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Viewing cable 05SANJOSE2231, COSTA RICA: THE COMMISSION OF EMINENT PERSONS
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UNCLAS SECTION 01 OF 04 SAN JOSE 002231
SIPDIS
SENSITIVE
WHA/CEN
EB FOR WCRAFT, BLAMPRON
E FOR DEDWARDS
WHA/EPSC FOR KURS, LGUMBINER
STATE PASS TO USTR FOR RVARGO, NMOORJANI, AMALITO
E.O. 12958: N/A
TAGS: ETRD ECPS ECON PREL PGOV SOCI CS
SUBJECT: COSTA RICA: THE COMMISSION OF EMINENT PERSONS
REPORT
REF: SAN JOSE 2202
¶1. (SBU) Summary: On September 20 the presidential-appointed
Commission of Eminent Persons (the Notables) exited the
stage in a notable way; after 60 days of analyzing CAFTA-DR,
they made no judgment about whether or not the treaty should
be approved. The Commission, however, appeared to be
unconvinced of the intrinsic merits of CAFTA-DR, stating that
the agreement will only be positive if the country is able to
make profound structural changes in political, social,
and administrative areas. The initial reaction in the press
is well summarized by the headline in La Prensa Libre:
Doubts About CAFTA-DR Continue. Our pro-CAFTA-DR
contacts were disappointed. End Summary.
-------------------
Decidedly Undecided
-------------------
¶2. (SBU) The commission appeared to be unconvinced of the
merits of CAFTA-DR stating that the agreement will only be
positive if the country is able to make profound
structural changes in political, social, and administrative
areas. The 69-page report is emphatic on the need for the
GOCR to bring to fruition a strong complementary agenda and
CAFTA-DR-implementing legislation. (Note: Doing this is no
small task as it will require many legislative projects
(time) and resources (human and money).
¶3. (SBU) Costa Rican themes of solidarity, universality, and
egalitarianism are woven throughout the report. The document
is also heavy on reminding the reader that Costa Rica is NOT
a developed country and should not be held to higher
standards in certain areas such as intellectual property
rights (IPR). The asymmetry between the economies of the
U.S. and Costa Rica thus is also a theme and is used to
strengthen the argument that Costa Rica needs to make
profound changes in order to prosper under CAFTA-DR.
¶4. (SBU) The report, with a few exceptions, gives equal time
to both sides and resolves little. However, the report does
give clear guidance on the same three points that Antillon
covered in the news conference (reftel), namely:
- It doesn,t matter if CAFTA-DR is referred to as a treaty
or an agreement, the results are the same. Additionally, as
one of the Commission members stated in the September 20
press conference, it is clear that the U.S. Congress,s
approval of the CAFTA-DR implementing legislation meets the
Vienna Convention requirements regarding international
agreements.
- Costa Rica is able to withdraw from the agreement if it
desires.
- Renegotiation is not possible since several countries have
already approved CAFTA-DR. However, the report does mention
two possible means to effect changes after implementing
CAFTA-DR -- by amendment via Article 22.2 of CAFTA-DR and the
other utilizing Article 31 of the Vienna Convention.
This last point plays into the hands of presidential
candidate Otton Solis by creating a false hope that the Costa
Rican Legislative Assembly can make unilateral
interpretations on some of its commitments that could correct
errors made by the negotiators.
¶5. (SBU) A good example of the report,s ambiguity is when
it recognizes the importance of trade in attracting foreign
direct investment (FDI) from the U.S. but also draws
attention to the importance of production for local use. The
report questions how many jobs U.S. FDI actually sustains.
The report clearly points out the advantages of access to the
world,s largest market but fears the crushing of the small
Costa Rican farmer by U.S.-subsidized products.
¶6. (SBU) The report states that CAFTA-DR proposes that
Costa Rica adopt obligations in the areas of intellectual
property rights (IPR), services, and investments that are
only now being reviewed and renegotiated at the World Trade
Organization (WTO), and that were the very contentious
disagreements during the talks of the Free Trade Area of the
Americas (FTAA). The report notes that requirements made
under CAFTA-DR, as compared to those proposed in the FTAA,
are more onerous and says that until these issues have been
resolved on a more global scale that they should not be
imposed by the U.S. in CAFTA-DR (IPR is the clearest
example).
