This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BOGOTA 002020 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PLS PASS USTR BHARMAN AND MLATTIMER; GENEVA FOR WTO 
MISSION 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ECON CO FTA
SUBJECT: TRADE MINISTER STATES COLOMBIA'S NEW MARKET BASED 
AGRICULTURAL IMPORT SYSTEM  WILL BE INCLUDED IN FTA 
NEGOTIATIONS 
 
Sensitive but unclassified -- please protect accordingly. 
 
¶1.   (SBU)  Summary. On February 16, 2004, the Colombian 
government implemented a new import system that provides 
tariff reductions for importers that purchase domestic 
production of corn (both white and yellow), grain sorghum, 
rice, soybeans and cotton.  The new system replaces the 
restrictive import licensing and domestic purchase 
requirements that were maintained for a wide range of 
agricultural products (including poultry, wheat, corn, 
barley, rice and oilseeds) under a WTO waiver that expired at 
the end of 2003.  Trade Minister Botero acknowledged at a 
February 23 meeting that the new system was not fully trade 
liberalizing, but emphasized that this was as far as the GOC 
could go at this time.  He added that the new system would be 
subject to discussion during the FTA negotiations. 
End Summary. 
 
¶2.    (SBU)  Trade Minister Botero met with Ambassador Wood 
on February 23 to discuss Colombia's new import system for 
six agricultural products (white and yellow corn, grain 
sorghum, rice, soybeans and cotton) formerly protected by 
restrictive import licensing requirements.  The voluntary 
system, implemented February 16, 2004, provides tariff 
reductions for importers that purchase local production and 
replaces a more restrictive system that required importers to 
demonstrate purchases of local production for a wide range of 
products (including poultry, wheat, corn, barley, rice and 
oilseeds) before they were authorized imports.  Colombia was 
obligated to dismantle the previous system when the waiver it 
had in the WTO expired on December 31, 2003.  Out-going Trade 
Vice Minister Claudia Uribe (soon to be Colombia's Ambassador 
to the WTO), Agriculture Vice Minister Andres Arias, Lead FTA 
Negotiator Amb. Hernando Jose Gomez and Ag negotiator Ricardo 
Torres also participated in the meeting.  AGATT and Econcouns 
accompanied the Ambassador. 
 
The New System 
-------------- 
 
¶3.  (SBU)  On February 16, the Ministry of Commerce Industry 
and Tourism published decree 430 establishing the Public 
Mechanism for Administration of Agricultural Quotas. As 
explained by Vice Ministers Uribe and Arias, the new, 
voluntary system will establish tariff-rate quotas (TRQ's) 
based on historical import levels for white and yellow corn, 
grain sorghum, soybeans, rice and cotton.  The TRQ levels 
will then be auctioned off at the existing Agricultural 
Commodities Board.  The bids must state the ratio of imports 
to domestic purchases that will be made by each importer. 
Those offering to purchase the most domestic production will 
win the right to purchase the imports bid at a reduced tariff 
rate, determined by a mathematical algorithm based on the 
ratio of domestic purchases to imports offered.  Imports 
beyond the TRQ are allowed, but face the general tariff rate 
(the Andean price band duty for corn, sorghum, and soybeans), 
and the MFN tariff rate for cotton (10 percent) and rice (80 
percent - the tariff was raised from 20 percent in December 
2003).  The Vice Ministers also presented copies of the new 
decree as well as a GOC analysis of the new program (faxed to 
the desk). 
 
GOC Rationale for New System 
---------------------------- 
 
¶4.  (SBU)  Minister Botero defended the new system as 
WTO-consistent because it eliminated previous absorption 
requirements and lowered the number of products benefited 
from 75 to 6.  He added that the new system was a transition 
to a more market-oriented approach, while acknowledging that 
the new system stopped short of free trade.  He then stated 
flatly that it was the best the GOC could do at this juncture 
given the political realities it faced.  Botero and Vice 
Minister Uribe both pointed out that the new system decreased 
the protection for some sectors, such as rice, where the 
previous combination of a small quota and restrictive import 
licensing requirements closed the sector to imports.  They 
also added that the products protected were the most 
politically sensitive in agriculture.  The new mechanism was 
a way to bring these protected sectors partially into the 
free market and thus prepare them for eventual free trade 
under an FTA. 
 
The system is open for negotiation under the FTA 
--------------------------------------------- --- 
 
¶5.  (SBU)  The Ambassador stated that we would review the new 
GOC policy, but noted that upon initial inspection it seemed 
that the GOC had created a new protective mechanism to 
replace a more restrictive one that had expired.  While 
noting that reducing the universe of items covered by the new 
system from 75 to 6 was indeed a positive step, the six 
remained protected and we had some questions about the WTO 
consistency of the new program.  The Ambassador added that 
taking such a measure, as well as increasing certain 
agricultural tariffs in late 2003, did not send a positive 
message about Colombia's willingness to open its markets on 
the eve of our FTA negotiations. 
 
¶6.  (SBU)  Minister Botero explained that he had requested 
this meeting to establish Colombia's good faith as a 
negotiating partner.  His intent was to explain the new 
system and highlight that it was a transitional measure aimed 
at introducing the market into previously protected areas. 
Botero repeated on several occasions that the new system was 
open to negotiation during FTA talks.  He added that the FTA 
talks would provide him the political cover to dismantle the 
protection that these sectors currently enjoyed.  In a 
negotiation, he would be able to open up these sectors by 
balancing those concessions with benefits gained.  Botero 
reiterated his personal commitment to liberalizing trade and 
underscored that the negotiating table would give him the 
political legitimacy to open up the Colombian economy. 
 
¶7.  (SBU)  Comment.  The political pressures Botero mentioned 
are real.  Both he and Vice Minister Uribe emphasized 
repeatedly that this was not a carefully planned move to 
raise protection on the eve of negotiations, but an effort to 
open up the heavily protected agricultural sector as much as 
the political atmosphere would bear.  The new system is, in 
fact, an improvement over the previous restrictive mechanism 
that expired.  Botero,s commitment to discuss this issue at 
the negotiating table is real, as is the assertion that 
negotiations provide him political cover to do so.  End 
Comment. 
WOOD