This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 002231
USTR FOR SCRONIN, KLEZNY
DEPT FOR E:ALARSON; WHA:CSTRUBLE, SPINKHAM; EB:BMANOGUE NSC FOR JOANNA WALLACE USDA FOR JBPENN
E.O. 12958: DECL: 07/16/2013
TAGS: ETRD BR FTAA
SUBJECT: BRAZIL'S ARSLANIAN: FTAA COMPROMISE POSSIBLE Classified By: Janice Fair, Economic Officer for Reason Section
1.5 (b) and (d)
1. (C) Summary. In an informal discussion with econoff on July 13, Regis Arslanian, the GOB's new director of FTAA and
Mercosul-EU negotiations, acknowledged that Mercosul was disappointed with the reaction it received during the San
Salvador TNC meeting to its proposal for restructuring the FTAA negotiations and suggested that Brazil could accept a
compromise reformulation with the United States. According to Arslanian, a bilateral structure for market access
discussions is a key element for the GOB. End Summary.
2. (C) On July 13, while traveling back to Brasilia from the FTAA Trade Negotiating Committee (TNC) meeting in San
Salvador (July 8-11), econoff discussed Mercosul's take on the meeting with Regis Percy Arslanian. Arslanian has been
advisor to Itamaraty Secretary-General Pinheiro Guimaraes, but told Econoff that he has been chosen to replace
Ambassador Carlos Simas Magalhaesas as Head of the International Negotiations Department (FTAA and Mercosul-EU
negotiations) under Ambassador Luiz Filipe Macedo Soares, who is Under Secretary for South America and Brazil's lead
FTAA negotiator at the Vice-Minister level. Earlier, econoff was told by Tovar da Silva Nunes, the GOB's FTAA
Coordinator, that Simas had been sacked on July 4 for not being in-sync with Itamaraty FTAA policy directives.
3. (C) According to Arslanian, Mercosul was extremely disappointed by the reaction it received at the TNC meeting to its
three-track proposal for restructuring the FTAA. Roughly speaking, the three tracks refer to: Track 1- bilateral market
access negotiations (industrial and agricultural goods, services, and investment) carried out under the FTAA umbrella;
Track 2- minimal rules to support market access such as dispute settlement, rules of origin, civil society,
institutional issues, Hemispheric Cooperation Program, etc.; and Track 3 - rules for services and investment,
intellectual property, competition policy, market access and rules for government procurement, domestic support, and
trade remedies, all of which would be considered only in the WTO.
4. (C) Mercosul presented its proposal in the TNC plenary, but the bulk of discussion took place in an informal session
during which most countries expressed concern with, and to a certain extent criticism of, Mercosul's intention to reduce
the scope of the FTAA. Arslanian said that the United States and other countries did not fully appreciate the intense
domestic political and social pressure the GOB is under, and reiterated that it would be impossible for Brazil/Mercosul
to complete the FTAA negotiations as currently structured.
5. (C) While other countries have suggested that a comprehensive FTAA in both market access and rules is necessary to
foster economic integration and prosperity in the region by encouraging strategic hemispheric partnerships and
attracting foreign direct investment, Brazil sees its strategic needs differently. Arslanian emphasized two points: the
importance of the U.S. market for Brazilian goods; and the importance of bilateral market access negotiations as
envisioned in Mercosul's three-track proposal.
6. (C) Arslanian stressed the GOB's interest in negotiating access to the U.S. market within the FTAA. However, he
registered disbelief that the U.S. is serious about giving duty-free treatment to certain sensitive products, citing
orange juice and steel, in particular. Econoff rebutted that in the initial U.S. goods offer every tariff item was
within one of the four product baskets, each of which is slated to go to zero-duty at some time, but pointed out that
with Mercosul's proposed wholesale removal of a number of issues of interest to the United States from the FTAA, the
U.S. would undoubtedly have difficulty justifying such a comprehensive market opening. In response, Arslanian said
Mercosul would be willing to negotiate market access in financial services and telecommunications with the United States
as trade-offs. Pressed on whether Mercosul would really be offering anything new in these areas, he answered
emphatically in the affirmative.
7. (C) In explaining Brazil's rationale for seeking a bilateral negotiating structure, Arslanian said that Brazil
believes other countries in the region (Central Americans, etc.) are willing to give away much more than Brazil is in
market access for services and investment to gain an opening of the U.S. goods market. He reiterated several times that
Brazil will not "level" its interests to those of other countries and would not accept a structure that would force
Brazil to make concessions based on other countries' willingness to "give away the store." Echoing comments made by
Mercosul's Uruguayan lead during the TNC, Arslanian also said that a bilateral process could focus the negotiation more
specifically on the interests of the parties involved and make it easier to identify for political leaders and society
at large the trade-offs that are made to reach an agreement. He claimed that Mercosul will not submit any offers in
services, investment and government procurement until a bilateral negotiating structure is approved.
8. (C) Arslanian asked why the U.S. delegation to the TNC did not discuss a baseline agreement approach that he believed
the USG had contemplated. Econoff responded simply that the USG did not have an official proposal to put forward.
Arslanian bemoaned the lack of such a discussion, opining that between the three-track proposal and a baseline agreement
approach, a compromise could probably be reached, as long as it includes a bilateral market access structure. He
intimidated that Mercosul could agree to include government procurement market access under the FTAA and that the
negotiating forum for rules in services and investment, and IPR could be revisited. Arslanian also wondered aloud about
the possibility of a two-stage process, with deepening (read as rules) coming in stage two, but was silent when asked by
econoff what guarantee the U.S. would have that Brazil would undertake stage two negotiations if it obtained the market
access for goods that it wanted in stage one.
9. (C) Comment: Arslanian seemed eager to encourage a dialog with the United States to develop a vision for the FTAA
that would satisfy both countries' needs. Given his past position in the Itamaraty Secretary-General's Office and his
new position specifically overseeing the FTAA negotiations, we are inclined to view his statements on GOB priorities and
possible flexibilities as credible. See septel for Mission's overview and analysis of factors affecting the GOB's latest
formulation of its FTAA policy. End Comment.