US embassy cable - 04AMMAN2494

UNCLAS SECTION 01 OF 03 AMMAN 002494 
 
SIPDIS 
 
SENSITIVE 
 
USDOC 4520/ITA/MAC/ONE/WIEGLER 
STATE FOR EB/CBA 
PASS TO USTR - E. SAUMS 
 
E.O. 12958: N/A 
TAGS: ETRD, KTIA, PREL, ECON, JO 
SUBJECT: JORDAN TRADE MINISTRY LAYS OUT FTA TRADE ISSUES FOR 
JC 
 
 
SENSITIVE BUT UNCLASSIFIED.  PROTECT ACCORDINGLY.  FOR USG 
USE ONLY. NOT FOR RELEASE ON THE INTERNET. 
 
1.  (SBU)  SUMMARY:  In preparation for the U.S.-Jordan 
Joint Committee meeting, Ministry of Industry and Trade 
official Amer Hadidi March 25 reviewed key trade issues with 
the TIJARA coalition of trade and business groups and sought 
their views on issues for the JC.  Issues included 
accelerating tariff reductions, discussing WTO issues, 
reviewing guidelines on rules of origin, FTA implementation, 
renewed interest in a bilateral government procurement 
agreement, and seeking cumulation of content for products in 
the region, including with Iraq.  Also highlighted was the 
GOJ's concern about the end of the Multifiber Agreement 
(MFA) at the close of 2004, with the GOJ likely to seek 
additional U.S. assistance to counter anticipated ill 
effects.  END SUMMARY. 
 
GPA:  Renewed Interest 
---------------------- 
 
2.  (SBU)  Hadidi, a senior MOIT trade negotiator and 
Director of the Department of Industrial Development, led 
off with a proposed government procurement agreement (GPA). 
Jordan has already presented its initial entity offer in the 
WTO, he said.   But the process takes a long time, an 
average of at least two years.  A bilateral GPA could be the 
same as the WTO agreement or it could be "GPA plus," he 
said.  With the growing U.S.-Jordan partnership, a bilateral 
GPA was of great interest to Jordan, he continued, and the 
GOJ would be raising GPA at the JC.  (NOTE:  This is a 
renewed expression of interest that had flagged over the 
last six months.  Hadidi told Econoff that the GOJ is 
sensitive to the problems the leading Jordanian exporter of 
air conditioning units, Petra Engineering, is facing with 
"Buy America" legislation at the state and local levels in 
the United States.  A GPA would help secure millions in 
additional contracts for the firm, while opening Jordan's 
markets wider to U.S. firms. END NOTE.) 
 
3.  (SBU)  On acceleration of the tariff reductions, now 
scheduled in the FTA to be completed in 2010, Hadidi said 
the GOJ would raise its July 2003 request for zero tariffs 
on certain garments in HST codes 61, 62, and 63.   (NOTE: 
The Trade Ministry has just forwarded to the Cabinet a 
national strategy on the garment industry in Jordan in which 
accelerated reductions in clothing tariffs on the U.S. 
market under the FTA play a key role.  Details to come 
septel.   Hadidi said privately that DPM Halaiqa will speak 
to the Israelis as soon as possible about the possible 
effects of this move on QIZ trade, but had emphasized that 
the political situation between Jordan and Israel had not 
improved since FM Shalom's "postponed" visit in January. 
Halaiqa would arrange a private consultation with Israeli 
DPM Olmert, probably by phone, he said.   END NOTE.) 
 
Cumulation of Content With "Adjacent Nations" and Singapore 
--------------------------------------------- -------------- 
 
4.  (SBU)  The FTA rules of origin already mention 
"adjacent" nations as potentially being able to participate 
in cumulation of content.  Hadidi said the GOJ was very 
interested in pursuing content cumulation in Jordanian 
products that included Iraq.  The similar relationship with 
Israel in the Qualifying Industrial Zones (QIZs) -- whereby 
Jordan's 35 percent value added can be supplemented with 8 
percent Israeli content to secure both duty-free and quota- 
free access to the U.S. market -- was "very beneficial" to 
Jordan, he said to the closed assembly.  Jordan would also 
seek to cumulate content with Morocco, he added.  Jordan had 
recently concluded an AGADIR trade agreement with Tunisia, 
Egypt, and Morocco, he said, and wanted to propose something 
along similar lines.  Acknowledging that the rules of origin 
in the U.S.-Morocco FTA were "quite different," Hadidi said 
the GOJ would seek potential synergies and then try to work 
together with the U.S. to develop them into concrete trade 
proposals. 
 
5.  (SBU)  As Jordan expected to sign an FTA with Singapore 
in May, the GOJ wanted to explore bringing Singapore into 
the discussion on cumulation, especially on pharmaceutical 
R&D and in hi-tech areas, he said. 
 
