Cablegate: Codel Goodlatte Meetings with Argentine Officials

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E.O. 12958: N/A
TAGS: ECON PREL EAGR AR OREP ETRD
SUBJECT: CODEL GOODLATTE MEETINGS WITH ARGENTINE OFFICIALS

1. (SBU) SUMMARY: CODEL Goodlatte November 30 meetings in
Argentina included discussions with senior officials at the
GoA Ministry of Foreign Affairs, the Ministry of Economy, and
the Argentine Lower House of Congress, as well as with U.S.
company representatives at the American Chamber of Commerce.
Delegation discussions focused on Argentina's burgeoning
agricultural sector and its important role in Argentina's
economic recovery; bilateral and multilateral
agriculture-related trade frictions; Argentina's development
of alternative bio-diesel fuels; the ongoing dispute between
Monsanto and Argentine producers on royalty payments for its
Roundup-Ready product; the GOA's controversial policies of
price controls, export taxes and export controls; and the
Argentine Congress interest in increasing contacts and
cooperation. END SUMMARY.

----------------------------
American Chamber of Commerce
-----------------------------

2. (SBU) The American Chamber of Commerce hosted a breakfast
meeting for CODEL Goodlatte and representatives of U.S.
companies involved in Argentina's agro-industrial sector,
including Cargill and Monsanto, who briefed the delegation on
agriculture-related trade issues in preparation for meetings
with GoA officials. Discussion focused on Argentina's strong
economic performance and the large role that the agricultural
sector had played in Argentina's now four year-long economic
recovery. Chairman Goodlatte asked about Argentina's ethanol
and bio-diesel fuel production efforts. Rep. Peterson
mentioned that U.S. companies are concerned that Argentina's
relatively low export tax (5 percent) on
bio-diesel fuel would effectively subsidize bio-diesel
exports to the U.S. Cargill underscored the fact that export
taxes in Argentina are a key fiscal policy instrument and
said they were confident that, if bio-diesel becomes a major
Argentine export, the GoA would certainly raise export taxes
on this product to increase foreign exchange earnings.

3. (SBU) Monsanto mentioned that Argentina is able to absorb
high export taxes on agricultural products such as soybeans
and sunflower seeds (currently 23.5%) due to Argentine
producers ready access to river ports and due to their highly
efficient production. Other company reps commented on the
perception that Argentina's top agricultural producers are
wealthy, yet have little political power. There are only
four existing associations of agricultural producers, two of
which announced their intention to strike November 29 to
protest GoA domestic price controls, export taxes and export
controls. Rep. Herseth asked about Argentina's environmental
policies and asked for an update on the diplomatic dispute
between Uruguay and Argentina over the construction of a large
paper mill on the river that defines the border between the two
nations. Cargill called the dispute more political than an
environmental issue, and noted that Argentina does not have a
strong environmental consciousness.

--------------------------------------------- ------
Meeting with Foreign Ministry - WTO, Monsanto, bilateral trade
--------------------------------------------- ------

4. (SBU) The delegation met with Vice Foreign Minister
Roberto Garcia Moritan and Secretary of Foreign Trade Alfredo
Chiaradia. The meeting focused on WTO negotiations but also
addressed the Monsanto dispute and trade with Venezuela,
China, the Middle East and the U.S. On WTO, Chiaradia
stressed that the GoA appreciated the strong U.S. position on
opening developed and developing country markets, but made
very clear the belief that the U.S. and EU would have to "do
their part" to reach an agreement, by reducing subsidies (so
countries can "compete with farmers, not with budgets") and
increasing market access. The GoA's "demand" is that the
U.S. understand that subsidy reduction is necessary for Doha
resolution. Goodlatte appreciated the GoA's consistently
strong position on non-agricultural market access and noted
our common views on EU agricultural protection. Goodlatte
opined that historically high grain prices as a consequence
of surging demand for grains as a feedstock for biofuels
production could ease the subsidy issue, which will be
addressed in a new Farm Bill sometime in the next year. Rep.
Peterson added that the Farm Bill's subsidy provisions will
likely be drafted on the assumption that a Doha consensus
will not be reached and added that TPA was not likely to be
renewed. Goodlatte observed that Congress probably would not
have passed the last US Doha offer, and stressed that the EU
had far more room for cuts in terms of both subsidies and tariffs.

