US embassy cable - 04MANAMA799

UNCLAS SECTION 01 OF 03 MANAMA 000799 
 
SIPDIS 
 
DEPARTMENT FOR DRL: KAUDROUE AND NEA/ARP, 
CAIRO FOR STEVE BONDY 
LONDON FOR ETHAN GOLDRICH 
DEPARTMENT OF LABOR LEWIS KARESH AND SUDHA HALEY 
DEPARTMENT PASS TO USTR WILLIAM CLATANOFF AND JASON BUNTIN 
 
E.O. 12958: N/A 
TAGS: ELAB, KTEX, PGOV, PREL, ETRD, KWMN, KMPI, BA 
SUBJECT: SOME BAHRAINIS RECOGNIZE THE NEED TO PLAN FOR 
PROBABLE TEXTILE INDUSTRY CONTRACTION 
 
REF: MANAMA 726 
 
1.  SUMMARY. Assistant USTR for Labor WIlliam Clatanoff, who 
visited Bahrain May 9-13, sounded a clarion call warning to 
Bahrainis that its textile and garment industry is in danger 
from the WTO-mandated end to the textile quota system.  He 
made clear that the US-Bahrain Free Trade Agreement (FTA) is 
not a panacea to save the industry.  It could, he said, save 
some textile firms and some jobs, but Bahrainis need to 
prepare for the worst.  Bahrainis across the board heard the 
call and some appeared inspired to take action.  If Bahrainis 
do not take action, Post expects that the political 
opposition may mistakenly attribute the loss of garment 
industry jobs to the FTA and not the WTO.  The average 
conspiracy-minded Bahraini easily could conclude that the GOB 
and USG colluded to improverish already poor Shi'a families. 
USG technical assistance to help address this problem could 
keep us on an even public relations keel. END SUMMARY. 
 
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END OF TEXTILE QUOTAS 
--------------------- 
 
2.  AUSTR Clatanoff visited Bahrain to raise awareness about 
the potential negative impact of the phase-out of textile 
quotas on January 1, 2005 in accordance with the WTO 
Agreement on Textiles and Clothing (ATC) (see reftel). 
Clatanoff met with GOB officials, parliamentarians, the 
business community, concerned NGOs and the union federation 
to discuss the end of the ATC transition period and possible 
options for re-employing hundred of Bahraini workers who may 
lose their jobs. 
 
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FTA IS NO PANACEA 
----------------- 
 
3.  After listening to the Bahrain Chamber of Commerce and 
Industry's (BCCI) Ready-made Garment Committee describe how 
the Free Trade Agreement (FTA) will double Bahrain's existing 
textile market, Clatanoff politely refuted the Committee's 
conclusions.  As he had done in every previous meeting, 
Clatantoff noted that the Bahraini textile industry's labor 
costs are 10 times China's. Even optimal FTA negotiated 
Tariff Preference Levels (TPL) alone would not overcome 
China's labor cost advantage.  Clatanoff instead asserted 
that the FTA cannot save Bahrain's current textile industry 
nor is it reasonable for Bahrainis to expect it to expand. 
What the US-Bahrain FTA can do, he said, is ease the 
transition for the Bahrain garment industry to adjust to 
world market competition. To overcome world wage 
differentials,  Bahrain would have to leverage other 
advantages.  For example, Clatanoff noted, key US importers 
and their customers ascribe to codes of conduct that mandate 
purchasing only from countries that guarantee workers freedom 
of association and the right to organize and bargain 
collectively. 
 
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WHAT CAN BAHRAINIS DO? 
---------------------- 
 
3.  Clatanoff advised Bahraini interlocutors that they should 
look at four aspects of labor market restructuring. 
 
-  Refocus the textile industry.  The business community 
could organize trade delegations to the US to solicit US 
companies to set up shop in Bahrain.  The textile companies 
could expand their customer base and market themselves to US 
clients that have corporate ethics policies that demand 
factories with good working conditions, quick-turn-around, 
expedient logistics and the right for workers to form unions. 
 
-  Identify new industries for conservative Shi'a women.  The 
business community could work with the Ministry of Industry 
to identify new industries to which garment workers can 
transfer. 
 
-  Immigration policy and Bahrainization.  The Ministry of 
Labor and Social Affairs (MOLSA) could limit the issuance of 
foreign work visas, allowing for job replacement by 
Bahrainis. 
 
-  Retraining.  MOLSA could coordinate with the union 
federation and training institutes to offer re-training for 
positions in a new sector or for garment positions that are 
vacant due to Bahrainization. 
 
