US embassy cable - 05TEGUCIGALPA2339

C O N F I D E N T I A L SECTION 01 OF 03 TEGUCIGALPA 002339 
 
SIPDIS 
 
STATE FOR WHA/CEN, WHA/EPSC, EB/ABT, EB/MTA, EB/BTA 
COMMERCE FOR MSELIGMAN 
TREASURY FOR DDOUGLAS 
STATE PASS AID (LAC/CAM)FOR LLIBANATI 
STATE PASS USTR FOR ANDREA MALITO 
GUATEMALA FOR COMMAT MLARSEN 
 
E.O. 12958: DECL: 11/16/2015 
TAGS: ETRD, ECON, EAGR, HO 
SUBJECT: HONDURAS OFFERS SUPPORT ON WTO; SEEKS USG HELP ON 
BANANAS AND FLEXIBILITY ON CAFTA IMPLEMENTATION 
 
REF: A. A) STATE 207068 
 
     B. B) TEGUCIGALPA 2314 
 
Classified By: EconChief PDunn for reasons 1.5 (B and D) 
 
1. (C) Summary:  Following a meeting with Ambassador and 
EconChief, GOH officials agreed on the need to keep 
expectations high for the Hong Kong negotiating round of the 
WTO Doha Development Agenda. In return, the GOH seeks a clear 
USG position opposing any EU effort at those talks to further 
stall resolution of its conflict with Latin America over 
bananas.  On CAFTA, the GOH remains fully committed to full 
compliance soonest.  While it can pass required legislation 
in time for a January 1 entry into force, it cannot likely 
craft and pass additional implementing regulations in that 
time frame.  The GOH strongly opposes any entry into force 
announcement that excludes Honduras, and instead seeks either 
USG recognition that CAFTA is self-executing (rendering most 
legislative changes unnecessary) or a delayed entry into 
force date.  Post agrees that entry into force without 
Honduras would be a political disaster for both the U.S. and 
Honduras and will continue to work with Washington-based 
agencies to identify alternatives.  End Summary. 
 
WTO Talks 
--------- 
 
2. (C) Per ref A, on November 16 Ambassador and EconChief 
called on Minister of Trade and Industry Irving Guerrero and 
Vice Minister Melvin Redondo to encourage greater public 
support for a high-ambition round of negotiations in Hong 
Kong in December.  Minister Guerrero was quoted in a lengthy 
press interview on November 15 managing down expectations for 
the round, warning the public that the Hong Kong meeting 
"would not accomplish much... except a few declarations with 
little substance."  Ambassador delivered a clear message that 
the USG continues to seek a high-ambition round and would 
appreciate public GOH support for such goals, both to keep 
expectations high and to keep pressure on the European Union 
to produce a better offer. 
 
3. (C) The Minister took these points on board, agreeing that 
this round of talks is both important and ambitious, and 
undertaking to provide a more positive message in future 
public pronouncements.  Vice Minister Redondo noted that the 
highly ambitious nature of the Hong Kong round is reflected 
in its five day schedule, vice the normal three days.  As 
evidence that the GOH still seeks meaningful outcomes, 
Redondo also noted that the GOH delegation to Hong Kong will 
include Minister of Agriculture Mariano Jimenez. 
 
Bananas and Cotton 
------------------ 
 
4. (C) Redondo noted, however, that the agricultural 
negotiations are "very delicate" in part because of the 
unresolved banana issue.  (Note:  Honduras is one of the six 
largest western-hemisphere banana exporters and is 
collaborating with the other five to battle the EU over its 
Tariff Rate Quota system.  End Note.)  The GOH is frustrated 
that even after losing in arbitration twice, the EU still 
refuses to comply with WTO rulings.  Redondo and Guerrero 
both expect the EU to again seek a waiver of its 
non-compliant policies in Hong Kong (as it successfully did 
in Doha), and requested that the USG oppose such a maneuver. 
The GOH is seeking a "very clear U.S. position," Redondo 
said.  "At least stay out of the way," Guerrero added, "but 
even better would be if the U.S. could oppose" any such 
waiver request. 
 