¶7. (SBU) The report also states that the reason the CAFTA-DR
debate has become so polarized is the perception that the
negotiations proceeded without proper political control over
the Costa Rican negotiators. Thus, according to the report,
At the end of the negotiations, only two options were
presented to the President ) to either agree to what they
had already negotiated or not be part of the agreement at
all, to either send the document they negotiated to the
Assembly or not, and to eventually either approve their
document or not. That is to say that the opponents to
CAFTA-DR feel that there was no possibility to introduce
modifications to what was negotiated by the Costa Rican
negotiating team. Faced with this choice, it is logical that
the citizenry and several business sectors tended to align
themselves as either in favor of or against CAFTA-DR.
-----------
Asymmetries
-----------
¶8. (SBU) The Commission,s report points out that the
population of Central American countries (CA) is only 11.7%
that of the U.S.; that CA GDP is 0.5% of that of the U.S.,
and that Agriculture in CA is 17% of GDP and only 2% in the
U.S., etc. The Commission report addressed asymmetries in
the negotiations and in the agreement. It notes that Costa
Rica was forced to cave on all of its non-negotiable
items but that the U.S. did not cede on any of its
non-negotiable items. For instance, the report points
out that the U.S. was successful in keeping agricultural
subsidies out of the negotiations, while Costa Rica was not
successful in excluding the opening of the telecommunications
or insurance markets.
¶9. (SBU) The report states that implementing CAFTA-DR in the
U.S. requires no substantial institutional changes, while
Costa Rica must make significant changes to implement the
agreement. In answering its own question, Does CAFTA-DR
provide satisfactory safeguards or compensation to offset
this asymmetry?, the report states that CAFTA-DR does not
include any program, mechanism, or cooperation resources for
Costa Rica from the U.S. (Note: The report draws a
comparison to the compensation given to the poorer countries
adhering to the EU.)
¶10. (SBU) The Commission,s report is heavy on the need to
not just talk about things that should be done to prepare
for CAFTA-DR, but to take action. If CAFTA-DR doesn,t
address the problem of asymmetries and its possible benefits
and few disadvantages depend on factors which are not in
CAFTA-DR, the country should prepare itself to enter the game
under its rules. Consequently, the best thing to do is to
take responsible political action to start your engines,
steer a straight course, and determine where we want to go,
what type and how much cargo to carry.
------------------------
SMALL AND MEDIUM FARMERS
------------------------
¶11. (SBU) The report recognizes the unique agricultural
history of Costa Rica and the still-strong connection to
agriculture, even among those who live in San Jose. The
negotiation of CAFTA-DR in this arena does not cause major
changes in the conditions of existing market access because
there is already access to the markets. The Commission
also states that, In this particular aspect of the treaty,
Costa Rica is strong because its exports are essentially
tropical and are not produced in the U.S. They recognize
that two sensitive products, onions and potatoes, were given
special protections by allowing only a small amount of these
products to enter from the U.S. as requested by Costa Rican
negotiators.
¶12. (SBU) One atypically positive view of U.S. subsidies was
given in the report: U.S. subsidies can be seen as
positive for Costa Rica as much as for consumers as for
companies that use these subsidized goods in their production
processes (such as wheat, yellow corn and soy), because these
crops are not produced in Costa Rica and could then be
acquired at better prices in the U.S. market.
----------------------------
INTELLECTUAL PROPERTY RIGHTS
----------------------------
¶13. (SBU) The report repeats the claims of CAFTA-DR
opponents that the U.S. obtained IPR protections in CAFTA-DR
that exceed international norms: The chapter on IPR is a
clear example of following U.S. policy. The U.S. is
implementing requirements via bilateral trade agreements that
are currently being discussed contentiously at the WTO.
Proceeding this way, the U.S. can gain more concessions in
bilateral trade agreements than it could on a multilateral
scale.
¶14. (SBU) The Commission uses the following statistics to
shore up their contention that Costa Rica is not a producer
of intellectual property and therefore will benefit less from
the IPR requirements of CAFTA-DR: The negotiation of this
chapter again shows important asymmetries. The number of
patents awarded in Costa Rica to citizens in 2002, 2003, and
2004 was respectively, 4, 3, and 2; While the U.S. awarded
84,271 patents in 2004. The report contends that this
statistic along with the fact that the national investment in
science and technology is only 0.4% of GDP in science and
technology reveals that Costa Rica, at this time, is far from
being a producer of patents and is more of a consumer and
user of foreign innovation.
------------------
TELECOMMUNICATIONS
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¶15. (SBU) Universality and solidarity are oft-used words in
this section. The report basically says that there are two
steps that must be taken as part of implementation of
CAFTA-DR: (1) strengthen the Costa Rican Institute of
Electricity (ICE), and (2) create a strong regulatory
authority to ensure universality and solidarity (meaning
equality in the provision of telecommunications services).
