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UNCLAS SECTION 01 OF 02 MONTERREY 000096 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO USTR (KENT SHIGETOMI) 
 
E.O. 12958: N/A 
TAGS: ETRD ELTN ECON EAGR PGOV MX CA
SUBJECT: NAFTA DEPUTIES MEETING REVIEWS SMOOTH NAFTA IMPLEMENTATION, 
IRONS OUT ISSUES 
 
 
MONTERREY 00000096  001.2 OF 002 
 
 
¶1.  (SBU)  Summary.  At their annual meeting NAFTA deputy trade 
ministers discussed the proposed agenda for a NAFTA ministerial 
to be held later in 2008.  Agreed items include a trilateral 
workplan to enhance North American economic competitiveness, 
analysis to compare the NAFTA with more recent free trade 
agreements, and launch of four sectoral promotion programs and a 
trilateral website to promote the NAFTA.  The United States also 
held separate meetings with both Canada and Mexico to discuss 
bilateral issues such as cross border trucking, sugar, pork, and 
softwood lumber.  End Summary. 
 
Successful Trilateral Talks 
 
¶2.  (U)  Deputy trade ministers from the United States, Mexico 
and Canada meet each year  to discuss implementation of the 
NAFTA.  On February 18-19 in Monterrey, Mexico, Deputy United 
States Trade Representative John Veroneau met with his 
counterparts Marie-Lucie Morin, Canadian Deputy Minister for 
International Trade, and Beatriz Leycegui, Mexican Under 
Secretary for International Trade Negotiations. 
 
SIPDIS 
 
¶3.  (SBU)  The NAFTA deputies noted that the final elimination 
of NAFTA tariffs on January 1, 2008 had proceeded smoothly. 
Despite some internal political opposition and protest, Mexican 
Under Secretary Leycegui stated that the elimination of tariffs 
on the sensitive products (corn, sugar, and beans) had gone 
better than expected, and there were fewer social protests than 
when other tariffs were eliminated in 2003.  DUSTR Veroneau 
agreed that there were fewer problems than expected, and he 
emphasized the importance of regional integration.  He also 
discussed the administration's efforts to persuade Congress to 
approve the U.S.-Colombia free trade agreement (FTA).  Canadian 
Deputy Minister Morin noted that although NAFTA was 
controversial in the United States and Mexico, Canadians still 
strongly supported NAFTA.  Canada is focused on negotiating free 
trade agreements with additional Latin American countries, 
having just completed a Peru FTA.  Canada is also negotiating 
with Caricom  and the Dominican Republic.  Leycegui stated that 
Latin America was on the top of Mexican President Calderon's 
agenda, and Mexico hoped to integrate the various FTAs it had 
already negotiated. 
 
¶4.  (SBU)  The NAFTA deputies also discussed means to 
'modernize' or enhance NAFTA, including a work plan to enhance 
North American competitiveness.  The deputies first agreed to 
compare NAFTA with the most recent FTAs, such as Colombia and 
Peru for the United States, before the next NAFTA ministerial 
meeting.  This comparison could identify differences between 
NAFTA and more recent agreements. Moreover, Mexico will propose 
a chapter-by-chapter review of NAFTA to determine where NAFTA 
could be enhanced.  The Deputies also reviewed work to date on 
four 'sectoral initiatives' covering swine, chemical, consumer 
electronics and steel and noted more detailed workplans and 
organization structure should be completed before announcing 
them at the Ministerial. 
 
¶5.  (SBU)  At the August 2007 meeting of the Free Trade 
Commission, ministers agreed to develop a workplan to advance 
North American economic competitiveness.  At the deputies 
meeting, Canada discussed its draft work plan, which called for 
research in nine sectors: global value chains; foreign direct 
investment, capital mobility and financial services; global 
account imbalances, exchange rates and interest rates; labor; 
resources and energy; services,  borders; competition from other 
regions;  and the environment.  Canada proposed that in their 
next meeting the NAFTA trade ministers agree on joint economic 
research that would eventually lead to specific policy 
recommendations to promote competitiveness.  Mexico sounded 
interested, and stressed that policies to improve 
competitiveness were the most important part of the exercise. 
Leycegui also thought that the work plan could be a platform to 
create a framework of cooperation to advance regional 
integration.  DUSTR Veroneau agreed that it would be useful to 
review existing NAFTA  literature.  Veroneau noted that internal 
governmental policies, such as the education system and 
infrastructure, are the real keys to national competitiveness. 
Veroneau was also cautious because the proposed study would 
reach far beyond trade policy and questioned whether the study 
would extend beyond the NAFTA trade ministers' mandates. 
Assistant USTR for the Americas Everett Eissenstat pointed out 
that there are risks to amending NAFTA in the current political 
climate, since the unintended result could be more trade 
 
