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Cablegate: Argentina On Doha Agriculture Modalities and Nama Linkage

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DE RUEHBU #1558/01 2220901
ZNR UUUUU ZZH
R 100901Z AUG 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 8878
INFO 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 6435
RUEHMN/AMEMBASSY MONTEVIDEO 6647
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RUEHRI/AMCONSUL RIO DE JANEIRO 2297
RUEHGV/USMISSION GENEVA 0656

UNCLAS BUENOS AIRES 001558

SIPDIS

SIPDIS
SENSITIVE

PASS USTR FOR KATHERINE DUCKWORTH AND MARY SULLIVAN
USDA FAS/ONA FOR ROBERT RIEMENSCHNEIDER AND GREGG YOUNG
EEB FOR DAS CHRIS MOORE
EEB/TPP/MTA FOR BILL CRAFT AND CHEVER VOLTMER
PASS NSC FOR DPRICE AND MSMART
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 ECON EAGR EINV PREL AR
SUBJECT: ARGENTINA ON DOHA AGRICULTURE MODALITIES AND NAMA LINKAGE

Ref: (A) STATE 104815
(B) BUENOS AIRES 1445
(C) BUENOS AIRES 1341

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Summary
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1. (SBU) The GoA believes the latest Doha Agriculture Modalities
draft is moving in the right direction and notes common ground with
the paper's domestic support, market access, and export competition
language. Trade policy makers here appreciate that the USG is now
"listening closely" to GoA Doha input and insist that Argentina is
not seeking to undermine a successful conclusion to the Doha Round.
They call their active participation in developing nation Doha
negotiating fora, including the G-110, G-90, G-20, and the NAMA 11,
a clear signal of the importance Argentina attaches to the
multilateral process. As before, the GoA call Doha Agriculture and
NAMA texts inextricably linked, claim a "lack of balance" between Ag
and NAMA draft text commitments, and argue that the less-than-
full-reciprocity concept had been "distorted" in recent draft texts.
The GoA notes flexibility and room to maneuver on its Services
offer, but cautions that current domestic political tensions require
that any commercial policies reform -- particularly those implied by
various NAMA formulas -- be gradual. End Summary.

-------------------------------------
Ag Modalities Text: "Right Direction"
-------------------------------------

2. (SBU) Econ Counselor, Trade Officer, and Econ Specialist met July
31 with Luis Niscovolos, Director of Multilateral Economic
Negotiations in the Argentine Foreign Ministry, along with Deputy
Director Conrado Solari-Yrigoyen and agricultural trade specialist
Miriam Chaves to review GoA concerns on the Doha Round "Draft
Modalities for Agriculture" paper tabled by the Committee on
Agriculture Chairman Falconer. Niscovolos called it a "modest
contribution, but in the right direction," in which the GoA finds --
in contrast to the NAMA Modalities draft -- significant areas of
agreement.

3. (SBU) Niscovolos noted Ambassador and EconCouns' July 25 meeting
with MFA Director for International Negotiations Ambassador
Stancanelli to review GoA NAMA concerns (Ref B), and appreciated
that the USG is now "listening closely" to GoA Doha input. He
stressed that Argentina is not seeking to undermine a successful
conclusion to the Doha Round. Rather, the GoA's active
participation in a variety of developing nation Doha negotiating
fora, including the G-110, G-90, G-20, and the NAMA 11, is a clear
indication of the importance Argentina attaches to the multilateral
process. He called the drafting of Paragraph 24 of the Hong Kong
Declaration "almost wholly an Argentine initiative" and said that
Argentina was the author of the June 2007 NAMA 11 communique (WTO
document TN/MA/W/86) that called a Swiss 35 coefficient a balanced
result that takes into account the needs and interests of developing
nations (Ref B). Argentina, he concluded, wants to leave its
"fingerprint" on Doha negotiations.

4. (SBU) Niscovolos regretted that, in his view, the dynamic of
end-game negotiations is such that Doha has shifted from being a
"Development Round" to one that focuses on developed country
priorities, with the developed nation mantra of a
"market-opening-outcome-that-results-in-meani ngful-new trade-flows"
an abstract concept that was never included in the original Doha
negotiating mandates.

5. (SBU) Niscovolos highlighted a number of specific concerns with
the Agriculture Modalities paper that the GoA had flagged in its
July 26 Trade Negotiations Committee intervention in Geneva:

DOMESTIC SUPPORT: Niscovolos noted that proposed OTDS (overall
trade-distorting support) tiers are close to what the G-20 proposed,
and offered that the lower levels of OTDS cuts proposed are
acceptable to Argentina. He expressed concern, however, at the lack
of precision in definitions of Amber and Blue Box product specific
limits.

Niscovolos argued that proposed U.S. Farm Bill legislation would
preserve U.S. domestic support at existing levels. The Falconer
paper, in contrast, would require significant U.S. OTDS cuts. He
cited as evidence a paper by French NGO Solidarite entitled "The
U.S. Overall Agricultural Trade Distorting Domestic Support OTDS for
2006 put in Perspective from 2001." The paper calls the commonly
accepted $11-odd billion value of U.S. OTDS misleadingly low in
light of recent rulings that U.S. cotton subsidies are not green box
and calculated that $25 billion was a more reasonable measure of
U.S. OTDS.

GREEN BOX: Niscovolos noted that conservation programs, for
example, while belonging in the Green Box, opened a "Pandora's Box"
of potential abuses by subsidies that are conservation in name but
actually have a "distorting effect" on trade. Such abuse would
weaken Green Box disciplines, and the GoA wants more "precise
criteria" included in the Agriculture Modalities text to better
define conservation.