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PUBLIC AWARENESS CAMPAIGN 
------------------------- 
 
4.  Clatanoff stressed the need for a public awareness 
campaign to explain that the end of the textile quota system 
may cause a loss of jobs in the sector.  Alerting the public 
ahead of time should lessen any shock or anger by the Shi'a 
community.  Such a reaction could trigger a political 
backlash, he worried.  Clatanoff continued that the public 
relations campaign needs to separate the possible job losses 
resulting from the end of the textile quota system from the 
FTA.  The coincidental entry into force of the FTA and the 
expiration of worldwide quotas could create opportunities for 
people to blame textile sector job losses on the FTA.  This 
could become a public relations nightmare for both the GOB 
and the USG. Both the GOB and the USG should publicly 
elaborate on what the FTA can and cannot do to help the 
sector. MOFNE Acting Director of Economic Planning Yousif 
Humood told EconOff on May 9 that he is willing to launch a 
public awareness effort after the last round of FTA 
negotiations concludes. 
 
-------------------------------- 
BAHRAINI REACTION TO SUGGESTIONS 
-------------------------------- 
 
5.  For the most part, the GOB and the business community 
were in favor of undertaking measures to aid the garment 
industry.  Initially, BCCI's presentation described expansion 
of the industry.  But after listening to Clatanoff challenge 
its assumptions about the FTA, BCCI Ready-made Garments 
Committee Chairman Abdul Ali Al-Aali told Emboffs on May 12 
that his committee would be willing to discuss the 
possibility of organizing a delegation to the US to attend 
trade shows to sell Bahrain to US companies. Taking into 
consideration the conditions under which conservative Shi'a 
women work, Ministry of Industry Director of Information Sami 
Ahmed Hussain Kadhem told PolOff on May 10 that he already 
has identified factory work such as electronics assembly, 
downstream aluminum products manufacture, airline food 
preparation, and revitalization of handicrafts production as 
possible alternate industries.  MOLSA Assistant 
Undersecretary for Training Abdul Ellah E. Al-Qassimi told 
Emboffs on May 11 that his division is ready to offer any 
kind of re-training to transition these workers.  MOLSA 
Director of Labor Relations Ali A. Al-Khalifa told PolOff on 
May 11 that a new immigration policy is being discussed in 
conjunction with Bahrainization and unemployment insurance. 
The Deputy Secretary General of the Supreme Council for Women 
(SCW) Hala Al-Ansari told Emboffs on May 15 that SCW is 
willing to provide some funding and training for women in 
leadership and empowerment.  To ensure success by so many 
different entities, Al-Ansari suggested that a foreign 
consultant be hired to coordinate implementation by all 
concerned parties. 
 
6.  At a luncheon where Clatanoff met NGOs and the union 
together, president of the textile union Kadija Ali Attiya 
came away inspired by the support offered by other NGO 
representatives attending the event.  Attiya told PolFSN on 
May 18 that she was previously unaware of the expiration of 
bilateral textile quotas.  She lamented that she is only one 
person with no staff, unable to reach every worker and to 
organize a "save jobs" campaign.  Public Freedoms and 
Democracy Watch Vice President Nizar Al-Qari offered his 
organization's full support.  Al-Qari also offered to draft 
letters for Attiya to the GOB, the trade union federation and 
the business community to seek recommendations for solutions. 
  Bahrain Women's Society Vice President Soroor Qarooni 
offered Attiya help planning a campaign to inform garment 
workers of the situation. 
 
7.  One official thought it was wrong to focus on the plight 
of these 3,500 Shi'a women.  Crown Prince's Court Economic 
Advisor Sirene Al-Shirawi told Emboffs on May 9 that free 
market forces would reshape Bahrain's labor market. 
Subsidizing or protecting any industrial sector would hinder 
that process.  Al-Shirawi downplayed the implication that the 
loss of 3,500 Shi'a jobs would be highly publicized by the 
opposition.  "There will be pain, but it will pass," she 
said. Al-Shirawi said she was willing to consider making 
these women a case study for unemployment insurance in the 
Crown Prince's labor reform study. 
 
8.  COMMENT.  Bahrainis will need to work together to address 
 anticipated Bahraini textile worker redundancies. 
Clatanoff's previous experience as Advisor to GOB's Minister 
of Labor in 1981-1984 and FTA Chief Labor Negotiator were 
great selling points with the Bahrainis. His personal and 
professional experience lent credibility to his suggestions. 
If Bahrainis do nothing to mitigate the loss of these garment 
industry jobs, Post expects that the opposition will have 
another opportunity to highlight the GOB's sectarian 
discrimination against the Shi'a. The opposition also may 
mistakenly attribute the loss of garment industry jobs to the 
FTA and not the WTO.  The average conspiracy-minded Bahraini 
easily could conclude that the GOB and USG colluded to 
improverish already poor Shi'a families. USG technical 
assistance to help address this problem could keep us on an 
even public relations keel. END COMMENT. 
 
9.  AUSTR William Clatanoff did not clear this cable. 
NEUMANN