MONTERREY 00000096  002.2 OF 002 
 
 
restrictive.  After more discussion, Veroneau requested time for 
consultations and review, and the deputies agreed to discuss the 
proposal further in mid- March. 
 
¶6.  (U)  The NAFTA deputies agreed to develop a NAFTA website to 
communicate the benefits of NAFTA to the general public.  Canada 
will provide initial funding and host the website, which will 
include facts, statistics and success stories, and links to 
other sites.  The United States and Mexico agreed to provide 
funding to maintain the site. All three countries will provide 
the content.  The goal is to formally launch the site at the 
Ministerial meeting. 
 
¶7.  (U)  After the NAFTA deputies meeting, DUSTR Veroneau held a 
press roundtable, where he explained the benefits of NAFTA to 
newspaper and television reporters.  Veroneau's remarks were 
carried in the leading Monterrey newspaper El Norte, 
highlighting a study that without NAFTA, Mexican exports would 
have been 50% lower.  Veroneau emphasized how the United States 
expects Latin America to experience strong economic growth, and 
the bilateral FTAs with Peru and Colombia will assist the member 
countries' economies. 
 
Mexican Bilateral Issues 
 
¶8.  (SBU)  Cross-Border Trucking:  Mexican Under Secretary 
Leycegui thanked the United States for continued implementation 
of the cross border trucking pilot program, but she asked about 
the legal challenges.  DUSTR Veroneau noted that the 
administration has worked hard to maintain the pilot program. 
There could be a preliminary ruling in the lawsuit against the 
pilot program in the next two to three months, but USTR expects 
the administration to prevail in the case.  Both sides agreed 
that it would be helpful to have additional American trucking 
companies involved in the program to generate political support. 
 
 
¶9.  (SBU)  Mexican Pork Exports:  Leycegui is under pressure 
from her pork industry.  In December 2007 Mexico shut down 10 
border posts to U.S. pork exports (constituting 5-6% of U.S. 
exports).  Moreover, the prime Mexican pork producing states are 
prohibited from exporting to the United States until they are 
certified free of classical swine fever.  Leycegui pressed the 
U.S. to certify the Mexican pork areas as free of classical 
swine fever, in part to assist Mexico to open Asian markets. 
Veroneau offered to check with USDA on the status of 
certification.  Veroneau was also concerned about the closing of 
Mexican ports of entry for U.S. animal exports, particularly if 
Mexican blocks more ports or expands its blockage to additional 
products.  The United States and Mexico also agreed to encourage 
additional communication between their pork industries. 
 
¶10.  (SBU)  Sugar:  Leycegui and Veroneau both noted that 
although sugar is a very sensitive product, both governments 
held firm and implemented NAFTA to permit free trade.  However, 
Mexico is still interested in the establishment of a NAFTA 
Chapter 20 dispute settlement panel on sugar.  Veroneau pointed 
out that the NAFTA panel would be unable to grant any relief 
since the markets are now open and any relief could only be 
prospective. 
 
Canadian Bilateral Issue 
 
¶11.  (SBU)  Softwood Lumber:  Due to the downturn in the United 
States housing market, there is considerable closure and 
consolidation in the U.S. and Canadian lumber industries. 
Canadian Deputy Minister for International Trade Morin and DUSTR 
Veroneau first discussed issues with a data reconciliation 
project between Canada and U.S. Customs on the value and volume 
of Canadian lumber exports.  Veroneau also responded to Canada's 
questions about an upcoming U.S. import surveillance mechanism 
to monitor Canadian exports.  Although Canada was concerned, 
Veroneau explained that the monitoring project was permitted 
under the Softwood Lumber agreement, and it was necessary to 
maintain U.S. industry confidence. 
WILLIAMSON