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Cablegate: Peru's Chief Fta Negotiator On Final Issues

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

082126Z Nov 05

UNCLAS SECTION 01 OF 02 LIMA 004777

SIPDIS

SENSITIVE

USTR FOR AUSTR VARGO AND BHARMAN
USDA FOR FAS/ITP/BERTSCH

E.O. 12958: N/A
TAGS: ETRD ECON EINV PGOV PREL PE
SUBJECT: PERU'S CHIEF FTA NEGOTIATOR ON FINAL ISSUES

REF: LIMA 2473

1. (SBU) Summary: Peru's Chief FTA Negotiator Pablo de la
Flor told the Ambassador that Peru is ready to conclude the
U.S.-Andean FTA negotiations by Thanksgiving, pending
resolution of specific IPR and Agriculture concerns. De la
Flor warned that Peru's Health Minister would resign --
creating FTA approval difficulties -- if the IPR chapter
failed to include a specific reference to the WTO national
drug/health emergency waiver, and if the data protection
provision covered new products rather than new formulas
(Peru wants coverage of new chemical entities, as in Chile
FTA). He added that President Toledo is focused on the
inclusion of biodiversity in the trade deal, but is not
prepared to exchange that for a CAFTA-plus IPR chapter. The
Ambassador urged Peru to immediately submit its revised
Agriculture offer to USTR. End Summary.

2. (U) Peru's Trade Vice Minister and Chief FTA Negotiator
Pablo de la Flor, accompanied by Trade Ministry FTA
Coordinator Eduardo Ferreyros, reiterated to the Ambassador
at the residence on November 7 that Peru is ready to wrap up
FTA negotiations by Thanksgiving. Two issues concerned De
la Flor: specific IPR chapter provisions and U.S.
flexibility on Agriculture issues.

IPR Issues: Data Protection and WTO Drug/Health Waiver
--------------------------------------------- ---------

3. (SBU) The Trade Vice Minister indicated that Peru is
prepared to accept the U.S. timeframe for data protection (5
year protection for pharmaceuticals/10 years for
agrochemicals), but insists that the coverage be for new
chemical entities, as in the U.S.-Chile FTA. De la Flor
cautioned that Peru's respected Health Minister would
resign, creating political havoc and difficulty for FTA
approval, if FTA data protection covered new products, as in
CAFTA.

4. (SBU) De la Flor added that, during the GOP's internal
coordination meetings, Peru's Health Minister had insisted
on a specific reference to the WTO national drug/health
emergency waiver in the IPR chapter (CAFTA has a side letter
to that effect). The Chief FTA Negotiator argued that such
an inclusion in the U.S.-Andean text would not lose any
support in the U.S. Congress and might even attract a few
votes.

Biodiversity: Near and Dear to President Toledo
--------------------------------------------- --

5. (SBU) De la Flor noted that President Toledo has focused
on few issues, most notably second-use patents and
biodiversity. The Trade Vice Minister indicated that he has
instructions to leave the table if the USG insists on adding
to the accord second-use patents -- which are neither in the
Chile nor Central America FTAs. De la Flor said that Peru
wants a rhetorical reference to biodiversity in the IPR
chapter, but is not prepared to exchange its inclusion for a
CAFTA-plus IPR chapter, as U.S. Chief Negotiator Regina
Vargo had proposed. De la Flor joked that the President
sleeps with the biodiversity issue at night, noting that the
First Lady's top concern is inclusion of biodiversity in the
FTA deal.

Ambassador Urges Accelerated Response on Agriculture
--------------------------------------------- -------

6. (SBU) The Ambassador encouraged de la Flor to present
USTR with Peru's revised agricultural offer, noting that
November 11 is a holiday in Washington and time is of the
essence. De la Flor responded that securing internal
coordination and approval had caused the delay. Final
acceptance of the GOP proposal by Ag Minister Manrique is
pending. De la Flor indicated he would try to send the
revised Peruvian proposal by November 8 to USTR.

7. (SBU) De la Flor shared that the new Peruvian Ag offer
included a CAFTA-equivalent offer for meat and a revised
corn proposal. The corn offer provides for greater U.S.
access to the Peruvian market up front, but a longer phase
out of the tariff. He did not mention Peru's revised rice
or poultry offers. The Chief FTA negotiator lamented the
failure of the dairy industry reps to identify a workable
solution, but he suggested the U.S. industry try again. He
acknowledged that the local Peruvians reps had insisted on
an unacceptable scenario (indefinite tariffs).

8. (SBU) De la Flor relayed that during his conversation
with House Ways and Means Chairman Thomas last month in
Washington, the Chairman insisted that the Peruvian
Agriculture proposal for tariff eliminations have definitive
phase out periods -- every tariff had to reach zero. De la
Flor indicated that Peru's new Ag offer reflects this
advice, but noted that for certain products (under a price
band system) the tariff base rate would approach their
maximum (bound) WTO tariff rate.

Better Deal for Colombia?
-------------------------

9. (SBU) When the Trade Vice Minister reiterated his concern
that by holding out Colombia might strike a better Ag deal
than Peru, the Ambassador assured De la Flor that USTR's Ag
Negotiator would be equally tough with Colombia. When De la
Flor reiterated his concern about with whom Peru would close
the Ag negotiations, the Ambassador indicated that USTR
Portman has set aside time for wrapping up the trade deal.

Government Procurement: Sale of U.S. Medicines to GOP
--------------------------------------------- --------

10. (SBU) We inquired about the Health Ministry's views on
the inclusion of ESSALUD (health insurance agency) on the
list of agencies open to contract bidding by U.S. companies,
noting that this is key to lowering expenses of government-
purchased medicines in Peru. De la Flor stated that the
Health Ministry does not consider the inclusion of ESSALUD
as beneficial, highlighting that when IVG taxes were
eliminated for medicines to treat Tuberculosis, Peruvian
consumers did not witness a subsequent price reduction. The
Chief FTA Negotiator indicated that he would work to include
ESSALUD, but this issue remains unresolved internally.

Comment: Peru is Ready and Focused
----------------------------------

11. (SBU) Concluding the FTA negotiations is a top priority
for President Toledo, who envisions the trade deal as part
of his legacy. The Peruvian FTA team recently briefed the
President, seeking guidance on agriculture issues. While
the Chief FTA Negotiator did not raise Andean coordination,
Peru remains willing to go it alone if Colombia and Ecuador
are not ready to wrap up the negotiations beginning on
November 14. In the end, we suspect that the Peruvians
would accept a CAFTA-like IPR chapter, but they will make a
hard push for the Chile FTA provision on data protection.
There is still much work to be done on the Agricultural
chapter and Peru's slowness in responding to U.S. proposals
may make it difficult to come to an agreement by
Thanksgiving. The Ambassador will be appearing before the
Foreign Trade Commission on November 9 to promote the Andean
FTA, explaining as well FTA commitments made by the Central
Americans.

STRUBLE

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