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Viewing cable 03BRASILIA2231, BRAZIL'S ARSLANIAN: FTAA COMPROMISE POSSIBLE

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Reference ID Created Released Classification Origin
03BRASILIA2231 2003-07-18 10:14 2011-07-11 00:00 CONFIDENTIAL Embassy Brasilia
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 002231 
 
SIPDIS 
 
USTR FOR SCRONIN, KLEZNY 
DEPT FOR E:ALARSON; WHA:CSTRUBLE, SPINKHAM; EB:BMANOGUE 
NSC FOR JOANNA WALLACE 
USDA FOR JBPENN 
 
E.O. 12958: DECL: 07/16/2013 
TAGS: ETRD BR FTAA
SUBJECT: BRAZIL'S ARSLANIAN: FTAA COMPROMISE POSSIBLE 
 
Classified By: Janice Fair, Economic Officer for Reason Section 1.5 (b) 
 and (d) 
 
1.  (C) Summary.  In an informal discussion with econoff on 
July 13, Regis Arslanian, the GOB's new director of FTAA and 
Mercosul-EU negotiations, acknowledged that Mercosul was 
disappointed with the reaction it received during the San 
Salvador TNC meeting to its proposal for restructuring the 
FTAA negotiations and suggested that Brazil could accept a 
compromise reformulation with the United States.  According 
to Arslanian, a bilateral structure for market access 
discussions is a key element for the GOB.  End Summary. 
 
2. (C) On July 13, while traveling back to Brasilia from the 
FTAA Trade Negotiating Committee (TNC) meeting in San 
Salvador (July 8-11), econoff discussed Mercosul's take on 
the meeting with Regis Percy Arslanian.  Arslanian has been 
advisor to Itamaraty Secretary-General Pinheiro Guimaraes, 
but told Econoff that he has been chosen to replace 
Ambassador Carlos Simas Magalhaesas as Head of the 
International Negotiations Department (FTAA and Mercosul-EU 
negotiations) under Ambassador Luiz Filipe Macedo Soares, who 
is Under Secretary for South America and Brazil's lead FTAA 
negotiator at the Vice-Minister level.  Earlier, econoff was 
told by Tovar da Silva Nunes, the GOB's FTAA Coordinator, 
that Simas had been sacked on July 4 for not being in-sync 
with Itamaraty FTAA policy directives. 
 
3. (C) According to Arslanian, Mercosul was extremely 
disappointed by the reaction it received at the TNC meeting 
to its three-track proposal for restructuring the FTAA. 
Roughly speaking, the three tracks refer to: Track 1- 
bilateral market access negotiations (industrial and 
agricultural goods, services, and investment) carried out 
under the FTAA umbrella; Track 2- minimal rules to support 
market access such as dispute settlement, rules of origin, 
civil society, institutional issues, Hemispheric Cooperation 
Program, etc.; and Track 3 - rules for services and 
investment, intellectual property, competition policy, market 
access and rules for government procurement, domestic 
support, and trade remedies, all of which would be considered 
only in the WTO. 
 
4. (C) Mercosul presented its proposal in the TNC plenary, 
but the bulk of discussion took place in an informal session 
during which most countries expressed concern with, and to a 
certain extent criticism of, Mercosul's intention to reduce 
the scope of the FTAA.  Arslanian said that the United States 
and other countries did not fully appreciate the intense 
domestic political and social pressure the GOB is under, and 
reiterated that it would be impossible for Brazil/Mercosul to 
complete the FTAA negotiations as currently structured. 
 
5. (C) While other countries have suggested that a 
comprehensive FTAA in both market access and rules is 
necessary to foster economic integration and prosperity in 
the region by encouraging strategic hemispheric partnerships 
and attracting foreign direct investment, Brazil sees its 
strategic needs differently.  Arslanian emphasized two 
points:  the importance of the U.S. market for Brazilian 
goods; and the importance of bilateral market access 
negotiations as envisioned in Mercosul's three-track 
proposal. 
 
6.  (C) Arslanian stressed the GOB's interest in negotiating 
access to the U.S. market within the FTAA.  However, he 
registered disbelief that the U.S. is serious about giving 
duty-free treatment to certain sensitive products, citing 
orange juice and steel, in particular.  Econoff rebutted that 
in the initial U.S. goods offer every tariff item was within 
one of the four product baskets, each of which is slated to 
go to zero-duty at some time, but pointed out that with 
Mercosul's proposed wholesale removal of a number of issues 
of interest to the United States from the FTAA, the U.S. 
would undoubtedly have difficulty justifying such a 
comprehensive market opening.  In response, Arslanian said 
Mercosul would be willing to negotiate market access in 
financial services and telecommunications with the United 
States as trade-offs.  Pressed on whether Mercosul would 
really be offering anything new in these areas, he answered 
emphatically in the affirmative. 
 
7. (C) In explaining Brazil's rationale for seeking a 
bilateral negotiating structure, Arslanian said that Brazil 
believes other countries in the region (Central Americans, 
etc.) are willing to give away much more than Brazil is in 
market access for services and investment to gain an opening 
of the U.S. goods market.   He reiterated several times that 
Brazil will not "level" its interests to those of other 
countries and would not accept a structure that would force 
Brazil to make concessions based on other countries' 
willingness to "give away the store."  Echoing comments made 
by Mercosul's Uruguayan lead during the TNC, Arslanian also 
said that a bilateral process could focus the negotiation 
more specifically on the interests of the parties involved 
and make it easier to identify for political leaders and 
society at large the trade-offs that are made to reach an 
agreement.  He claimed that Mercosul will not submit any 
offers in services, investment and government procurement 
until a bilateral negotiating structure is approved. 
 
8. (C) Arslanian asked why the U.S. delegation to the TNC did 
not discuss a baseline agreement approach that he believed 
the USG had contemplated.  Econoff responded simply that the 
USG did not have an official proposal to put forward. 
Arslanian bemoaned the lack of such a discussion, opining 
that between the three-track proposal and a baseline 
agreement approach, a compromise could probably be reached, 
as long as it includes a bilateral market access structure. 
He intimidated that Mercosul could agree to include 
government procurement market access under the FTAA and that 
the negotiating forum for rules in services and investment, 
and IPR could be revisited.  Arslanian also wondered aloud 
about the possibility of a two-stage process, with deepening 
(read as rules) coming in stage two, but was silent when 
asked by econoff what guarantee the U.S. would have that 
Brazil would undertake stage two negotiations if it obtained 
the market access for goods that it wanted in stage one. 
 
9. (C) Comment:  Arslanian seemed eager to encourage a dialog 
with the United States to develop a vision for the FTAA that 
would satisfy both countries' needs.  Given his past position 
in the Itamaraty Secretary-General's Office and his new 
position specifically overseeing the FTAA negotiations, we 
are inclined to view his statements on GOB priorities and 
possible flexibilities as credible.  See septel for Mission's 
overview and analysis of factors affecting the GOB's latest 
formulation of its FTAA policy.  End Comment. 
HRINAK