations approach. At the same time, the omission of key
sector agreements and the extreme length characterizing the
liberalization periods for most sectors limit the relevance
of the agreement for the upcoming FTA talks.
WOOD

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