US embassy cable - 04BRASILIA582

UNCLAS SECTION 01 OF 02 BRASILIA 000582 
 
SIPDIS 
 
USTR FOR SUE CRONIN 
NSC FOR SHANNON, DEMPSEY, CRUZ 
TREASURY FOR OASIA/SEGAL 
USDA FOR U/S PENN, FAS/FAA/TERPSTRA 
USDOC FOR 4322/ITA/IEP/WH/OLAC-SC 
 
E.O. 12958: N/A 
TAGS: EFIN, ECON, EINV, ETRD, PREL, PGOV, BR, Trade 
SUBJECT: MERCOSUL AND INDIA/SACU TALKING TURKEY ON TARIFF 
AGREEMENTS? 
 
Ref: Brasilia 300 
 
1.  An article in the March 5-7 `Valor Economico' quoted 
Itamaraty Negotiator Regis Arslanian's claims of progress in 
negotiation of the Mercosul-India preferential tariff 
agreement (PTA).  Arslanian also spoke of the quick 
conclusion of a PTA with the Southern African Customs Union 
(SACU).  Embassy's unofficial translation of the `Valor' 
article follows in para 3 below. 
 
2.  COMMENT:  Momentum of the Mercosul-India negotiations is 
likely to continue apace so as to produce a deliverable for 
signature by the June 30 target date, or perhaps even at the 
UNCTAD meeting in Sao Paulo in mid-June.  The SACU 
negotiations, initiated before those with India, seem to be 
finally coming out of hibernation.  The scope of the SACU 
agreement will probably mirror that of the Indian PTA, but 
addressing the needs of the smaller members of SACU will 
complicate and slow the negotiating process.  The existence 
of PTAs helps entice the private sector to explore these new 
markets and -- perhaps more importantly for the GoB -- 
demonstrates political commitment to improving relations 
with developing-country partners. 
 
3.  (Begin Text of Unofficial Embassy Translation) 
 
(HEADLINE) Agreement with India Should be Completed by June 
 
The director of Itamaraty's Department of International 
Negotiations, Regis Percy Arslanian, advised yesterday that 
the preferential tariff agreement between Mercosul and India 
should be concluded by June 30.  This agreement is 
considered the first step towards an effective free trade 
agreement and calls for the reduction of import tariffs on a 
number of items. 
 
The list of products presented by Mercosul to India for 
tariff reduction contains approximately 1700 items, while 
the Indian list has around 1600.  The first meeting to 
establish which products should be privileged in trade 
relations between Mercosul and India ended last Wednesday 
with the definition of 100 line items for each side.  This 
was an initial stage, just to test the waters, said the 
diplomat.  A further list of trade items to be opened up for 
trade will be exchanged on March 31. 
 
The Mercosul list includes some strong Brazilian trade items 
like leather, agricultural products, ethanol, soy oil and 
various kinds of meat.  Arslanian advised that this last 
product was also on the Indian list and was accepted by both 
sides. 
 
Despite the small quantity of products accepted by both 
parties given the list offered by each one, the diplomat is 
certain that negotiations will take a favorable tack in the 
long run.  "Little by little the quantity will increase, but 
it is clear that not all of the 1700 products will be 
considered," he emphasized. 
 
The tariff levels to be allowed for the 100 products already 
accepted for each country have also not yet been defined. 
"Neither we nor the Indians have completed consultations 
with the private sector.  At some point, we are going to 
define the margin of liberalization that we are going to 
offer", said Arslanian.  In Brazil, these consultations will 
be done by the Ministry of Development, Industry and Foreign 
Commerce. 
 
Along with the definition of products, the governments of 
the Mercosul countries and India are trying to finish 
another three annexes to the free trade agreement: rules of 
origin, dispute settlement and safeguards.  The negotiations 
for this agreement were initiated during the trip President 
Luiz Inacio Lula da Silva made to India in January. 
 
Itamaraty also revealed a note relative to the meeting of 
the Trilateral IBSA Dialogue (India, Brazil and South 
Africa) on the chancellor level that started yesterday and 
ends today in New Delhi, the Indian capital.  According to 
the document, the ministers discussed among other subjects, 
"the reform of the UN and the situation in the Middle East, 
including the possibility of G-3 individual and group 
actions in support of peace between Israel and Palestine." 
 
Mercosul is also negotiating a preferential tariff agreement 
with the Southern Africa Customs Union (SACU) as a 
preliminary measure to a free trade agreement.  "South 
Africa proposed finishing negotiations by March 31, but we 
are going to suggest another date in April," commented 
Arslanian. 
 
(two paragraphs on Mercosul/EU negotiations omitted.) 
 
(End Text of Embassy Translation) 
 
VIRDEN