US embassy cable - 04SANTODOMINGO6292

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 006292 
 
SIPDIS 
 
DEPT/WHITE HOUSE PASS USTR FOR VARGO,RYCKMAN,MALITO, 
CRONIN; DEPT FOR WHA, WHA/CAR,WHA/EPSC, ED/TPP/BTA; NSC FOR 
SHANNON AND MADISON;GENEVA FOR MISSION TO WTO;USCINCSO ALSO 
FOR POLAD; TREASURY FOR OASIA-LCARTER; USDOC FOR 
4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION AND 
3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: DECL: 11/18/2014 
TAGS: ETRD, PGOV, DR 
SUBJECT: DOMINICAN SENATORS SCHEDULE VOTE ON REPEAL OF 
PROTECTIONIST TAX BLOCKING CAFTA 
 
Classified By: DCM Lisa Kubiske.  Reason: 1.4 (b) and (d). 
 
1. (SBU) Summary.  Senate president Andres Bautista has 
scheduled a Senate vote to repeal the 25 percent tax on 
beverages sweetened with high fructose corn syrup (HFCS) for 
Saturday, November 20.  This move follows the Ambassador,s 
delivery of USTR Amb. Zoellick,s November 16 letter to 
President Fernandez, and frank exchanges between the 
Ambassador, Embassy officers, and Dominican senators at a 
November 18 lunch hosted by the American Chamber of Commerce. 
  The senators at lunch believe that they will have 
sufficient votes for repeal of the tax, to break the impasse 
of the past two months and forward the repeal bill to the 
House of Representatives, where we expect fewer problems.  We 
are optimistic that the Senate will vote to repeal the tax 
November 20 -- but the outcome is not assured, given the 
power of the sugar sector.  End Summary. 
 
Making A Strategy for Repeal 
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2. (C) Embassy Santo Domingo has worked closely over the past 
three weeks with 
Senate Trade Committee president Sen. Alejandro Santos and 
former Under Secretary of Industry and Commerce Hugo Rivera 
to coordinate a strategy for the repeal of the protectionist 
25 percent tax on fructose-sweetened drinks.  This has 
included strategy sessions with representatives of the 
American Chamber of Commerce (AmCham) and the Association of 
Free Zone Companies (ADOZONA). 
 
3.  (U) Both AmCham and ADOZONA have made strong public 
relations efforts in recent weeks concerning the benefits of 
the Free Trade Agreement (FTA) and the imminent danger of the 
exclusion of the Dominican Republic.  These efforts were 
greatly boosted by USAID's programming of a visit by 
contractor Pete Minor with a persuasive, well-documented 
projection of the country's standing as a garment exporter 
-- either with or without the FTA.  Minor's program in Santo 
Domingo and the second city, Santiago, expanded to include 
previously unplanned briefings, including one for senators. 
 
4. (C) Sen. Santos (protect) calculated in early November 
that he had an easy majority within his 12-member special 
committee but that in the Senate generally he could count for 
certain on only 12 votes.  Another 5 would be needed to 
assure passage in the event that all 32 senators were 
present.  Working together, Santos, Rivera and EcoPol 
counselor enlisted AmCham president Jorge Ivan Rodriguez to 
host a private luncheon at which the Ambassador could 
influence the most likely swing votes -- the senators from 
the border provinces with no sugar industry activities.  The 
event was planned for the week of November 8-12 but was 
delayed because key senators were traveling.  Since ADOZONA 
was putting together a high profile event in Santiago on 
November 15, after further changes the luncheon was set for 
Thursday, November 18.  The ADOZONA event gathered 
congressional representatives from 14 provinces for a 
well-publicized push in favor of the FTA at which Sen. Santos 
urged that action was urgent, in order to save the agreement 
(this was the theme we had chosen with him in our working 
sessions). 
 
Advising the President 
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5.  (C) On November 16 the Ambassador hand-delivered a letter 
signed by USTR Ambassador Zoellick to President Fernandez. 
President Fernandez told him he would actively encourage the 
Dominican congress to repeal the 25 percent tax on 
fructose-sweetened beverages and was optimistic that the 
congress would act.  Fernandez also firmly stated his 
intention for the Dominican Republic to remain in CAFTA. 
 
Free Trade for Lunch 
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6.  (SBU) At the November 18 lunch hosted by AmCham Vice 
President Kevin Manning, the Ambassador had the opportunity 
to speak at length with Senate President Andres Bautista and 
six other senators, among them Sen. Santos. Initially, 
several senators offered rationales for delaying work on the 
repeal, mentioning inter alia their "patriotic duty" to 
defend agriculture, the need for PRD party consultation, and 
the necessity of voting their consciences.  One senator 
expressed frustration that the Executive Branch had an 
attitude of acting as if the Dominican congress did not exist 
(a long valid complaint, just as applicable to the Mejia 
administration).  The Ambassador urged an early vote and 
Bautista responded that the time was not right because a 
delegation of eight senators is leaving for a ten-day trip to 
China next week. 
 
7. (SBU) Despite the excuses, it appeared that at least some 
senators had changed their views since approving the tax 
package including the 25 percent measure in late September. 
One senator from a heavily agricultural region said that he 
had originally favored the 25 percent tax but thorough 
evaluation of &what was right for the country8 had caused 
him to favor repeal.  Bautista said that during recent 
meetings in Guatemala his Central American counterparts 
appeared delighted at the prospect that the Dominicans would 
be excluded from CAFTA.  Another senator confirmed to the DCM 
that the sugar sector was no longer lobbying as vigorously as 
before. 
 
8. (U) The Ambassador emphasized that despite many promises 
over recent months of action on repeal, commitments had been 
avoided and the country had positioned itself for exclusion. 
AmCham VP Manning read aloud an AmCham translation of USTR 
Amb. Zoellick's letter to Senator Grassley advising him of 
administrative actions to remove the Dominican Republic from 
the FTA.  The Ambassador quoted from Senator Grassley's press 
release endorsing the move and underscored the seriousness 
with which Washington now viewed the situation. 
 
9. (SBU) By the end of lunch, discussion among the senators 
focused on the mechanics of arranging an early vote on the 
repeal measure.  They decided to schedule a highly unusual 
Saturday session for November 20, because otherwise the China 
trip would delay Senate consideration for at least two weeks. 
 
Comment 
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10. (C) The Saturday vote is a direct result of our 
campaigning with trade-friendly associations and the 
conversation at lunch.  We are optimistic that the Senate 
will pass the repeal in two successive readings that day. 
That said, the outcome is not assured, given the power of the 
sugar sector in the Dominican Republic. 
KUBISKE