VZCZCXRO5806
PP RUEHAG RUEHAP RUEHCD RUEHDE RUEHDF RUEHGD RUEHGI RUEHHM RUEHHO
RUEHLZ RUEHMA RUEHMC RUEHMR RUEHNG RUEHNL RUEHPA RUEHPB RUEHRD RUEHRN
RUEHRS RUEHTM
DE RUEHME #1484/01 0851810
ZNR UUUUU ZZH
P 261810Z MAR 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 5953
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0400
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 0949

UNCLAS SECTION 01 OF 03 MEXICO 001484 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/TPP/MTA 
STATE PASS USTR FOR DWOSKIN/ROHDE/MELLE/SHIGETOMI 
USDA FOR FAS/ONA 
 
E.O. 12958: N/A 
TAGS: ETRD WTRO EAGR KTEX ELAB ENRG MX CN
SUBJECT: LAMY AND SOJO ON THE DOHA ROUND AND THE 
TRADE-DEVELOPMENT NEXUS 
 
 
Summary 
------- 
 
¶1. WTO Director General Lamy and Mexico's Economy Secretary 
spent two hours discussing the status of the Doha round of 
trade negotiations and the stake that Mexico and other 
developing economies have in its successful conclusion.  Lamy 
said the three main challenges are getting the U.S. to offer 
deeper cuts in agricultural subsidies, getting the Europeans, 
Japanese, and Koreans to slash their agricultural tariffs, 
and getting key developing countries like India and Argentina 
to reduce tariffs on industrial goods.  The two fielded a 
number of questions from the audience on China's role in 
global commerce, the impact of rising agricultural commodity 
prices, how best to address trade in textiles, and the 
advisability of closer coordination between the various 
international economic institutions.  End summary. 
 
Lamy - A Deal is Close, But Failure a Real Possibility 
--------------------------------------------- --------- 
 
¶2. At a March 23 forum hosted by Mexico's Secretariat of 
Economy, Pascal Lamy (WTO DG) and Eduardo Sojo (Secretary of 
Economy) gave presentations on the state of play in the Doha 
talks and why a successful outcome is important to Mexico and 
other developing economies.  On the former topic, Lamy said a 
deal was within reach but would not be easy.  He said there 
are three key ingredients to reaching a deal: 1) deeper cuts 
in U.S. agricultural subsidies, with other countries 
following the U.S. lead; 2) deeper cuts in EU, Japanese, and 
Korea agricultural tariffs, with developing countries 
following their lead (and refraining from abuse of the 
'sensitive products' category to avoid painful concessions); 
and 3) real reductions in industrial tariffs by developing 
countries like India and Argentina.  In addition to these 
three, Lamy also noted that a number of countries, including 
Mexico, had yet to table revised and improved services 
offers.  Aside from calling out Mexico on its lack of a new 
services offer, Lamy praised the country as one of those that 
could be depended on for support in pushing Doha to the 
finish line.  (Note: Lamy is in the middle of a road trip to 
rally global support for the round.  He arrived in Mexico 
from Indonesia and is headed for Africa next.  End note.)  In 
response to a question from the audience, he said that he 
believed there was political will in the U.S. to make the 
needed concessions (on agricultural subsidies and additional 
discipline for anti-dumping measures), and that there was a 
reasonable chance that the U.S. Congress would approve a 
deal, since in return America would get substantially more 
market access for its services and agricultural and 
industrial goods in large and growing developing economies 
like India, China, and Brazil.  Perhaps even more important 
to the U.S., he opined, was our long-standing strategic 
interest in a strong global trade system.  He warned, 
however, that the chances for success could drop 
significantly if the negotiations were not concluded before 
the expiration of the President's Trade Promotion Authority 
this summer. 
 
Sojo -- More World in Mexico, More Mexico in the World 
--------------------------------------------- --------- 
 
¶3. Sojo recited the great benefits that have accrued to 
Mexico from its two-decades-long policy of market opening, 
and said President Calderon was committed to further 
integration into the global economy under the slogan found in 
the para header above.  He pledged Mexico's support for a 
successful conclusion to the round, saying that a collapse 
would lead to more protectionism worldwide.  Success, on the 
other hand, would help achieve the goals of not just Mexico, 
but of most developing countries, including gaining 
additional access to fellow developing country markets and 
leveling the playing field with the advanced economies in 
terms of agricultural subsidies and trade remedies.  Lamy 
amplified on this point, noting that even a country with as 
many free trade agreements as Mexico had very little leverage 
over its trade partners on these sorts of issues, and that 
the multilateral venue was really the only way to achieve 
real progress on them. 
 
