US embassy cable - 04AMMAN4133

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 004133 
 
SIPDIS 
 
USDOC 4520/ITA/MAC/OME/CLOUSTAUNAU 
STATE FOR EB/CBA 
PASS TO USTR--E. SAUMS 
 
E.O. 12958: DECL: 04/20/2014 
TAGS: ETRD, KTIA, KIPR, PREL, JO 
SUBJECT: JORDAN'S TRADE MINISTER REVIEWS FTA TRADE ISSUES 
FOR JUNE 8 JOINT COMMITTEE MEETING 
 
REF: A. AMMAN 02494 
     B. AMMAN 03425 
 
Classified By: DCM--D.Hale, Reasons 1.5 (b) and (d). 
 
(CONFIDENTIAL -- ENTIRE TEXT.) 
 
1. (C)  SUMMARY:  DPM and Trade Minister Mohammad Halaiqa 
reviewed with the Ambassador a number of trade issues, most 
related to the upcoming June 8 meeting of the FTA Joint 
Committee.  Halaiqa reported that he had spoken with Israeli 
DPM and Trade Minister Ehud Olmert regarding accelerated 
tariff reductions and Olmert had replied that he would tell 
USTR that Israel had no objections.  On rules of origin, 
Jordan intends to upgrade its trade relationship with Israel 
and then approach the EU with a list of zero tariff products, 
preferably with support from the USG.  On the DAMAN 
preinspection issue, Halaiqa offered little.  He argued that 
the standards being applied were a combination of U.S. and 
European standards but agreed on the need to discuss the 
issue at the JC.  Turning to the Government Procurement 
Agreement, Halaiqa was very appreciative of the support of 
the U.S. delegation in Geneva and hopes that an agreement 
could be signed by the end of the year, again with U.S. 
assistance.  Halaiqa touched on the pharmaceutical and double 
taxation agreement issues.  (This cable will be supplemented 
with septel presenting post's thinking on the agenda for the 
JC and proposed strategies.)  END SUMMARY. 
 
----------------------------- 
ACCELERATED TARIFF REDUCTIONS 
----------------------------- 
 
2. (C)  On May 20, the Ambassador called on Deputy Prime 
Minister and Minister of Industry and Trade Mohammad Halaiqa 
to discuss a number of trade issues in the run-up to the June 
8 FTA Joint Committee meeting in Washington, DC.  After 
congratulating Halaiqa on the success of the just-completed 
World Economic Forum (WEF), held at the Dead Sea, the 
Ambassador said that he understood Jordan had discussed with 
Israel the issue of accelerated tariff reductions. Halaiqa 
replied that indeed he had raised the issue with Israeli 
Deputy Prime Minister and Minister of Industry and Trade Ehud 
Olmert during the WEF, in the presence of King Abdullah. 
Olmert responded that accelerated FTA tariff reductions posed 
no problem for Israel.  Olmert mentioned that he would be 
traveling shortly to Washington and that he would mention 
Israel's agreement to the proposal to USTR Robert Zoellick. 
 
 
--------------------------------- 
JORDANIAN-ISRAELI TRADE AGREEMENT 
--------------------------------- 
 
3. (C)  The Ambassador asked about the recently-announced 
trade agreement between Israel and Jordan which was signed at 
the WEF with considerable press coverage.  Halaiqa explained 
that the agreement was a preliminary step needed to enable 
Jordan and Israel to gain the same QIZ-type treatment with 
the EU that already exists with the U.S.  As part of this 
process, Jordan will upgrade its relationship with Israel to 
a "semi-FTA" and negotiate with the EU a zero-tariff list of 
products.  Both Jordan and Israel would need to gain EU 
support.  Halaiqa termed the approach "a major step" which 
would attract good investment to Jordan.  The terms of this 
proposal would undoubtedly differ from those of the QIZs and 
result in different percentages of Israeli and Jordanian 
content.  In any event, Halaiqa requested U.S. support with 
the EU for the proposal. 
 
--------------- 
RULES OF ORIGIN 
--------------- 
 
4. (C)  The Ambassador asked what Jordan would be raising at 
the JC with respect to rules of origin.   Halaiqa said that 
Jordan was looking at the possibility of "accumulation of 
content" under the FTA rules of origin.  An accumulation with 
Singapore could allow Jordan to increase exports to the U.S. 
as envisioned under the current agreement, although the 
proposal needs further work at the technical level.  Jordan 
would hope eventually to be able to accumulate rules of 
origin with other FTA partners of the U.S., including, 
eventually, Iraq and the Palestinian Authority. 
 
