VZCZCXRO2530
PP RUEHCHI RUEHDT RUEHHM
DE RUEHML #1221/01 0761030
ZNR UUUUU ZZH
P 171030Z MAR 06
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC PRIORITY 0042
INFO RUEHZS/ASEAN COLLECTIVE
RUEHGV/USMISSION GENEVA 2149
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 MANILA 001221 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR EAP/MTS 
STATE PASS TO USTR FOR KBHATIA, RDEHAAN, BWEISEL AND DKATZ 
USDOC FOR 4430/ITA/MAC/DBISBEE AND SBERLINGUETTE 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ETTC EINV KIPR RP
SUBJECT:  DEPUTY USTR BHATIA'S MEETINGS IN MANILA:  TRADE 
AND INDUSTRY SECRETARY FAVILA, MARCH 16 
 
REF: A)  05 Manila 05447 
 
     B)  06 Manila 01080 
     C)  06 Manila 01138 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION - 
PROTECT ACCORDINGLY 
 
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SUMMARY 
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¶1.  (SBU) In a March 16 meeting with Deputy USTR Karan 
Bhatia, Trade and Industry Secretary Peter Favila expressed 
appreciation for USTR's recognition of GRP progress on 
intellectual property rights (IPR) protection and the 
February announcement to move the Philippines from the 
Special 301 Priority Watch List to its Watch List.  Favila 
noted that IPR protection is seen as an important part of 
the overall bilateral trade relationship, and will encourage 
investment and economic growth.  Favila said the GRP is 
implementing interim measures to restore tax incentives to 
investors at the Clark Special Economic Zone (SEZ) while 
necessary legislation makes its way through Congress. 
Favila expressed support for the US position in the WTO Doha 
Round negotiations, especially with respect to agriculture, 
noting that President Arroyo has instructed key officials to 
support the US.  However, Favila added that tariff 
reductions in agriculture are meaningless without reducing 
trade distorting structures in the Philippine economy. 
Favila also mentioned the upcoming ASEAN Economic Ministers 
Retreat in Boracay on May 15 and expressed hope that USTR 
Ambassador Portman would attend. 
 
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PARTICIPANTS 
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¶2.  (U) --  USG: Deputy USTR Ambassador Karan Bhatia, 
Assistant USTR Barbara Weisel, Special Assistant Bob DeHaan, 
Charge d'Affaires Paul Jones, Econ Counselor Robert Ludan, 
and Economic Officer Shannon Cazeau. 
-- GRP:  Department of Trade and Industry (DTI) Secretary 
Peter Favila, Director Ramon Kabigting of the Bureau of 
International Trade Relations (BITR), Director General (DG) 
Adrian Cristobal of the Intellectual Property Office, and 
Assistant Chief Arlene Ligad of the Bilateral Relations 
Division, BITR. 
 
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INTELLECTUAL PROPERTY RIGHTS 
---------------------------- 
 
¶3.  (SBU) Ambassador Bhatia congratulated Secretary Favila 
and DG Cristobal for their work on improving the protection 
of intellectual property rights (IPR), which contributed to 
the decision to move the Philippines from USTR's Special 301 
Priority Watch List to the Watch List in February 2006. 
Bhatia emphasized that this had been a "tough decision" for 
USTR since it was not supported by many industry 
stakeholders; continued strong cooperation and progress on 
IPR initiatives will be all the more important in 2006. 
Secretary Favila said that both he and President Arroyo 
 
SIPDIS 
appreciated USTR's decision.  Following the announcement, 
President Arroyo hosted a congratulatory lunch for IPR 
officials.  At that time, she instructed the Philippine 
National Police (PNP) to double or triple its police forces 
involved in IPR, and she made it clear to the Secretary of 
Justice that she wants to see more convictions for IPR 
violators.  Favila added that he sees IPR as an important 
part of the overall bilateral trade relationship and 
recognizes that improved IPR protection can result in 
increased investment and greater economic growth. 
 
¶4.  (SBU) DG Cristobal said that draft legislation to 
implement the World Intellectual Property Office (WIPO) 
internet treaties is now in committee in the House.  Favila 
added that he has already talked to President Arroyo about 
the need to certify this bill as urgent at some point in the 
future. 
 
¶5.  (U) Bhatia raised concerns about draft legislation (ref 
A) that would reduce patent protection for pharmaceutical 
products, which may be inconsistent with the Agreement on 
Trade Related Aspects of Intellectual Property Rights 
 
MANILA 00001221  002 OF 003 
 
 
(TRIPs), noting that DTI had circulated a position paper 
supporting the bill (SB 2139).  Favila said that the GRP is 
willing to have a dialogue with the pharmaceutical industry, 
but that the end goal of lawmakers is to reduce the cost of 
medicines because people simply cannot afford to buy them. 
Cristobal asked that the Embassy arrange a forum for 
dialogue with industry.  Bhatia said that USTR would be 
happy to talk to industry representatives about such a 
dialogue, and noted that it would be better to have dialogue 
before the legislation is actually enacted. 
 