Trade Necessary but Insufficient to Tackle Poverty 
 
MEXICO 00001484  002 OF 003 
 
 
--------------------------------------------- ---- 
 
¶4. In response to a question from the audience, Lamy gave an 
eloquent description of the three necessary conditions for 
combating poverty in developing countries.  Of the three, the 
WTO plays the lead role on the first, a supporting role on 
the second, and no role on the third.  1) Economies must open 
up.  We know that economies that close themselves off see 
increased poverty, and we know that greater openness at least 
provides the opportunity for greater wealth.  The WTO was 
established precisely to open up the economies of its 
members, thus its lead role on working to achieve this 
condition.  2) Economies must have the capacity to benefit 
from the opportunities presented by greater openness. 
Without the ability to meet health, security, and safety 
standards of target markets, without the infrastructure 
necessary to move products and people across its borders, a 
country will profit little from openness.  Lamy said that if 
the Doha round is successful, trade capacity building for 
developed countries will be a major component of the WTO's 
future responsibilities.  3) Only domestic political choices 
can assure that additional wealth actually makes its way into 
the pockets of the poor, making this condition the 
responibility of each country's government.  Picking up on 
this point, Sojo said that Mexico is a country in which the 
third condition has not yet been met.  He said the Calderon 
administration was cognizant of the country's huge 
disparities in wealth and the consequent need to democratize 
economic opportunity.  He said the government would intervene 
selectively to ensure that small and medium-sized 
enterprises, poorer regions of the country, and other 
marginalized groups would be able to plug into the national 
and global economies.  Along these same lines, the private 
sector participant on the panel -- Cesar de Anda, head of 
Mexico's Poultry Association -- emphasized that Mexico needed 
to undertake deep structural reforms to prepare itself to 
compete internationally, especially if the Doha talks result 
in a new deal that further lowers world trade barriers. 
 
China, Corn, Textiles and ILO 
----------------------------- 
 
¶5. Several questions from the audience asked about dealing 
with the commercial rise of China, in particular its 
compliance (or lack thereof) with its WTO obligations and its 
use of allegedly unfair trade practices.  Lamy replied that 
China did not have a perfect compliance record, and that it 
was prone at times to "innovative" interpretations of its 
obligations, but that in general it had implemented its 
commitments in good faith.  With regard to unfair trade 
practices, Lamy said the whole point of getting China into 
the WTO (for which Beijing paid a high price in terms of 
market access) was to subject it to the same enforceable 
rules that all other WTO members are supposed to abide by. 
Sojo pointed out that Mexico has recently joined a case 
against China for fiscal incentives and domestic content 
rules that Mexico feels unfairly discriminate against foreign 
products. 
 
¶6. One questioner asked whether rising prices for 
agricultural commodities like corn might disrupt 
international trade.  Lamy responded that market 
circumstances sometimes lead to unpleasant situations, but 
that distortions always make them even worse, referring 
specifically to U.S. subsidies for corn production, U.S. 
tariffs on ethanol imports, and Mexican restrictions on corn 
imports.  Sojo pointed out that high agricultural commodity 
prices might make it politically easier for the U.S. to make 
Doha concessions on cutting its domestic farm support 
payments.  De Anda added that these high prices were raising 
costs in the milk, meat, and egg industries, and were yet 
another reason why Mexico's agriculture sector needed to 
upgrade its technological and productive capacities. 
 
¶7. In response to a suggestion that textiles and apparel be 
dealt with separately from other industrial goods (implying a 
preference for slower tariff reductions for these products), 
Lamy noted that countries like Mexico, Turkey, and Morocco, 
which benefit from and want to maintain preferential tariff 
treatment in the U.S. and EU markets, have requested a review 
of the 2005 elimination of global quotas on textiles and 
 
MEXICO 00001484  003 OF 003 
 
 
clothing, which forced them to compete somewhat more directly 
with the Chinese, Indians, and Bangladeshis.  However, he 
pointed out that integrating the rag trade into the 
mainstream of global commerce was exactly the result that 
developing countries had sought and won in the Uruguay Round. 
 He warned that countries with a competitive advantage in 
this industry, like Pakistan, would be hardpressed to sign on 
to a Doha agreement that would deny them access in their most 
promising market sector. 
 
¶8. Finally, asked about coordination (or lack thereof) among 
the separate international economic institutions, Lamy said 
it was important that these organizations respect the 
boundaries between their respective areas of competency. 
That said, he highlighted a recent study that the WTO had 
co-sponsored with the International Labor Organization on the 
effect of trade liberalization on job markets, two issues 
that are clearly and closely linked in the public's mind, 
regardless of the bureaucratic division of labor in Geneva. 
He said there was room for improved coordination among all 
international institutions. 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity 
GARZA