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Cablegate: Argentina: Doha Nama Text Unacceptable As Basis For

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OO RUEHWEB

DE RUEHBU #1445/01 2071407
ZNR UUUUU ZZH
O 261407Z JUL 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8744
INFO RUEHGV/USMISSION GENEVA IMMEDIATE 0646
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6398
RUEHMN/AMEMASSY MONTEVIDEO 6610
RUEHSG/AMEMBASSY SANTIAGO 0620
RUEHBR/AMEMBASSY BRASILIA 6260
RUEHLP/AMEMBASSY LA PAZ AUG CARACAS 1373
RUEHSO/AMCONSUL SAO PAULO 3440
RUEHRI/AMCONSUL RIO DE JANEIRO 2281

UNCLAS BUENOS AIRES 001445

SIPDIS

SIPDIS
SENSITIVE

GENEVA PASS TO USG WTO DELEGATION
EEB FOR DAS CHRIS MOORE
EEB/TPP/MTA FOR BILL CRAFT AND CHEVER VOLTMER
PASS NSC FOR DPRICE, MSMART
PASS USTR FOR KATHERINE DUCKWORTH AND MARY SULLIVAN
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
TREASURY FOR NLEE AND LTRAN
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
US SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: ETRD WTRO PREL AR
SUBJECT: ARGENTINA: DOHA NAMA TEXT UNACCEPTABLE AS BASIS FOR
NEGOTIATON

Ref: BUENOS AIRES 1363

-------
Summary
-------

1. (SBU) The GoA views the current Doha Non-Agricultural Market
Access (NAMA) Modalities text presented by NAMA Committee Chair
Stevenson wholly "unacceptable as a basis for negotiations"
according to senior Argentine trade officials. They argue it fails
to reflect the views of the NAMA 11, a developing economy group that
includes Argentina, Brazil and India. The GoA plans to make this
point firmly during July 26-27 discussions in Geneva. A key Foreign
Ministry official offered that a way to move forward in Geneva would
be to have WTO Director General Lamy publicly "takes note" of NAMA
11 concerns expressed during the negotiating session, pledge to have
them incorporated into a revised text, and declare that current
negotiations will remain open in "permanent session" pending further
discussion of a revised NAMA Modalities text in September.

2. (SBU) Our GoA Foreign Ministry interlocutors contrast the
unacceptable NAMA Modalities text with the Agriculture Modalities
text which they say fairly represents all views. The NAMA 11's
Swiss 35 coefficient proposal would, according to the GoA, result in
a maximum Mercosur bound rates of 17% and a decrease in applied
rates for 25% of Argentine tariff lines that account for 37% of
Argentine import value. The Foreign Ministry emphasized that, while
the NAMA text's 19 - 23 Swiss coefficient is politically
unacceptable to Argentina's domestic constituencies ("The President
would fire me," declared the Foreign Ministry's top trade official),
the NAMA 11's Swiss 35 counter-proposal should not be taken as a
final take-it-or-leave it option. Rather it should be acknowledged
and appreciated in Geneva for the significant impact it will have on
currently applied Argentine tariffs. Separately, the EU Ambassador
said he thinks the Argentines could probably live with a Swiss 30
coefficient but they will not accept the 19 - 23 range in the
current text. End Summary


--------------------------------------------- -
NAMA Modalities Text Excludes NAMA 11 Concerns
--------------------------------------------- -

3. (SBU) Ambassador and Econ Counselor met July 25 with Nestor
Stancanelli, Ambassador and Director of the Foreign Ministry's
International Economic Negotiations Directorate, and with Minister
Luis Niscovolos, Director of Multilateral Economic Negotiations to
follow-up on Argentina's position in upcoming Geneva Doha talks this
week. This conversation followed the Ambassador's July 24 phone
conversation with Deputy Foreign Minister Roberto Garcia Moritan
urging cooperation in Geneva. According to Stancanelli, the NAMA
Modalities draft has been presented by NAMA Committee Chair
Stevenson as a "final outcome" fait accompli rather than as a
starting point for further negotiations, wholly disregarding ongoing
discussion with NAMA 11 members. The NAMA 11 represents the larget
single developing country group in terms of consolidated trade and
GDP, Stancanelli said, and their voice must be acknowledged.

4. (SBU) Stancanelli called Stevenson neither a fair nor a helpful
NAMA Committee chair/interlocutor for tabling this one-sided text,
adding that this is also the WTO Secretariat's thinking expressed
during private discussions in Geneva last week. The current NAMA
Modalities text, he said, stands in stark contrast to the
Agricultural Modalities text: While there remains "much to change
and correct" in the Agriculture text, especially vis a vis the EU's
positions, Stancanelli commended this text as reflecting input from
all of WTO members and so is a basis to keep negotiating.

