VZCZCXRO9283
OO RUEHCHI RUEHDT RUEHHM
DE RUEHML #1644/01 1380847
ZNR UUUUU ZZH
O 180847Z MAY 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6564
INFO RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUEHZS/ASEAN COLLECTIVE PRIORITY
RUEHBY/AMEMBASSY CANBERRA PRIORITY 9605
RUEHWL/AMEMBASSY WELLINGTON PRIORITY 3418

UNCLAS SECTION 01 OF 03 MANILA 001644 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EAP/MTS, EB/TPP/BTA, AND EB/IFD 
STATE PASS USTR BWEISEL AND DKATZ 
TREASURY FOR OASIA JEWELL 
USDOC FOR 4430/ITA/MAC/ASIA, PAC/KOREA AND SE ASIA/ASEAN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD WTRO KIPR
SUBJECT: Trade Council Reviews U.S.-Philippine Trade and Investment 
Issues 
 
REF: Manila 1370 
 
Summary 
------- 
 
¶1. (SBU) On May 9, the U.S. Philippine Trade and Investment Council 
met to review outstanding bilateral trade and investment issues.  In 
a very productive session, participants noted that a number of 
bilateral trade and investment irritants have been resolved.  Other 
potential irritants were identified by both sides and will be the 
subject of further discussion.  The head of the Philippine 
delegation expressed interest in moving toward negotiations on a 
U.S.-Philippine free trade agreement.  U.S. participants noted an 
apparent improvement in the quality of GRP interagency coordination. 
 End summary. 
 
Reviewing Trade and Investment Issues 
------------------------------------- 
 
¶2. (U) Established under the 1989 U.S.-Philippine Trade and 
Investment Framework Agreement, the TIC meets regularly to review 
outstanding bilateral trade and investment issues.  Assistant U.S. 
Trade Representative (USTR) Barbara Weisel and USTR Director for 
Southeast Asia and the Pacific David Katz led the U.S. delegation, 
with participation from the State Department, U.S. Agency for 
International Development (USAID), U.S. Department of Commerce, and 
U.S. Department of Agriculture.  Philippine Department of Trade and 
Industry (DTI) Undersecretary Thomas Aquino led the Philippine 
delegation, joined by representatives of 10 different agencies, 
including the Department of Finance, Bureau of Customs, and 
Department of Foreign Affairs.  Meetings of the TIC, which have 
taken place regularly since 2002, identify trade and investment 
issues pending between the United States and the Philippines and, as 
this meeting showed, often lead to their resolution. 
 
Taxes and Tariffs 
----------------- 
 
¶3. (SBU) Barbara Weisel raised the December 2006 Philippine decision 
to freeze all tariff rates for four years.  Weisel asked Aquino if 
this meant that the Philippines was no longer open to tariff 
reduction under the Doha Round.  Aquino replied that the freeze was 
intended to permit Philippine business to undertake medium-range 
planning uninterrupted by the uncertainty of shifting tariff rates, 
though he acknowledged that the move was "misinterpreted" by other 
governments.  He said it has no impact on Philippine positions in 
the Doha Round.  Weisel also raised the issue of Philippine excise 
taxes on wines and spirits, noting that higher rates are levied on 
alcoholic beverages of foreign origin.  Representatives of the 
Bureau of Internal Revenue replied that uniform rates were applied 
to beverages based upon their ingredients, not their origin.  Weisel 
replied that domestically produced ingredients were subjected to 
lighter taxation, which could lead the USG to take WTO action 
against the Philippines. 
 
¶4. (U) Aquino reported to the U.S. side that the five-point increase 
(from 30% to 35%) in the most favored nation tariff on imported 
automobiles enacted in 2005 was a temporary measure that expired in 
November, 2006.  It was not renewed. 
 
Agriculture 
----------- 
 
¶5. (SBU) The U.S. side noted the increased access the U.S. has 
provided for Philippine mangoes.  The U.S. Department of Agriculture 
continues to work with its GRP counterpart to resolved phytosanitary 
issues on mangoes. 
 