(Note: Consistent with the Commission,s stance on the
choosing of fixed dates for implementation of various aspects
of CAFTA-DR conditions, the Commission takes issue with the
requirement for the GOCR to pass a law to strengthen ICE by
December 31, 2004. The report states that this
implementation date was strangely established. End Note)
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INSURANCE
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¶16. (SBU) With regard to the Costa Rican insurance monopoly,
the report notes: The timeframes established are short,
and if we add to that fact that we are reaching the
implementation dates quickly for Costa Rica, the Commission
feels that the pressure is strong and inconvenient. The
Commission also recognizes the need to have a strong
regulator in the insurance industry.
¶17. (SBU) The report also expressed the Commission,s worry
that an evaluation of the financial impacts of opening the
insurance market on INS was not completed. Evaluations were
also not completed regarding the impacts on employment in
this sector, on foreign direct investment, or on the economy
as a whole.
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COMPLEMENTARY AND IMPLEMENTATION AGENDAS
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¶18. (SBU) The Commission said that CAFTA-DR has already had
effects in Costa Rica and that it has precipitated the
discussion and debate of essential national agendas to
prepare for a future with or without CAFTA-DR.
¶19. (U) According to the report, the implementation agenda
should include: (1) the Telecommunications Act which should
meet the requirements of CAFTA-DR in the gradual opening of
telecommunications services, (2) the proposed law to
strengthen the Costa Rican Institute of Electricity (ICE)
which should give ICE the autonomy to operate in a
deregulated telecommunications industry, (3) the insurance
industry law which will comply with the requirements of
CAFTA-DR regarding the gradual opening of the insurance
market, and (4) other bills associated with increasing trade
capacity, e.g., to improve customs capabilities. The
Commission reiterated its worry about the failure of the
Mixed Commission to Strengthen ICE.
¶20. (U) The Commission recommends that the complementary
agenda should, at the very least, include projects in the
following additional areas:
-education, emphasizing science, technology, and languages,
creativity, culture, and ethics;
-strengthening of small and medium businesses;
-improving infrastructure;
-strengthening the office of intellectual property rights
protection and developing capabilities in this area;
-creation of an office of trade agreement matters;
-administrative political reform, modernizing the government
and simplifying processes; and
-improvement, rationalizing, and harmonization of laws.
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THE REPORT,S FINAL CONSIDERATIONS
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¶21. (U) The report,s final considerations section was a
general summary of the Commission,s work. It included a
fire hydrant metaphor that was repeated by Commission
Chairman Chang during the September 20 press conference in
which he stated that implementing CAFTA-DR as negotiated
would be like connecting a garden house to the overpowering
flow of an open fire hydrant. The report states that It
is not that the hydrant is bad. In fact the opposite is true
) it supplies ample and much needed water ) but we should
find a bigger hose and include regulating valves to ensure
the best use of the source. The complementary agenda
proposed by this Commission is the big fire hose and valves.
The agenda currently proposed by the GOCR is the garden hose.
It is in the complementary agenda that the Commission has
found one of the greatest deficiencies and the need for
urgent action.
¶22. (U) In its report, the Commission recommended caution to
the decision-makers and warned that a major diversion of
trade may occur because of the preferences given by the U.S.
to the countries that have already approved CAFTA-DR, and
because there is no certainty that the current benefits that
Costa Rica realizes through the unilateral Caribbean Basin
Initiative (CBI) will continue if Costa Rica does not approve
CAFTA-DR.
¶23. (U) The Commission writes that not approving CAFTA-DR
would result in diminished trade with the U.S., diminished
FDI, loss of confidence by third countries who would not
invest in Costa Rica except to export to the U.S., and the
U.S. poaching the Central American market from Costa Rica.
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COMMENT
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¶24. (SBU) The members of the Commission of Eminent Persons
managed to deliver a report that pleased almost no one and
resolved absolutely nothing. It is hard to say what it will
contribute to the ratification debate or whether it will
influence the President,s decision to send the treaty to the
Legislative Assembly. The Commission members studiously
tried to appear even-handed but could not resist casting
Costa Rica/Central America throughout the Report as a David
up against a U.S. Goliath, but without a sling to defend
itself. Perhaps the most helpful observation by the
Commission members was the acknowledgment that the
consequences of not approving the treaty, which they admit
can no longer be changed, would be harmful for Costa Rica
economically.
FRISBIE