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Cablegate: Scenesetter for Ambassador Kirk

VZCZCXRO7983
RR RUEHCD RUEHHO RUEHNG RUEHRS
DE RUEHME #0426/01 0362144
ZNR UUUUU ZZH
R 052142Z FEB 10
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 0366
INFO ALL US CONSULATES IN MEXICO COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFIUU/CDR USNORTHCOM PETERSON AFB CO
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/USAID WASHDC 0007
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC

UNCLAS SECTION 01 OF 04 MEXICO 000426

SENSITIVE
SIPDIS
STATE FOR WHA/MEX/GOMEZ
STATE PASS TO USTR FOR MELLE/MCCOY/SHIGETOMI
STATE PASS TO JUSTICE FOR CCIPS/KOUAME AND OPDAT/TRUEBELL
STATE PASS TO COMMERCE FOR ITA/MAC/ONAFTA/WORD
STATE PASS TO ITA/MAC/IPR/WILSON
COMMERCE PASS TO USPTO FOR RODRIGUEZ/BERDUT/MORALES

E.O. 12958: N/A
TAGS: ECON KIPR MX ETRD PREL EINT ENRG BTIO
SUBJECT: Scenesetter for Ambassador Kirk

1. (SBU) Summary. Your visit comes at a crucial moment in our
efforts to deepen our bilateral relationship with Mexico, our third
largest trading partner after Canada and China. As we
institutionalize our security agenda we will also need to give more
attention to the economic and social agendas in a country whose
economic and social well-being affects ours directly. The United
States' global competitiveness depends increasingly on a more
competitive Mexico. Efforts to strengthen our mutually beneficial
competitiveness in 2010 will focus on spurring innovation, building
a modern 21st century border, encouraging the requisite regulations
and infrastructure, and supporting a sustainable energy and
environment agenda. All these are top priorities for the Calderon
administration and offer huge potential for future U.S. investment
and economic development. Mexico's and our economic recovery go
hand in hand, and U.S. export-led successes depend increasingly on
partnering with Mexico's lower-cost manufacturing capability. The
top issues on the Mexican agenda will be the long-standing trucking
dispute and other trade irritants, including Mexican tuna and
shrimp exports to the United States. President Calderon is
personally devoted to the issue of climate change and renewable
energy, opening the possibility for trade and investment
opportunities that benefit both countries. End Summary.

Political Context

--------------------

2. (SBU) Present Calderon enters the last three years of his
six-year term facing a complicated political and economic
environment. His PAN party emerged seriously weakened from a
dramatic 2009 mid-term election in which the opposition (PRI)
gained control of the Mexican Congress. His popularity numbers
have dropped 10-points since the beginning of last year, yet they
still hover solidly over 50 percent. He is by no means a lame
duck. Still, the opposition PRI party is in the ascendancy,
cautiously managing its illusory unity in an effort to dominate the
ten gubernatorial contests that are up in the coming year, and to
avoid any missteps that could jeopardize its front-runner status in
the run-up to the 2012 presidential elections. In addition, the
public's deepening economic worries have begun to counterbalance
their concern about security.

Economic Context

----------------------

3. (SBU) Following the 2009 electoral setback, Calderon made
promoting jobs and eradicating poverty his top two priorities for
2010, sharing the agenda with security issues that have become
acutely sensitive in the past weeks due to the persisting violence
in Ciudad Juarez. It is important that Calderon succeed in making
real progress on the economy and security in the last three years
of his term. The economic and security agendas are time-sensitive
and volatile, and the more momentum that can be achieved now, the
greater the prospect for continuity into a new administration.
However, the complexities of pushing viable economic reforms
through an opposition Congress complicate advancing such an agenda.
If Calderon is unable to strengthen Mexico's competitiveness in
order to promote jobs and eradicate poverty, the United States will
also feel the impact through immigration pressures and greater
volatility in high-violence cities that have been the battleground
for narco-traffickers. A stable and growing Mexico is in both our
security and economic interests.

MEXICO 00000426 002 OF 004


4. (SBU) As with any mature trade relationship, the United States
and Mexico have a number of trade-based issues, including
cross-border trucking, tuna/dolphin labeling, country-of-origin
labeling (COOL), the Buy American program, and the shrimp/turtle
excluder devices (TEDs) issue (although not strictly a trade
concern), that complicate further a complex bilateral agenda where
Mexico has, in an unprecedented way, engaged the U.S. in its most
sensitive security issues. The GOM does not see these trade
disputes as discrete, but as a message on the relative lack of
importance we place on achieving a dynamic economic relationship
with Mexico that would be mutually beneficial in improving our
ability to compete in today's global market.

5. (SBU) The trucking issue is the most important and symbolic of
these issues. Internally, the GOM is under pressure from its
trucking industry to expand retaliatory measures under NAFTA. It
has become a daily struggle to get the GOM to defer a new round of
retaliatory measures and to risk further damage to our partnership.
We have succeeded this far, but it is only a matter of time before
the GOM takes new actions. Ironically, this blockage of a major
transit flow from Mexico to the United States is hurting our own
exports to Mexico. For example, the retaliatory tariffs imposed
almost a year ago have accounted for a 17 percent drop in the
shipments of one of the United States' largest retailers to its
Mexican operations.

6. (SBU) On tuna/dolphins, the challenge will be to break out of
our litigious impasse with Mexico. The GOM is primed to hear the
various non-litigious options you will present. They will be
reluctant to drop our even pause their WTO case against us unless
they are assured that these options lead to their desired outcome
of access to the U.S. market for Mexican tuna. While the
shrimp/TEDs issue has not been on USTR's agenda, you should expect
the Mexicans to raise it. Decertification of Mexican shrimp
exports could result in a $300 - $400 million loss in exports, and
the key actors you will see are deeply engaged on this issue.