--------------------------- 
CLARK SPECIAL ECONOMIC ZONE 
--------------------------- 
 
¶6.  (SBU) With respect to restoring investment incentives 
for the Clark Special Economic Zone (SEZ) (ref B), Favila 
said that he had already worked with President Arroyo to 
issue an executive order temporarily to restore incentives, 
as an interim measure, while the necessary legislation is 
pending in Congress.  He added that Finance Secretary Teves 
has also been very supportive on this issue.  Soon after the 
Supreme Court issued its ruling, Favila was approached by 
various business people, particularly from the U.S., who 
asked him to write a letter to the Supreme Court to advise 
that he did not intend to implement the ruling.  Favila said 
that such a letter would have been in contempt of court and 
inappropriate.  He asked business representatives to trust 
the GRP to resolve the issue, while in the meantime he would 
explore "stop-gap" measures to address the interim period. 
 
----------------------------------- 
MINING AND THE USGS MINERALS SURVEY 
----------------------------------- 
 
¶7.  (U) Bhatia gave Favila a non-paper on the US Geological 
Survey's proposed minerals survey, which requires about $1 
million in funding from the GRP (ref C).  Favila said that 
he is hoping "to move fast on this one" and has made an 
announcement about the US offer to work with the Philippines 
on this project. 
 
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WTO DOHA ROUND 
-------------- 
 
¶8.  (SBU) Bhatia expressed concern for the GRP's slow 
movement on Doha Round initiatives, especially on 
agricultural market access.  Favila said that the GRP 
supports and has been consistently pushing for the "dual 
pillars of market access and export subsidies."  The GRP 
sees the Philippines' growth rate anchored to agricultural 
production and foreign investment and as such, this is where 
the GRP is focusing its attention, particularly with respect 
to agriculture.  Favila said that any further lowering of 
tariffs on domestic agriculture would be meaningless if 
there were not also reductions on trade distorting measures 
and structural problems that lessen the impact on prices. 
Favila added that President Arroyo had told him and other 
officials that they "ought to look at the U.S. position and 
support it."  Favila said that the GRP is taking a "general 
attitude of support" for the U.S. on agriculture. 
 
¶9.  (U) Bhatia said that agriculture is important but that 
the U.S. is also concerned about non-agricultural market 
access (NAMA).  Sectoral initiatives are promising, 
particularly for the Philippines in the areas of mining, 
tourism, and electronics.  Director Kabigting said that the 
GRP is happy to discuss these ideas, particularly with 
respect to electronics. 
 
-------------------------------- 
ASEAN ECONOMIC MINISTERS RETREAT 
-------------------------------- 
 
¶10.  (U) Favila mentioned the upcoming ASEAN Economic 
Ministers Retreat, which the Philippines is hosting on the 
island of Boracay (tentatively scheduled for May 15, 2006). 
Kabigting said that ASEAN is very excited about the 
possibility of USTR Ambassador Robert Portman attending, 
noting that ASEAN and the GRP would be very happy if true 
ministerial level could be achieved for the meeting.  Bhatia 
said that he would relay the message to Ambassador Portman. 
 
 
MANILA 00001221  003 OF 003 
 
 
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COMMENT 
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¶11.  (SBU) The overall tone of the meeting was very positive 
and cooperative, which highlights the GRP's continued 
willingness to work closely with the U.S. on bilateral trade 
issues.  Favila has not been very involved on IPR issues 
since the main responsible agency, the Intellectual Property 
Office, reports directly to the President, although DTI does 
have "dotted line" authority over IPR.  The February Watch 
List decision has generated much high-level attention to the 
issue, and Bhatia's meetings with Favila and other officials 
reinforced the importance of this issue to our trade agenda. 
This may translate into a more active approach at higher 
levels, which will help ensure forward movement on IPR 
initiatives. 
 
¶12.  (SBU) With respect to the Clark SEZ tax incentives, 
Favila is very supportive and is exploring creative short- 
term measures until Congress passes legislation.  However, 
investor patience is wearing thin and the uncertainty 
created by the lack of formal resolution may deter future 
investment.  Favila was enthusiastic about the USGS mining 
survey, although a funding commitment may have to await 
passage of the 2006 budget.  Favila's statements on the WTO 
Doha Round were encouraging, but GRP delegations at WTO are 
sometimes out of sync with senior officials in Manila.  The 
GRP has staunchly maintained that its applied tariff rates 
are already low and it does not intend to reduce them in the 
near term.  There is also little room for the GRP to 
maneuver on NAMA due to current constitutional limitations. 
 
¶13.  (U)  Ambassador Bhatia did not have an opportunity to 
clear this message. 
 
JONES