VZCZCXRO1357
RR RUEHCN RUEHGH RUEHVC
DE RUEHBJ #0684/01 0760856
ZNR UUUUU ZZH
R 170856Z MAR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 2912
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHSJ/AMEMBASSY SAN JOSE 0116
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 000684 
 
STATE PASS USTR 
DEPT FOR EEB/TPP/BA, EAP/CM, EAP/EP, WHA/CEN, WHA/EPSC 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL ETRD EINV CH CR
SUBJECT: CHINA CEMENTS TIES WITH COSTA RICA THROUGH TRADE 
 
REF: 08 SAN JOSE 969 
 
Summary 
------- 
 
¶1. (SBU) Costa Rica is reaping economic benefits from China for 
its 2007 decision to switch diplomatic recognition from Taipei to 
Beijing, including talks on a bilateral free trade agreement (FTA) 
announced during President Hu's 2008 visit and the planned 
construction of a new soccer stadium.  Costa Rica's trade with 
China is complementary, with microchips leading the way and hopes 
for burgeoning Chinese demand in high-end coffee.  Costa Rican 
diplomats believe the FTA will face little resistance from either 
congress or civil society, and will provide China a trade platform 
in the region.  End summary. 
 
Switching from Taipei to Beijing Opens Door to FTA 
--------------------------------------------- ----- 
 
¶2. (SBU) "Fundamental realism" drove the decision to switch 
diplomatic recognition from Taipei to Beijing, Costa Rican 
Commercial Counselor Alvaro Cedeno told EmbOffs January 22.  Such 
a shift opened the door to enhanced economic ties, most clearly in 
the form of the announcement of FTA negotiations during President 
Hu Jintao's November 2008 visit (reftel).  The GOCR wants to 
expand access to the Chinese market for primary Costa Rican 
exports including high-end coffee, agricultural products, IT 
products and medical equipment.  China is also building a PRC- 
funded, USD 75 million sports stadium in San Jose that will seat 
35,000 spectators.  An Anhui-based construction company has begun 
the work, and will provide the project's engineers and laborers, 
according to Costa Rican embassy officials. 
 
Costa Rica's Pro-trade Policy Gaining Support 
--------------------------------------------- - 
 
¶3. (SBU) The GOCR is pursuing an aggressive global trade agenda. 
A China FTA, if concluded, would add to Costa Rica's existing free 
trade partners, including the United States, Mexico and Central 
America, the Dominican Republic, Chile, Canada, South Korea and 
Singapore.  The scope of the China-Costa Rica FTA, much of will 
negotiated on the basis of the China-Peru FTA model, includes 
trade in goods (see para 2 above for sectors of particular 
interest to Costa Rica), rules of origin, customs procedures, 
sanitary and phyto-sanitary measures, technical barriers to trade, 
trade remedies, services, intellectual property rights, and 
dispute resolution.  The FTA will build on a rapidly growing trade 
relationship between the two countries, Cedeno said.  Six rounds 
of talks are planned, the first of which was held in January 2009. 
 
The second round is scheduled to take place in China April 14-17. 
With regard to eventual prospects for ratification, Costa Rican 
Consul Roberto Cespedes said the deal will likely face little 
opposition from Costa Rican policymakers and civil society, who 
have already been intensively exposed to the pro- and con- trade 
arguments as a result of the divisive debate over ratification of 
the U.S. free trade agreement with Central America and the 
Dominican Republic (CAFTA-DR).  He added that Chinese goods, food, 
and culture have been in Costa Rica for many years, further 
alleviating people's concerns about expanded bilateral trade. 
 
More Complementary Economies 
---------------------------- 
 
¶4. (SBU) The complementary nature of the Costa Rican and Chinese 
economies will facilitate ratification of the FTA, according to 
Costa Rican diplomats.  Unlike Mexico and other Central American 
countries that have lost substantial market share to Chinese 
products (particularly in the textile and apparel sectors) both at 
home and in third-country markets like the United States, Costa 
Rica has remained relatively unaffected by the huge surge in 
China's global exports.  Costa Rica's main export industries are 
in higher-value added sectors like medical devices and IT 
products, in which the Chinese compete less.  In fact, semi- 
conductor chips (most of which are made at the large Intel plant 
in Costa Rica) currently comprise around 80% of Costa Rica's 
exports to China.  Still, China's share of the electronics and IT 
sectors has grown rapidly, and our Costa Rican counterparts noted 
that Intel plans to establish a new chip plant in Dalian which 
could affect Costa Rica's main export.  Another product Costa Rica 
hopes to exploit is coffee, but Cespedes and Cedeno said it will 
take some time to foster Chinese consumers' appreciation for the 
premium-quality Arabica beans that Costa Rica specializes in 
growing.  With regard to another famous Costa Rican export, 
bananas, they said that it was simply not feasible to export such 
 
BEIJING 00000684  002 OF 002 
 
 
a perishable item all the way to China. 
 
Not Much FDI, but a Confucius Institute 
--------------------------------------- 
¶5. (SBU) In addition to expanded trade engagement, Cedeno said 
Costa Rica is interested in attracting Chinese tourism and 
investment.  Due to the country's small size and low profile in 
China, however, there has been very little of either to date, 
though the conclusion of an FTA may help change that.  Cespedes 
mentioned that China, together with the University of Costa Rica, 
recently inaugurated a Confucius Institute to promote Chinese 
culture. 
 
Comment 
------- 
 
¶6. (SBU) The tiny Costa Rican market offers relatively little to 
China in terms of export opportunities.  Though Beijing and Taipei 
seem to have an undeclared diplomatic ceasefire since the 
inauguration of Ma Ying-jeou under which the two sides are 
refraining from trying to flip recognition, it is likely no 
coincidence that China's Costa Rican charm offensive (Hu visit, 
FTA talks, soccer stadium, Confucius Institute) is aimed at the 
only Central American country with which Beijing has official 
ties. 
 
End comment. 
 
 
Piccuta