MARKET ACCESS: Niscovolos noted a high degree of "coincidence"
between GoA, G-20 and USG positions here, including on levels of
ambition. "Our difference is with the EU position here," he said.
Niscovolos emphasized that, while average bound duty reductions were
capped at 36-40% for developing countries, there was no
corresponding minimum for developed countries. He again cited
common ground with the USG on the fact that there is no 100% tariff
cap for developed countries, and expressed concern about the higher
range of tariff lines which could be designated "sensitive" in the
Falconer draft versus the G-20 position, which could limit tariff
reductions for developed countries. "We are afraid," he concluded,
that special products and safeguards could be used as a shield
against change.

Chaves added that tariff-rate quotas for sensitive products could
expand inappropriately if based partly on import levels rather than
only on domestic consumption. She argued that the EU proposal,
since it is based on import levels, would limit tariff cuts on
sensitive products by restricting the expansion of TRQ quotas for
that product. Niscovolos also criticized TRQ loopholes in the
G-33's market access proposal, adding that agricultural tariffs are
already complex and this will do nothing to simplify them.

EXPORT COMPETITION: Niscovolos offered that the GoA agreed with the
suggested elimination date of 2013, but argued that there was too
much "frontloading" in the proposal. He also made clear that this
issue was of lesser importance to the GoA.

PEACE CLAUSE AND SPECIAL SAFEGUARDS: Finally, Niscovolos made clear
there was "no way" the GoA would accept insertion of a new "peace
clause" such as that found in the 1994 WTO "Agreement on
Agriculture" Article 13. He also criticized the special safeguard
mechanism in Article 5 and argued that it should be eliminated,
since the safeguard could be used in a way that would "neutralize"
the true market access increase negotiated in an eventual Doha
agreement, and the actual tariff cut would be "very modest" compared
to the proposed base tariff cuts. Chaves noted that the GoA has
co-presented two papers - JOB(07)/85 and JOB(07)/90 - with this

argument.

------------------------------------
"Room to Maneuver" on Services Offer
------------------------------------

6. (SBU) Niscovolos regretted that service sector negotiations were
given lower priority that Agriculture and NAMA in recent Geneva
talks. "Argentina has worked hard since the beginning on this, with
two of our best service sector negotiators now serving on the WTO
Secretariat's service staff." Argentina, he said, had undertaken

SIPDIS
specific commitments in six of the 12 GATS sectors, had participated
in the extended telecom negotiations and had ratified the Fourth
Protocol. Argentina has "no significant barriers" and has made
broad commitments in financial services (with the exception of
insurance), telecom services, business services, distribution
services and tourism, as well as Mode 4 access. He concluded noting
that Argentina understands the importance of the services pillar to
developed countries in general and to the U.S. in particular and has
"room to maneuver" on its offer.

-------------------------------------------
GOA: "Can't Separate" NAMA from Agriculture
-------------------------------------------

7. (SBU) The GoA "can't separate" NAMA and agriculture in the Doha
negotiations, Niscovolos said, because they are equally important
and because the Hong Kong Declaration mandate specifically calls for
a "balance" between the two. Solari stressed the "lack of balance"
between agricultural and NAMA commitments in the draft texts,
emphasizing that the concept of "real market access" was not a Doha
Round mandate. The "less than full reciprocity" concept had been
"distorted" in recent draft texts, he said, challenging the U.S. to
"find something wrong" with the supporting data and calculations
included in the Argentine-drafted NAMA 11 communique (WTO document
TN/MA/W/86).

8. (SBU) Niscovolos closed noting that middle income Argentina, with
its history of economic volatility and recently growing income
inequality, combines characteristics of developed and developing
nations. The consequent domestic political tensions require that
any reform of domestic commercial policies -- including those
implied by various NAMA formulas -- must be gradual.

-------
COMMENT
-------

9. (SBU) While Argentina's share of world trade was less than 0.37%
in 2006 (and declining), its share of world agricultural exports
that year exceeded three percent, and Argentina remains a leading
player in international oil seed and meat markets. It is no
surprise, then, that the GOA is deeply interested in the technical
nuance of the Doha Agriculture Modalities paper. GoA linkage of
Agriculture and NAMA pillars reflects an articulated GoA policy (Ref
C) that Argentina must develop a diverse industrial base to increase
domestic value-added and limit dependence on agricultural commodity
exports; that current windfall GoA revenues (via high commodity
export tariffs) should be used to provide targeted subsidies to
develop domestic industry; and that these subsidies should be
combined with strongly protectionist trade policies -- including
maintaining the highest possible NAMA-consistent tariffs -- in
order to facilitate this economic restructuring.

10. (SBU) The considerable Foreign Ministry energy put into
multilateral trade talks has been interpreted by some local analysts
as compensatory behavior for this Ministry's limited profile in
Kirchner administration foreign policy initiatives. It is also seen
as one of a series of Argentine plays to one-up Brazil for influence
within the G-20. Foreign Ministry Trade Secretary Alfredo
Chiaradia, in a clear reference to Brazil, said in June that "some"
countries might seek a Doha deal that is bad economically in
exchange for political gain. The sense in the GoA appears to be
that Argentina has little to gain from agreeing to current Doha
drafts but much to gain domestically, in a pre-election period rife
with protectionist populism, from holding out against one.

WAYNE

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