5. (SBU) Rep. Peterson questioned the apparent contradiction
between the GoA's claim of wanting free trade and the GoA's
current use of export taxes. Chiaradia noted that export
taxes are, like import tariffs, WTO-compliant. He also
explained that export taxes are helpful to domestic
consumers, keeping products available on local markets at
prices lower than international reference rates. They are
also helpful, Chiaradia explained, in encouraging Argentine
domestic value-added processing of otherwise raw commodity
exports by countering the tendency of importing countries to
escalate tariff rates up the value-added chain, and a
significant source of revenue for the GoA. When asked if
export taxes would rise as biofuel demand drives up commodity
prices, Chiaradia deferred, saying that supply might rise to
match the demand increase.

6. (SBU) Goodlatte raised the Monsanto biotech soybean
royalties collection issue, noting that U.S. economic
strength was tied to the capacity of companies like Monsanto
to innovate, and that, by helping increase soy production in
Argentina, Monsanto had contributed significantly to
Argentina's economic growth and prosperity. Chiaradia noted
our partnership on biotech in the WTO against the EU, and
argued the Monsanto case was based on a misunderstanding
about what should be protected. While he stated that
Monsanto "should capture the reward" for the use of their
product, that idea applied to the seed itself, not to
products which were derived from soybeans. He explained that
Monsanto originally sold its Roundup Ready seeds in Argentina
without patent protection because Monsanto's application
wasn't filed in time and so worked with licenses instead. He
said that Monsanto, "all of a sudden" decided to go to court
in the EU. "We have always been ready to negotiate with
Monsanto," he said, suggesting that Goodlatte ask Monsanto
why it hadn't taken up the GoA on its offer to talk.
Goodlatte requested more GoA support for the protection of
intellectual property, including better enforcement of
existing laws and regulations.

7. (SBU) In response to a question from Goodlatte on where
MERCOSUR was headed with Venezuela as a new member, Chiaradia
noted that MERCOSUR had already had a "free trade" framework
with Venezuela, and Venezuela's membership had only
accelerated a process of trade opening. Many details of
Venezuela's accession, he added, remain to be negotiated.
Chiaradia explained that, while the four original MERCOSUR
members are competitors in agriculture, Venezuela is not a
significant agricultural producer. Opening Argentine trade
with Venezuela will offer preferential access to key
Argentine exports, and provide Argentina greater access to
Venezuela's productive strengths, including in hydrocarbons
and steel. He added that "five are more complicated than
four," but downplayed integration difficulties by comparing
Venezuela's accession to the EU's incorporation of new
members. "We will probably have more influence on Venezuela
than Venezuela has on us," he said.

8. (SBU) Garcia Moritan responded to a question about
anti-terrorism efforts by noting the upcoming 3 1 tri-border
discussions. When asked about China trade, Chiaradia stated
that Argentine exports were about USD 3.2 billion and imports
USD 2.2 billion, so Argentina enjoys a surplus - but
"probably not for very long," as the export composition is
not favorable to Argentina in the long-term. (Note:
approximately 78% of Argentine exports to China in 2005 were
oilseeds - mainly soybeans - and vegetable oils.) On
Argentine trade interests in the Middle East, Chiaradia
said Argentina's trade policy is to trade where it can, and
that Argentina has regular trade relations with all countries
in the region except Iran.

--------------------------------------------- ---------
Meeting with Economy Minister and Agriculture Secretary -
economy, export taxes, economic intervention, Mercosur,
agricultural trade, Monsanto
--------------------------------------------- ---------

9. (SBU) Economy Minister Felica Miceli noted the great
improvement in the economy since the economic crisis of
2001-2002, and stated that the previous governments had not
provided a good environment for growth, and hailed the
results of President Kirchner's policies. She said that many
problems remained, highlighting unemployment, social
inequalities, and poverty. She frankly acknowledged the
economic distortions that result from high export taxes and
price controls, especially relating to agricultural
products and argued that "as politicians, we all understand
that we can't be fully happy, and at times, we have to choose
among bad options." Miceli concluded that the products
impacted by GoA price controls, export tariffs and export
constraints - bread, beef, chicken, milk, corn and wheat -
would be "two or three times more expensive" if the
government did not intervene, that millions of poor would
be severely affected, that the producers were still in a
"privileged" economic position, and if the GOA did not
intervene, there would be social unrest.