-------------------------------------------
NAMA 11 Proposal "Ambitious and Aggressive"
-------------------------------------------

5. (SBU) The NAMA Chair's proposed 19 - 23 Swiss coefficient ceiling
ignores NAMA country realities and sensitivities, Stancanelli said.
The NAMA 11's Swiss 35 coefficient counter-proposal will result in a
46.7% cut in overall NAMA bound rates and a slightly larger 48% cut
in bound rates for Mercosur members. Beyond mere water cuts, the
Swiss 35 proposal would eventually result in a maximum Mercosur
bound rates of 17% and a decrease in applied rates for 25% of
Argentine tariff lines that account for 37% of Argentine import
value.

6. (SBU) Stancanelli emphasized that the Swiss 35 proposal should
not be taken as a final take-it-or-leave it option, but rather
should be appreciated for the significant impact it will have on
currently applied Argentine tariffs. He added that U.S. foreign
direct investors in Argentina (e.g. the auto sector's Ford and GM)
have optimized regional production to benefit from Mercosur common
external tariff and would be hurt by NAMA tariff cuts, along with
Argentine industry. The common threat to Argentine and U.S.
interests here, he offered, comes from China and others, with
Chinese imports to Argentina up 45% over the last year alone.

7. (SBU) On Paragraph 7 developing country flexibilities,
Stancanelli said Argentina would opt for the second option which
allows for the outright exclusion of a percentage of tariff lines
whose total value does not exceed a fixed percentage of
non-agricultural imports. He called the 5% of tariff lines and 5%
of total value of non-agricultural imports in the NAMA Modalities
text wholly inadequate to protect sensitive Argentine production of
automobiles, textiles, toys, footwear and some chemical and
petrochemical products. Together, he said, these account for a
substantially higher percentage of tariff lines and roughly 13-15%
of the volume of Argentina's trade.

--------------------------------------------- ---------
Domestic Political Context: Swiss 19 - 23 "Impossible"
--------------------------------------------- ---------

8. (SBU) While the Hong Kong Declaration's Para 24 requires
"comparable levels of ambition" in agricultural and NAMA tariff
cuts, Stancanelli said, proposed agricultural cuts, with so many
non-transparent conditions/exceptions, are hardly comparable to
proposed NAMA reduction levels. It is important for developed
country interlocutors to understand, he said, that that the NAMA
Chair's proposed Swiss 19 coefficient implies a 60% cut in Argentine
bound rates - a level politically impossible to accommodate today in
Argentina. In contrast, the net 46.7% cut in overall NAMA bound
rates implied by the NAMA 11's Swiss 35 proposal is doable in a
domestic political context. This considerable drop in NAMA tariffs
should be celebrated -- not attacked -- by developed country WTO
members, Stancanelli concluded, and at a minimum this point of view
must be reflected in the NAMA text in order to move forward.
Stancanelli admitted that there remains some differences on Geneva
negotiating tactics among NAMA 11 members, but emphasized again that
it is "impossible" for Argentina to accept the current NAMA draft
text as a basis for negotiations.

------------
Way Forward?
------------

9. (SBU) Argentina wants negotiations to continue, Stancanelli said,
and wants to avoid a drama in Geneva talks this week. However, it
will have to state at the meeting that the current NAMA language is
"unacceptable as a basis for negotiations." There is no/no GoA
flexibility on this, he emphasized. While not all NAMA 11 members
will take such a hard-line position, he said, Argentina assuredly
will. He reasoned that, if the NAMA Modalities document is accepted
as it stands, the nature of WTO negotiations will give it both
weight and inertia that will make it difficult to significantly
modify in future discussions.

10. (SBU) Stancanelli offered that a way forward would be to have
Director General Lamy publicly "takes note" of NAMA 11 concerns
expressed during the session, pledge to have them incorporated into
a revised draft NAMA Modalities text, and declare that the current
session will remain open in "permanent session" pending further
discussion of a revised NAMA Modalities draft in September.

---------------------
EU Ambassador's Views
---------------------

11. (SBU) Ambassador spoke separately with the EC Ambassador who
noted that, in an upcoming lunch of all EU ambassadors with Deputy
Foreign Minister Garcia Moritan, they would press for Argentina to
accept the NAMA text as a basis for negotiation and point out that
Argentina has a lot to lose if the agricultural text does not move
forward because NAMA is stuck. However, the EC ambassador was not
optimistic. He said the GoA could probably live with a Swiss 30
coefficient eventually, but will likely not accept the range in the
current text. He concluded that newly appointed GoA Economy
Minister Peirano will likely not be helpful; he is in the camp of
those who believe strongly in protecting local industry.

-------------------------------
Trade Under-Secretary Chiaradia
-------------------------------

12. (SBU) MFA Undersecretary Alfredo Chiaradia (Assistant
Secretary-equivalent) called Ambassador the morning of July 26 on

SIPDIS
his return to the country. He said regarding the NAMA text "there
are some things we cannot go beyond politically." "While Lamy and
Mandelson may want an agreement at all costs, Argentina can't be as
flexible. If I were to go the President with an accord that
includes higher than 50% (NAMA) tariff cuts, I would be fired," he
concluded. "We want an agreement, but it needs to be reasonable."

13. (U) To see more Buenos Aires reporting, visit our classified
website at: http://www.state.sgov.gov/p/wha/buenosaires.< /a>


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