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ZNR UUUUU ZZH
R 112047Z JUN 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 3141
INFO RUEHCV/AMEMBASSY CARACAS 0525
RUEHLP/AMEMBASSY LA PAZ JUN LIMA 6256
RUEHOT/AMEMBASSY OTTAWA 2473
RUEHZP/AMEMBASSY PANAMA 1842
RUEHQT/AMEMBASSY QUITO 6928
RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS BOGOTA 002120
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ETRD EFIN ECON CO CA
SUBJECT: OY CANADA - COLOMBIA CLOSES FTA WITH CANADA
REF: A. OTTAWA 778
B. BOGOTA 1926
1. (U) SUMMARY: Colombia closed free trade negotiations with
Canada on Saturday, June 7. Implementation before the
U.S.-Colombia Trade Promotion Agreement (CTPA) could place
some U.S. producers at a competitive disadvantage, most
notably agricultural products, certain manufactured products,
service providers and investors. Modeled on the U.S. accord,
the Agreement nonetheless contains important differences,
such as the exclusion of poultry and dairy, no intellectual
property chapter and the absence of trade sanctions as an
option in resolving labor and environment disputes. The GOC
expects to bring the Agreement into force in early 2009. END
SUMMARY.
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Onward and Outward
------------------
2. (U) By closing its trade negotiations with Canada, the
Uribe Administration further advanced its policy of expanding
Colombia's access to global markets. The trade agreement
with Canada is the second to have closed in 2008; the GOC
finished negotiations earlier this year with three Central
American countries, El Salvador, Guatemala and Honduras.
Colombia, which also negotiated a pact with Chile in 2007,
plans to close shortly with the EFTA countries (Norway,
Switzerland, Iceland and Liechtenstein) and hopes to jump
start negotiations with the European Union (EU). As those
negotiations conclude, the Colombians are looking westward
for potential trade and investment partners (ref B).
--------------------------------------------- --
The Same But Different - Canada is Not the U.S.
--------------------------------------------- --
3. (SBU) Canadian and Colombian trade officials agreed at the
inception of negotiations to model their agreement on the
recently concluded U.S.-Colombia Trade Promotion Agreement
(CTPA), which meant the negotiations began with nearly 80
percent of the Agreement in place. However, according to one
negotiator, using the CTPA model became an albatross for the
GOC, because the Canadians expected the same level of access
the Colombians had granted to the U.S. The Colombians,
however, were unwilling to provide equivalent access to a
much smaller economy. (NOTE: The Central Americans treated
the Colombians similarly in their negotiations, where
Colombia asked for and was refused terms that the U.S.
received in the U.S-Central American Free Trade Agreement
(CAFTA). END NOTE)
4. (SBU) Poultry, eggs and dairy - contentious issues before
and after the CTPA negotiations - were left out of the Canada
agreement. Labor and environment chapters made it into the
Agreement, but the obligations were relegated to "parallel
agreements," since not all Canadian provinces can sign on to
the obligations. The parallel agreements, however, are
essentially the same as the obligations in CTPA, with two
major exceptions: 1.) labor and environment disputes can
result in fines but not in trade sanctions, as stipulated in
the CTPA; and 2.) disputes will follow the process described
in the side agreements, not through the trade agreement's
dispute settlement chapter, as is the case in the CTPA. The
Colombians, however, were able to gain something in the
Canada agreement that is not contained in the CTPA,
recognition of equivalent rights for Colombian immigrants in
Canada. Trade Vice Minister Munoz told EconCouns that the
parties took a more collaborative, and less combatant,
approach on these issues than in CTPA negotiations.
5. (SBU) Negotiators dropped the intellectual property
chapter. According to a Colombian negotiator, the Canadians
refused to include biodiversity obligations in the chapter -
a major sticking point in the CTPA negotiations - so the
Colombians rejected the entire chapter. In practice, this
does not amount to much of a sacrifice for the Canadians as
intellectual property regimes cannot discriminate by country
of origin. Therefore, Canadians and all nationalities will
eventually enjoy the same protections granted in the most
advanced agreement, which, when approved, will be the CTPA.
6. (U) In the investment chapter, negotiators put the
investor-state provisions on stability contracts in an annex.
Colombia also won a concession on the investor-state dispute
settlement process that arbitration must conform to Colombian
law and take place in Colombia. In the CTPA, arbitration
does not have to follow Colombian law and the arbitration can
take place outside of Colombia.
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Advantage Canada
----------------
7. (U) Canada primarily exports to Colombia cereals, paper
(newsprint), off-road dump trucks, copper wire, machinery and
electrical equipment. The Colombian tariff on those products
varies, and in many instances the GOC waives the tariff to
increase importation of intermediate goods or when world
prices are high, as is currently the case with cereals. The
Colombia-Canada agreement will immediately eliminate nearly
all tariffs on industrial products, including machinery,
textiles and apparel, giving Canadian producers a clear
advantage over U.S. producers in various sectors. For
instance, motor graders (heavy earth leveling equipment)
produced in Canada would face no tariff while a similar
product made by Caterpillar in Illinois would face a duty of
up to 20 percent. According to Mars' General Manager in
Colombia, if the Canadian agreement comes into force and the
CTPA does not, Mars may shift exports to Colombia to its
facilities in Canada rather than from the current suppliers
in Hackenstown, New Jersey (candy) and Columbus, Ohio (pet
food).
8. (U) Canada exported $17 million in commercial services in
2004, mainly in mining, oil and gas, engineering,
architecture and information technology. Under the
Agreement, Canadian companies in those and other sectors will
enjoy greater market access than their U.S. competitors. The
Government Procurement chapter provides more opportunities
for Canadian firms than U.S. suppliers. In addition,
Canadian investors will gain greater coverage than equivalent
U.S. investors.
9. (U) Although the GOC is not currently imposing tariffs on
most of Canada's agricultural exports because of high world
prices, the Agreement will give Canadian producers a leg up
on U.S. exporters when world food prices decline and Colombia
reapplies its variable agricultural tariffs. For example,
Canadian pork and beef producers will be able to export duty
free to Colombia, whereas U.S. producers would face a 5 to 80
percent tariff on these products.
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Road to Approval
----------------
10. (U) The Colombians expect to sign the Agreement at the
end of July or beginning of August, following the requisite
review process. Congressional and constitutional court
approval will take at least six months, but the GOC hopes to
have the Agreement operational by early 2009.
11. (SBU) Comment: Uribe's very active trade team is
starting to show some concrete results. The Canada agreement
locks in a key trade partner, and the GOC is hopeful that it
will serve to put pressure on the U.S. to approve the CTPA.
As one business leader told EconCouns, "apart from putting
pressure on the Democrats" to approve the CTPA, the Canada
deal actually represents a solid economic gain for Colombia
as it increases Colombian duty free access from 72% to 92% of
it products. This access will be particularly important for
Colombian sugar, biofuels, flowers and textiles.
BROWNFIELD