¶6. (SBU) The GRP's request for the extension of special treatment of 
rice until 2012 was granted by WTO on December 27, 2006. USTR noted 
that although  the USG has no objections on the Philippines 
extension of special treatment on rice, an exchange of letters was 
needed to formalize the bilateral agreement which contains GRP's 
specific concessions.  Aquino said the GRP has done the necessary 
domestic "leg work" to comply with its commitments.  An Executive 
Order is currently for the signature of the President, which would 
formally implement the Philippine concessions. 
 
¶7. (SBU) USTR inquired about the recent trip of Philippine officials 
to the US to observe US BSE mitigation measures and about the 
possibility of opening trade for bone-in beef and beef from animals 
above 30 months.  The Philippine Department of Agriculture(DA)said 
 
MANILA 00001644  002 OF 003 
 
 
although the Philippine team has generally given a favorable 
recommendation, it would wait for the final OIE determination of the 
U.S.BSE risk status during the General Assembly Meeting in May 2007 
before formally allowing US bone-in beef, but that it will still 
maintain the 30-month and below age requirement.  When pressed for a 
timeframe, the DA said that an Administrative Order would be 
immediately issued after the final recommendation of the OIE on May 
¶20. 
 
¶8. (SBU) The Philippine Bureau of Food and Drug (BFAD) reported that 
in September 2006, a draft Administrative Order (AO) on food 
labeling guidelines for foods derived from biotechnology had been 
prepared.  The draft AO, however, needed refinement and the 
Department of Health is currently making minor revisions.  The draft 
espouses a voluntary labeling regime, according to the BFAD. 
 
¶9. (SBU) Weisel stated that USTR continued to have concerns about 
the implementation of Milk Code regulations that would effectively 
ban the advertisement of breast-milk substitutes.  Aquino replied 
that a court-ordered suspension of the regulations remained in 
effect, and would be the subject of a June 19 hearing at the Supreme 
Court.  Weisel asked the GRP to consult the industry before moving 
to implement the regulations, and to ensure that regulations have a 
scientific basis. 
 
Intellectual Property Rights (IPR) 
---------------------------------- 
 
¶10. (SBU) Adrian Cristobal, Director General of the Intellectual 
Property Office (IPO), led the Philippine side during the 
discussions of IPR.  Cristobal noted the Philippines remained on the 
Watch List on the 2007 Special 301 Report, and expressed his hope 
the RP could exit the list altogether in the next few years.  He 
discussed the memorandum of agreement his office signed late last 
year with the U.S. Patent and Trademark Office as an important 
achievement.  Under its terms, two officials from his office will 
attend an eight-month training program at the USPTO headquarters 
this year.  He said first quarter 2007 seizures of pirated goods 
showed a dramatic rise over 2006, with Customs and the Philippine 
National Police nearly matching their previous yearly totals in only 
three months.  He referred to President Arroyo's November 2006 
memorandum on intellectual property, and said the IPO would build on 
it to enforce mall owner liability for IP infractions and to carry 
out a more intensive public awareness campaign highlighting the 
benefits of IPR enforcement. 
 
¶11. (SBU) Weisel and Katz introduced several issues in reply, 
including illegal book copying at Philippine universities and the 
theft of cable television and satellite signals.  Cristobal replied 
that 93 indictments have been filed with the Department of Justice 
against cable companies who were pirating signals, and that several 
raids have been conducted against copy shops around the campus of 
the University of the Philippines in Quezon City.  Customs 
Commissioner Napoleon Morales praised the work of his bureau's 
Intellectual Property Unit, remarking that it seized four inbound 
optical disk replicating machines in January, 2007.  Reynaldo Umali, 
Legal Director at Customs, added that the Bureau intended to make 
the IP unit permanent, and expand its staffing from the present 
seven officers to 30.  Weisel closed the discussion by calling for 
the newly-elected Philippine Congress to pass legislation 
incorporating the WIPO Internet Treaties into the Intellectual 
Property Code. 
 
¶12. (SBU) On the legislation pending in Congress on pharmaceutical 
patents (reftel), Cristobal indicated that the executive branch did 
not foresee or endorse the House of Representatives' amendments 
imposing price controls on prescription drugs.  He does not expect 
it to pass during the lame duck session in June. Weisel said that 
the USG continues to expect that any legislation be consistent with 
the RP's commitments under TRIPS, especially regarding new use 
patents and commercial use of patent holders' research data. 
 