The Challenge: A Positive Economic Agenda

--------------------------------------------- --------

7. (SBU) The challenge, apart from resolving these trade irritants
in a mutually satisfactory manner, is to find areas where we can
move forward together. We need to create a positive economic
partnership with Mexico beyond trade that goes to the heart of
improving Mexico's competitiveness, which is key to the rationale
for integrating the U.S. and Mexican economies and thereby
increasing the competitiveness of both countries in global markets.
We have identified a few opportunities in which USTR plays a vital
role.

Regulatory Reform

-----------------------

8. (SBU) Mexico has been desirous of moving quickly to make our
regulations more compatible, often repeating that regulatory
cooperation is an essential component of making North America more

MEXICO 00000426 003 OF 004


competitive. Our three governments have asked our regulatory
agencies to provide updates of cooperative efforts in previously
identified sectors ranging from organics to information technology,
as well as highlight priorities in each of these sectors in which
regulatory cooperation is feasible and achievable.

9. (SBU) We believe that in addition to these sectors, there is
potential for regulatory cooperation that are as essential for the
business community as for consumers. These include pharmaceutical
testing, standards for medical devices, common certification for
telecommunications equipment, and automobile emissions. You need
not get into the detail of regulatory reform, but it would be
helpful if you could affirm our commitment to engage intensively in
this area and produce a concrete agenda for the North American
Leaders Summit.

Renewable Energy

----------------------

10. (SBU) Advancing bilateral cooperation on renewable energy,
energy efficiency and the environmental agenda has been a top
priority for both President Obama and President Calderon since
their first meeting January 2009. This agenda was formalized when
the Bilateral Clean Energy and Climate Change Framework was
announced during President Obama's April 2009 visit to Mexico. On
January 25-26 a senior level working group met in Washington to
discuss pragmatic steps to advance this collaboration. The working
group agreed to establish a bilateral task force which will work to
create a renewable energy market between Baja California and
California. The task force will consider standards, transmission
capacity, regulatory issues and financing. This pilot project
could be able more broadly across the border, creating significant
opportunities for US companies to export green technology to
Mexico. The January 25-26 meeting also helped advance cooperation
on the Framework Convention on Climate Change 16th Conference of
the parties (COP-16) which Mexico is hosting in late 2010.

11. (SBU) You could also stress President Obama's persona
commitment to advancing a joint agenda on climate change and
renewable energy. You could stress the administration's commitment
to use all available policy and financial tools, drawing on DOE,
EPA, State, TDA, USAID, OPIC and EXIM to create a viable renewable
energy market between both countries. This wider context will also
help reinforce USTR's Trade Climate Initiative.

CITEL MRA

-------------

12. (SBU) We have recently revived talks with the GOM over the
implementation of the Organization of American States' Mutual
Recognition Agreement for Conformity Assessment of
Telecommunications Equipment (CITEL MRA). The CITEL MRA framework
agreement, signed by 34 countries in 1999, goes into effect between
two signatory countries upon an exchange of letters. To date, the
only signatory country with which the U.S. has exchanged letters is
Canada. Mexico is concerned that this MRA disadvantages an
emerging market like Mexico, which produces little telecom
equipment, and fears that in the face of U.S. competition CITEL

MEXICO 00000426 004 OF 004


would leave the sector stillborn as well as harm Mexico's standards
testing laboratories. However, Mexico will host a trilateral
meeting in Mexico City on February 25-26, and we will use the CITEL
MRA as a starting point to allay Mexico's concerns.

IPR

----

13. (SBU) There is potential for enhanced unilateral enforcement
efforts in Mexico, further bilateral cooperation and even
multilateral coordination in the region in combating IPR
violations. Mexico continues to suffer from widespread commercial
IPR infringement that causes huge losses to Mexican, U.S., and
third country IP right-holders. However, the GOM has significantly
improved its IPR protection and enforcement efforts and
intra-governmental coordination, and has enhanced the cooperation
between government agencies and the industry. A September 2009
DOJ-sponsored training program for Mexican customs officials in
Manzanillo led to the detention of nearly 500 tons of Chinese
counterfeit goods at the Pacific port of Lazaro Cardenas within a
matter of weeks thereafter. Participation by the General
Commissioner of COFEPRIS (Mexico's FDA-equivalent) in a March 2009
APEC-sponsored anti-counterfeit pharmaceuticals symposium in Mexico
City, and later in a July 2009 tour of the IPR Coordination Center
in Washington, appears to have heightened GOM sensitivities and
contributed to an enforcement action in which seven pharmacies in
Cancun were closed for distributing counterfeit Cialis and other
medicines.

Border and Customs Facilitation

--------------------------------------

14. (SBU) We need to leverage the competitive advantage inherent
in our shared border and extend the border to transit hubs
throughout Mexico and the United States, as well as move our
security and customs operations to these decentralized points. As
long as border operations are limited to a geographic line between
the United States and Mexico, we will be bound by physical space
and infrastructure. If we create multiple customs points in cities
like Monterrey and Guadalajara using pre-clearance and automation
resources, we can expand processing capacity and accelerate
transit. GPS technology will let us track trucks and trains to
confirm that they do not get diverted and opened. Only by moving
in this direction can we shatter the physical stranglehold on our
borders that limits the legitimate movement of people and goods.

15. (SBU) We have begun a discussion of these border issues with
Mexico under the bilateral Policy Coordination Group on security
issues with Mexico chaired by John Brennan. You could affirm
support for the work we are doing in this channel and note that
Secretary Napolitano will be in Mexico on February 17 - 18. In the
bilateral part of her agenda she will want to focus on the dual
challenges of competitiveness and security as we seek to create a
21st century border adapted to global competitive challenges.
PASCUAL

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