US embassy cable - 05LIMA4777

UNCLAS SECTION 01 OF 02 LIMA 004777 
 
SIPDIS 
 
SENSITIVE 
 
USTR FOR AUSTR VARGO AND BHARMAN 
USDA FOR FAS/ITP/BERTSCH 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, PGOV, PREL, PE 
SUBJECT: PERU'S CHIEF FTA NEGOTIATOR ON FINAL ISSUES 
 
REF: LIMA 2473 
 
1. (SBU) Summary:  Peru's Chief FTA Negotiator Pablo de la 
Flor told the Ambassador that Peru is ready to conclude the 
U.S.-Andean FTA negotiations by Thanksgiving, pending 
resolution of specific IPR and Agriculture concerns.  De la 
Flor warned that Peru's Health Minister would resign -- 
creating FTA approval difficulties -- if the IPR chapter 
failed to include a specific reference to the WTO national 
drug/health emergency waiver, and if the data protection 
provision covered new products rather than new formulas 
(Peru wants coverage of new chemical entities, as in Chile 
FTA).  He added that President Toledo is focused on the 
inclusion of biodiversity in the trade deal, but is not 
prepared to exchange that for a CAFTA-plus IPR chapter.  The 
Ambassador urged Peru to immediately submit its revised 
Agriculture offer to USTR.  End Summary. 
 
2. (U) Peru's Trade Vice Minister and Chief FTA Negotiator 
Pablo de la Flor, accompanied by Trade Ministry FTA 
Coordinator Eduardo Ferreyros, reiterated to the Ambassador 
at the residence on November 7 that Peru is ready to wrap up 
FTA negotiations by Thanksgiving.  Two issues concerned De 
la Flor: specific IPR chapter provisions and U.S. 
flexibility on Agriculture issues. 
 
IPR Issues: Data Protection and WTO Drug/Health Waiver 
--------------------------------------------- --------- 
 
3. (SBU) The Trade Vice Minister indicated that Peru is 
prepared to accept the U.S. timeframe for data protection (5 
year protection for pharmaceuticals/10 years for 
agrochemicals), but insists that the coverage be for new 
chemical entities, as in the U.S.-Chile FTA.  De la Flor 
cautioned that Peru's respected Health Minister would 
resign, creating political havoc and difficulty for FTA 
approval, if FTA data protection covered new products, as in 
CAFTA. 
 
4. (SBU) De la Flor added that, during the GOP's internal 
coordination meetings, Peru's Health Minister had insisted 
on a specific reference to the WTO national drug/health 
emergency waiver in the IPR chapter (CAFTA has a side letter 
to that effect).  The Chief FTA Negotiator argued that such 
an inclusion in the U.S.-Andean text would not lose any 
support in the U.S. Congress and might even attract a few 
votes. 
 
Biodiversity: Near and Dear to President Toledo 
--------------------------------------------- -- 
 
5. (SBU) De la Flor noted that President Toledo has focused 
on few issues, most notably second-use patents and 
biodiversity.  The Trade Vice Minister indicated that he has 
instructions to leave the table if the USG insists on adding 
to the accord second-use patents -- which are neither in the 
Chile nor Central America FTAs.  De la Flor said that Peru 
wants a rhetorical reference to biodiversity in the IPR 
chapter, but is not prepared to exchange its inclusion for a 
CAFTA-plus IPR chapter, as U.S. Chief Negotiator Regina 
Vargo had proposed.  De la Flor joked that the President 
sleeps with the biodiversity issue at night, noting that the 
First Lady's top concern is inclusion of biodiversity in the 
FTA deal. 
 
Ambassador Urges Accelerated Response on Agriculture 
--------------------------------------------- ------- 
 
6. (SBU) The Ambassador encouraged de la Flor to present 
USTR with Peru's revised agricultural offer, noting that 
November 11 is a holiday in Washington and time is of the 
essence.  De la Flor responded that securing internal 
coordination and approval had caused the delay.  Final 
acceptance of the GOP proposal by Ag Minister Manrique is 
pending.  De la Flor indicated he would try to send the 
revised Peruvian proposal by November 8 to USTR. 
 
7. (SBU) De la Flor shared that the new Peruvian Ag offer 
included a CAFTA-equivalent offer for meat and a revised 
corn proposal.  The corn offer provides for greater U.S. 
access to the Peruvian market up front, but a longer phase 
out of the tariff.  He did not mention Peru's revised rice 
or poultry offers.  The Chief FTA negotiator lamented the 
failure of the dairy industry reps to identify a workable 
solution, but he suggested the U.S. industry try again.  He 
acknowledged that the local Peruvians reps had insisted on 
an unacceptable scenario (indefinite tariffs). 
 
8. (SBU) De la Flor relayed that during his conversation 
with House Ways and Means Chairman Thomas last month in 
Washington, the Chairman insisted that the Peruvian 
Agriculture proposal for tariff eliminations have definitive 
phase out periods -- every tariff had to reach zero.  De la 
Flor indicated that Peru's new Ag offer reflects this 
advice, but noted that for certain products (under a price 
band system) the tariff base rate would approach their 
maximum (bound) WTO tariff rate. 
 
Better Deal for Colombia? 
------------------------- 
 
9. (SBU) When the Trade Vice Minister reiterated his concern 
that by holding out Colombia might strike a better Ag deal 
than Peru, the Ambassador assured De la Flor that USTR's Ag 
Negotiator would be equally tough with Colombia.  When De la 
Flor reiterated his concern about with whom Peru would close 
the Ag negotiations, the Ambassador indicated that USTR 
Portman has set aside time for wrapping up the trade deal. 
 
Government Procurement: Sale of U.S. Medicines to GOP 
--------------------------------------------- -------- 
 
10. (SBU) We inquired about the Health Ministry's views on 
the inclusion of ESSALUD (health insurance agency) on the 
list of agencies open to contract bidding by U.S. companies, 
noting that this is key to lowering expenses of government- 
purchased medicines in Peru.  De la Flor stated that the 
Health Ministry does not consider the inclusion of ESSALUD 
as beneficial, highlighting that when IVG taxes were 
eliminated for medicines to treat Tuberculosis, Peruvian 
consumers did not witness a subsequent price reduction.  The 
Chief FTA Negotiator indicated that he would work to include 
ESSALUD, but this issue remains unresolved internally. 
 
Comment: Peru is Ready and Focused 
---------------------------------- 
 
11. (SBU) Concluding the FTA negotiations is a top priority 
for President Toledo, who envisions the trade deal as part 
of his legacy.  The Peruvian FTA team recently briefed the 
President, seeking guidance on agriculture issues.  While 
the Chief FTA Negotiator did not raise Andean coordination, 
Peru remains willing to go it alone if Colombia and Ecuador 
are not ready to wrap up the negotiations beginning on 
November 14.  In the end, we suspect that the Peruvians 
would accept a CAFTA-like IPR chapter, but they will make a 
hard push for the Chile FTA provision on data protection. 
There is still much work to be done on the Agricultural 
chapter and Peru's slowness in responding to U.S. proposals 
may make it difficult to come to an agreement by 
Thanksgiving.  The Ambassador will be appearing before the 
Foreign Trade Commission on November 9 to promote the Andean 
FTA, explaining as well FTA commitments made by the Central 
Americans. 
 
STRUBLE