US embassy cable - 05LIMA4969

UNCLAS SECTION 01 OF 02 LIMA 004969 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/TPP/ABT 
TREASURY FOR OASIA/INL 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USDA FOR FAS/ITP/GRUNENDFELDER 
BANGKOK FOR TRADE OFFICER 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EAGR, PGOV, PREL, PE 
SUBJECT: PERU SIGNS "PARTIAL" FTA WITH THAILAND 
 
REF: A) LIMA 3554   B) 04 LIMA 5481 
 
1.  (U) Summary.  After over a year of negotiations, the GOP 
signed an "early harvest" free trade agreement with Thailand 
on November 19 during the APEC Conference in Busan, South 
Korea.  The agreement covers approximately 70 percent of 
products exported by the two countries, but does not cover 
sensitive products including rice, sugar and poultry. 
According to the Ministry of Trade, Peru expects to ink a 
final and more complete agreement with Thailand by mid-2006. 
End Summary. 
 
Details of the Agreement 
------------------------ 
 
2.  (U) President Alejandro Toledo and Thai Prime Minister 
Thaksin Shinawatra signed an "early harvest" trade pact on 
the fringes of the Asian-Pacific Economic Cooperation (APEC) 
forum on November 19, after more than a year of 
negotiations.  The trade accord is not a comprehensive 
document, only covering approximately 70 percent of the two 
countries' products.  As expected, sensitive agricultural 
products - rice, sugar and sugarcane, and some poultry and 
fish products - are excluded.  Although the agreement is 
limited, the GOP is heralding it as the first step toward a 
comprehensive Free Trade Agreement (FTA) with Thailand. 
 
3.  (SBU) According to Julio Chang, APEC Director at the 
Ministry of Trade, the GOP will continue negotiations with 
Thailand for a comprehensive FTA.  He expects negotiations 
will conclude by mid-2006, enabling the governments to sign 
a completed Peruvian-Thai FTA by August 2006.  Chang 
indicated his concern that discussions on sensitive 
agricultural products will decelerate FTA talks. 
 
Why Thailand? 
------------- 
 
4.  (SBU)  The GOP continues to push for closer economic 
ties with Asia; several Ministry of Trade officials have 
informed us that they believe the way into Asia - namely 
China - is through the smaller countries, such as Thailand 
and Singapore.  Thailand is Peru's largest trading partner 
in Southeast Asia; trade between the two countries was $69.1 
million in 2005 (through September). Peru exported over $30 
million in goods to Thailand in 2004, which accounted for 
0.2 percent of Peru's total exports.  Principal products 
included zinc, copper, and fishmeal.  Peru imported $9.8 
billion in goods in 2004, 0.4 percent of which came from 
Thailand.  Imports included light trucks, manufactured goods 
such as ovens, microwaves, and refrigerators, and polyester 
thread/fabric. 
 
5.  (SBU) Although the majority of sensitive items excluded 
from the FTA are agricultural products, the GOP continues to 
state that the FTA with Thailand will benefit Peru's 
agricultural sector.  Chang noted that exports of fruit 
(grapes), asparagus, onions, paprika, and coffee should 
increase under and FTA.  During the signing ceremony, 
President Toledo promised that the FTA would generate $500 
million in export earnings and generate 300,000 new jobs. 
 
Comment 
------- 
 
6.  (SBU) The GOP attempted to take center stage at the APEC 
Summit by signing the partial FTA with Thailand, only to be 
surpassed by the signing of the Chile-China FTA.  While the 
"early harvest" agreement marks Peru's first trade accord 
with an Asian country, we expect that Peru's defensive 
position on sensitive agricultural products may limit its 
ability to conclude a comprehensive agreement.  Peru's 
negotiators may want to focus on concluding negotiations on 
sensitive agricultural issues in the U.S.-Andean FTA before 
they shift their focus to Thailand. 
STRUBLE