----- 
DAMAN 
----- 
 
5. (C)  The Ambassador thanked Halaiqa for his letter on the 
DAMAN pre-inspection program (REF B), but emphasized that it 
did not allay U.S. concerns.  DAMAN was still a major concern 
to the U.S. side.  Halaiqa referred to the problem of 
defective goods shipped from the U.S. but of East Asian 
points of origin.  He said that he would bring to the JC a 
portfolio of pictures of these defective goods.  But, he was 
open to trying to resolve the issue before the JC.  When 
asked again about the use of standards other than U.S. 
standards under DAMAN, Halaiqa said the French inspection 
company (Bureau Veritas) was doing pre-inspection according 
to Jordanian standards.  He claimed that those standards were 
composed of both U.S. and European standards.  The Ambassador 
said he remained concerned about the costs of the program and 
the delays the pre-inspections caused.  The mere fact that 
this program existed was deterring would-be traders.  Halaiqa 
replied he believed most of the problems were caused by 
companies' ignorance of the program.  He concluded by saying 
that the two sides should discuss the issue face-to-face at 
the JC.  He added that Jordan Institute of Standards and 
Metrology head Ahmed Hindawi would be a part of his 
delegation.  In addition, Hindawi would discuss the DAMAN 
program at a lunch of 100 companies. 
 
 
-------------------------------- 
GOVERNMENT PROCUREMENT AGREEMENT 
-------------------------------- 
 
6. (C)  The Ambassador asked Halaiqa about the apparent 
slowdown in progress on a Government Procurement Agreement 
(GPA).  His aide, Maha Ali, said that Jordan was interested 
in an interim solution through a waiver of the Buy America 
Act.  We advised this was unlikely. Halaiqa added that the 
last GPA negotiations at the WTO in Geneva had been 
successful and the U.S. delegation had been very supportive, 
despite EU pressure on the threshold being discussed.  Ali 
said that the time-frame depends on the progress of the WTO 
negotiations; Halaiqa said Jordan could sign an agreement as 
soon as the negotiations were complete.  He asserted that if 
Jordan attempted a bilateral GPA, Singapore, which had just 
signed an FTA with Jordan, would object.  For this reason, 
Jordan preferred the multilateral approach.  Jordan had 
modified its original offer and this version had been well 
received in Geneva.  If it can, Jordan is willing to speed up 
this process.  He added that the draft legislation of the GPA 
was ongoing and should be ready for presentation to the 
Cabinet by September 2004.  (Note: The USG through USAID is 
supporting much of the legal and technical work being done by 
the GPA.  End Note.) 
 
7. (C)  After checking with an aide, Halaiqa added that 
Jordan had agreed with the U.S. Mission in Geneva on the need 
to negotiate multilaterally and that Jordan may submit a 
revised entity offer to the WTO this summer.  Jordan will try 
to reduce the transmission time and submit the proposal to 
the WTO in October and the agreement could be signed by the 
end of the year.  The U.S. and Jordan could coordinate and 
the U.S. could help press the Europeans to accept Jordan's 
offer, he suggested.  (Comment:  The timing Halaiqa suggests 
may be optimistic.  Several of the working-level Jordanian 
officials involved expect the process may take as long as 18 
months.  End comment.) 
 
--------------------- 
JABA ATTENDING THE JC 
--------------------- 
 
8. (C)  The Ambassador welcomed the announcement that the 
Jordanian-American Business Association would be accompanying 
the Jordanian delegation to the JC.  Halaiqa added that he 
might also go to New York for meetings with the textile 
industry en route to King Abdullah's private sector promotion 
visit to Chicago.  Halaiqa would travel with members of 
Jordan's new textile trade association, JGATE.  (Note:  The 
USG, again through USAID, is partially supporting four to six 
members of the JABA private sector delegation attending the 
JC.  End Note.) 
 
--------------------------------- 
MERCK'S OSTEOPOROSIS DRUG PROBLEM 
--------------------------------- 
 
9. (C)  Regarding Merck's problem with the osteoporosis drug, 
Fosamax, Halaiqa said the issue was still in the courts.  In 
response to the Ambassador's assertion that the decision 
should be a regulatory one, Halaiqa responded that there were 
merits to that point, but on balance, it was felt this was a 
matter for the courts to decide.  Nevertheless, he said that 
he would bring an official from Jordan's Food and Drug 
Administration to the JC.  (Comment:  Merck's original case 
was thrown out by the court because the filing was late. 
Merck is still considering whether to have its regional arm 
re-file, an approach allowed under Jordanian law.  End 
Comment.) 
 
--------------- 
DOUBLE TAXATION 
--------------- 
 
10. (C)  Halaiqa brought up his interest in an agreement on 
avoidance of double taxation.  The USAID representative 
attending reported that USAID had done some preliminary work 
on this, funding a study which indicated that such an 
agreement might undercut Jordan's tax revenues.  Halaiqa 
commented that Jordan collected no taxes from Jordanians 
living in the U.S. (Note:  USAID is preparing a full study on 
this issue that should be completed by the end of August 
2004.  Additionally, USAID is investigating the issue of 
financial disclosure, a former stumbling block in 
negotiations.  End Note.) 
GNEHM