¶13. (SBU) Weisel mentioned the lawsuit filed by the Federation of 
State Boards of Physical Therapy against private Philippine exam 
preparation schools that offer courses to students taking the U.S. 
physical therapy licensing exam.  The Board accuses the schools of 
hiring individuals to take the exam at its now-closed Guam testing 
center in order to memorize the questions for use in preparation 
classes, leading to a passing rate in Guam significantly above the 
statistical norm.  The Federation has sued for copyright 
infringement.  GRP representatives were generally skeptical of the 
lawsuit, with Aquino doubting that one could usefully memorize 
 
MANILA 00001644  003 OF 003 
 
 
questions with the detail needed for exam preparation.  Cristobal 
added that the Federation bore primary responsibility for exam 
security. 
 
Customs and Textiles 
-------------------- 
 
¶14. (SBU) Aquino reported that the process to set up the ASEAN 
Single Window of customs procedures is moving ahead on schedule, and 
the regime is to be implemented fully by 2012.  The Bureau of 
Customs, led by Deputy Commissioner Alex Arevalo, is working on 
National Single Window agreements with six separate government 
agencies, assisted by USAID.  USAID noted that its Bangkok office is 
presently undertaking a gap analysis that will measure the 
efficiency gains that could come from successful implementation of 
the Single Window. 
 
¶15. (SBU) According to Weisel, four cases of alleged illegal 
transshipment are being pursued under the framework under the 
memorandum of understanding (MOU) on textile transshipment that USTR 
and DTI signed in 2006.  She noted that the initial draft of 
implementing regulations issued by the Bureau of Customs appeared to 
contradict the MOU by mandating that textile plants selected for 
inspection be given advance notice.  Aquino responded that the draft 
regulations still must pass through an interagency process and 
promised provide the USG with a copy and take into account our 
comments. 
 
Chemical Standards Dialogue 
--------------------------- 
 
¶16. (SBU) Weisel proposed a video conference to allow experts to 
discuss USG concerns about market access for new chemicals.  Favila 
agreed. 
 
Free Trade Agreements 
--------------------- 
 
¶17. (SBU) Weisel reported that there are four bilateral free trade 
agreements pending ratification by the U.S. Congress (South Korea, 
Panama, Peru, Colombia).  She also said that within the region, 
negotiations with Malaysia continue while those with Thailand are 
suspended pending the restoration of a democratic government. 
Weisel described the status of negotiations between the 
Administration and Congress to secure an extension of Trade 
Promotion Authority (TPA). 
 
¶18. (SBU) Aquino said the GRP remains interested in negotiating a 
bilateral trade agreement with the United States.  Weisel responded 
that without TPA, the United States could not undertake any new 
negotiations.  When Aquino asked if a staged sectoral agreement was 
an option, Weisel responded that USTR followed a policy of 
negotiating comprehensive agreements that resolved all issues at 
once. 
 
¶19. (SBU) Weisel broadened the discussion to the WTO Doha Round. 
She lamented what the USG sees as a tendency among smaller nations 
to stand aside from negotiations, expecting the United States and 
the European Union to reach agreement on agriculture.  She urged the 
Philippines to play a leadership role to encourage a successful 
conclusion. 
 
¶20. (U) Assistant Secretary Ramon Kabigting of DTI concluded the 
discussion by reporting on the results of the ASEAN Summit of 
January 2007.  He focused on the agreement to expand the ASEAN-China 
free trade agreement to include services.  He also noted that there 
were talks on liberalizing trade in merchandise with Australia and 
New Zealand, and that APEC would begin multilateral negotiations 
with Japan and the European Union shortly. 
 
Conclusion and Comment 
---------------------- 
 
¶21. (SBU) TIC meetings provide a valuable opportunity for the two 
governments to talk through issues and appreciate each other's views 
about the trade and investment relationship.  In this meeting, 
participants were able to establish two irritants, the auto tariff 
increase and biotech labeling, had been resolved. 
Kenney