5. (C) Guerrero also noted that to neutralize EU influence 
over Africa on this issue, the U.S. needed to act on cotton 
(a crop that, not coincidentally, is now also of interest to 
the GOH thanks to changes under CAFTA).  EconChief noted the 
November 10 announcement in Burkina Faso of the Cotton 
Improvement Program and supplied Guerrero with additional 
information following the meeting.  Guerrero approved of the 
idea, noting that the U.S. needs to do more marketing to win 
the hearts and minds of the developing countries on trade 
issues.  It is outrageous, he said, that the EU can maintain 
such harmful trade policies and still be perceived as a 
defender of developing countries. 
 
CAFTA Implementation 
-------------------- 
 
6. (C) On CAFTA implementation, Guerrero made an impassioned 
appeal for more time to complete and pass legislation needed 
to bring Honduras into compliance (see ref B for additional 
background).  A U.S. Presidential Proclamation on CAFTA that 
excluded Honduras would be a political disaster for Honduras, 
he said, and an embarrassment for the U.S. Trade 
Representative (USTR), which would be accused by opponents of 
free trade of negotiating with countries that are not ready 
to enter into free trade deals.  The fallout from such a 
debacle, particularly following the difficulties at the Mar 
del Plata Summit, could significantly set back the cause of 
free trade in the hemisphere.  Instead, he suggested, USTR 
should accept that CAFTA is self-executing (that is, that its 
provisions trump domestic law in Honduras and therefore no 
additional implementing legislation is needed) and announce 
that Honduras will be ready for CAFTA entry into force. 
EconChief noted that USTR has already indicated it is 
disinclined to accept that reasoning. 
 
7. (C) An alternative, suggested Guerrero, is a later entry 
into force.  (He illustrated his idea citing the date of 
April 1, 2006, but said he is not wedded to that date.)  That 
would give all the Central American countries ample time to 
get their legislation right and then to follow up with 
appropriate and effective implementing regulations.  Not only 
would getting all of those changes accomplished in the next 
few weeks be impossible for Honduras (which faces national 
elections on November 27 and whose Congress is currently out 
of session campaigning), but even if it were possible it 
would not be possible for USTR to evaluate the new 
legislation in time.  USTR is stretched thin, Guerrero 
recognized, by the Andean talks and by WTO concerns and could 
not hope to master the intricacies of the legal systems of 
six Latin American countries and then translate, evaluate, 
and certify reams of legislative and regulatory changes in 
time for a January 1 entry into force. 
 
8. (C) Guerrero is also concerned that some recent USG 
requests for changes to law and regulation are new and 
constitute moving the goalposts.  He said that requiring 
additional specific legislation on generic drugs, for 
example, is not only impractical in the short time remaining, 
but it could ignite a firestorm of protest against CAFTA. 
Better, he said, to allow the GOH to remedy any lacuna 
regarding generic drugs using administrative procedures and 
regulations, thus avoiding a potentially inflammatory debate 
in Congress. 
 
9. (C) As a third alternative, Guerrero suggested perhaps 
USTR could announce the entry into force of CAFTA in January 
as planned, based on the legislative framework being in 
place, but make it contingent on prompt passage of 
appropriate implementing regulations.  Such a solution avoids 
embarrassment for all and would leave sufficient time to all 
parties, including within the USG, to consider adequately and 
approve of the measures to be adopted. 
 
Comment 
------- 
 
10. (C) Comment:  Guerrero seemed somewhat sheepish when 
gently chided for his unhelpful public comments on the 
upcoming WTO talks, and appears to have genuinely taken on 
board our expectation that GOH public statements in the 
future support a high-ambition negotiating round.  On CAFTA 
implementation, Post agrees with Guerrero that entry into 
force without Honduras would be a devastating blow to the GOH 
and to USG efforts to expand free trade throughout the 
hemisphere.  Post will continue to work with Washington-based 
agencies to identify alternatives.  Similarly, Post 
understands the GOH need to come home from Hong Kong with 
something tangible, and would support a USG effort to block 
any efforts by the EU to further stall the resolution of this 
seemingly interminable conflict over bananas.  End Comment. 
Ford 
Ford