6.  (SBU)  Pointing to yet another U.S. FTA -- this time 
with Chile -- Hadidi noted that under the trade agreement 
the U.S. gave full exemptions to Chile on all duties for 
three big garment categories starting immediately. 
Commenting that this was "slightly better" than Jordan's FTA 
with the U.S., he expressed the hope that Jordan-U.S. talks 
at the JC could "improve on the FTA."  (NOTE:  In March 9 
discussions with Econoff, Hadidi had said that this issue 
would only be raised if acceleration of tariff reductions 
were not approved.    He had acknowledged the different 
FTA's had different rules of origin and that Morocco had 
agreed to a metric volume cap.  END NOTE.)  Hadidi was not 
as enthusiastic about the connections under the proposed 
Middle East Free Trade Area (MEFTA), saying only that the 
GOJ would have to wait to see where the potential is. 
The End of the Multi-Fiber Agreement: A Hot Issue 
--------------------------------------------- ---- 
 
7.  (SBU)  Hadidi dwelled on the end of the MFA, which he 
said was a "hot issue" in Jordan.  (NOTE:  Jordan's USD 560 
million in QIZ exports to the U.S. last year were almost 
entirely in the garments sector.  END NOTE.)  Hadidi said 
that the QIZs had attracted some manufacturers who were 
interested only in Jordan's unique quota-free system, an 
advantage that would disappear with the end of the MFA on 
December 31.  He pointed to some China-based companies which 
had set up factories in Jordan only to fill the gaps in 
their large orders from U.S. buyers, having met quota 
ceilings in other countries where their factories are 
located.  The GOJ wanted to be proactive to address the 
looming problem of quota-free competition, Hadidi said.  A 
national strategy for the textiles and garment industry was 
being finalized that very day, he said, and would be 
submitted to the Prime Ministry for review by the GOJ 
cabinet.  He assured the group that the GOJ was keenly aware 
of the problem and wanted to establish close relations with 
the affected businesses. 
 
8.  (SBU)  Hadidi said that the GOJ would, during the June 
JC, ask the U.S. on what bases it would approach the end of 
the MFA.  Jordan was aware of certain safeguard measures and 
bilateral agreements with China that might limit the effects 
of the end of the MFA.  However, Hadidi asserted, the GOJ 
would ask the United States government for direct assistance 
to deal with competition from low-wage nations.  (NOTE: 
Privately, Hadidi asserted that A/USTR had assured the GOJ 
that the U.S. would be taking certain steps to counter any 
threats, such as from China.  END NOTE.) 
 
FTA Implementation:  Jordan "Lagging" 
------------------------------------- 
 
9.  (SBU)  In the JC, Jordan would raise implementation in 
three key areas:  IPR, labor, and customs.  Any deviation 
from mutual commitments would be reviewed carefully, he 
said.  Jordan would brief on the current status of their 
efforts on each issue, and seek USTR views on where it is 
lagging.  Hadidi acknowledged that the GOJ was behind in 
certain areas;  the GOJ was committed to serious discussion. 
 
Other Issues, Iraq 
------------------ 
 
10.  (SBU)  The GOJ would raise the WTO Doha round, 
technical assistance on behalf of Jordan's FDA and in other 
areas, and guidelines on rules of origin, which are 
mentioned in the text of the Free Trade Agreement but have 
not yet been developed, said Hadidi. 
 
11.  (SBU)  Noting that the reconstruction of Iraq offered a 
challenge and an opportunity for Iraq, Hadidi said the 
government's role was to facilitate access for businesses. 
He noted that Iraq would be raised at the JC, and again 
referred to possible trade arrangements.  He said that the 
objective of the discussions would be to work with the U.S. 
to facilitate both trade and access to prime contractors as 
sources of sub-contracts for Jordanian businesses. 
 
Private Sector Still Reviewing Issues 
------------------------------------- 
12.  (SBU)  The chairman of the Jordan American Business 
Association (JABA) focused on two key points of the JC: 
acceleration of tariff reductions, and the DAMAN pre- 
shipment inspection program.  One importer noted that 
telephone equipment was now included under electronics and 
would have to be pre-inspected before being exported to 
Jordan.  JABA would be assembling a group of importers 
affected by DAMAN in April.  Hadidi acknowledged that DAMAN, 
a difficult issue, was under review at the highest levels of 
the GOJ, and would probably come up in the context of the 
JC. (NOTE:  In a private conversation, Hadidi elaborated 
that the GOJ wanted to get rid of the ill effects of DAMAN 
toward the U.S., but was concerned about the WTO issue of 
discriminatory treatment toward other trading nations. END 
NOTE.) 
 
13.  (SBU)  Others aired their concerns about on-time 
delivery of goods and the poor response to the FTA 
opportunities by Jordanian businessmen, who may not know 
about the market-access advantages  offered by the FTA.  One 
member reported that an active subcommittee of concerned 
TIJARA members was grappling with an enhanced FTA awareness 
campaign, including more Arabic-text literature and 
websites. 
 
Gnehm