10. (SBU) In response to CODEL's questions about the nature
and future of Mercosur, Miceli said that its goal was not to
become "another European Union," and in any case it was not
nearly as economically advanced. She said it would take time
and further negotiations to fully incorporate Venezuela as
Mercosur's fifth member, but that she was optimistic about
the process.

11. (SBU) Secretary of Agriculture, Livestock, Fisheries, and
Food, Miguel Campos complained about the "unfairness" and
lack of consistency of the United States agricultural import
policy restrictions of Argentine beef and other products. He
particularly complained about U.S. policies relating to Foot
and Mouth and BSE disease, saying it is widely known that the
former posed no risk to human health. On "Mad Cow Disease,"
he said that there was no consistency on the part of the U.S.
in its judging whether a country was safe from such diseases.
Campos said that the U.S. should establish "minimum risk"
criteria for judging such disease transmission risk, akin to
the model the U.S. had proposed to Japan. He also asked for
the same such quality and consistency of risk assessment on
the risk of Newcastle disease in imported poultry. Rep.
Goodlatte responded that the U.S. is actively studying these
issues, and that all requests will receive a full hearing.
He noted that in 2005, the U.S. had re-opened its market to
beef imports from Uruguay, demonstrating that the U.S.
responsiveness to improved phytosanitary practices. He also
expressed his hope that Argentina would someday open up its
own market to U.S. beef. He expressed the hope that both
sides might consider looking at nations' markets not in a
national sense, but perhaps in a regional sense, as often
such outbreaks are limited to small areas within vast land
areas that comprise both our nations.

12. (SBU) The group discussed, in very frank terms, the
longstanding dispute involving Monsanto seeking compensation
for the use of the Roundup Ready (RR) soybean technology.
(Note: 98% of soybean grain in Argentina is RR.) Rep.
Goodlatte pointed out how important IPR and its protection
are to the American economy, creativity, and jobs. He asked
about any latest progress on Monsanto. Minister Miceli and
Secretary Campos said they remained open and hopeful that

SIPDIS
Monsanto and the Argentine grain exporters could come to an
agreement whereby the latter would pay for the use of the RR
technology. GOA officials noted that Monsanto never did
obtain a patent in Argentina for its product but readily
acknowledged Monsanto's tremendous success in Argentina.
They agreed it is fair that Monsanto's should be compensated
for its technology. Miceli and Campos said that this dispute
was between Monsanto and the exporters, and not with the GOA,
adding they had been very hopeful last year that the two
sides were close to an agreement, and were disappointed that
an agreement was not ultimately reached. (Note: This
observation is disingenuous. The GOA has consistently
obstructed the achievement of a solution to this issue. End
Note). They were at pains to express that the GOA was not
directly involved in these negotiations, but said they always
encouraged that a solution be found. However, once Monsanto
sought legal redress in Europe (which the GOA officials
described as a "big setback"), the GOA had no choice but to
legally defend its Argentine citizen exporters.

--------------------------------------------- ---------
Meeting with Lower House of Congress - desire to increase
contacts, information-sharing and cooperation
--------------------------------------------- ---------

13. (SBU) CODEL was then hosted for a luncheon by their
counterparts from the Argentine House of Deputies. The
Argentine deputies represented a cross section of the
Congress from both the ruling party and the opposition.
Members included the president of the Argentine Agricultural
Committee Ana Berrate and the president of the House of
Deputies Alberto Balestrini. Mr. Balestrini welcomed the
opportunity to expand contacts and the exchange of
information with their U.S. counterparts. Mr. Goodlatte said
the U.S. Congress was ready to engage with Argentine on a
broader basis, noting that democracy is the foundation of
economic development. Opposition deputy Federico Pinedo
noted that U.S.-Argentine relations had been based primarily
on security issues and noted the need to enhance cooperation
beyond these topics. Mr. Peterson questioned the Argentine
delegation on how they intended to develop and support the
local biodiesel industry. He also noted that whatever
influence the Argentine Congress could have on MERCOSUR to
restrain trade complaints would be useful.

14. (U) The CODEL did not have a chance to clear on this
cable.

15. (U) For additional Buenos Aires reporting, please see
http://www.state.sgov.gov/p/wha/buenosaires
WAYNE

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