US embassy cable - 04MANAMA1216

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001216 
 
SIPDIS 
 
NOFORN 
 
DEPT FOR INR/I AND NEA/ARP 
 
E.O. 12958: DECL: 07/10/2029 
TAGS: PINR, ECON, ETRD, BA 
SUBJECT: (C/NF) BAHRAIN AND TRADE WITH THE UNITED STATES 
(C-NE4-00522) 
 
REF: STATE 149503 
 
Classified By: CDA SUSAN ZIADEH. REASON 1.4(C). 
 
(C/NF) The Bahraini business community is convinced that the 
U.S.-Bahrain FTA is a positive development.  Yet they are 
perplexed by this new mechanism. Continued public diplomacy 
outreach--by both GOB and USG--can help counter some of the 
misimpressions about the FTA, what it means, and what it can 
help accomplish.  The business community and labor leaders 
are seeking guidance from all corners on how to turn the FTA 
into business deals and to create jobs.  Embassy Public 
Affairs and Commercial sections will work with MEPI-sponsored 
technical assistance teams and the GOB to address these 
concerns and help lead the Bahraini business community to 
successful FTA implementation.   Responses in this cable are 
keyed to questions reftel. 
 
A. (C/NF)  The business community has run with the 
government's pro-FTA message, and now the GOB is trying to 
manage what they fear may be unrealistic expectations. 
 
B. (C/NF) The business community believes it should benefit 
from the FTA.  However, with a few exceptions, business 
people do not yet understand how to translate this new policy 
into business deals. They have asked for, and will require, 
quite a bit of handholding to make implementation a success. 
 
(C/NF) The insurance industry fears outside competition 
most--ironically so, given that the sector is relatively open 
already and AIG has a long-standing presence in Bahrain.  The 
textile/garment businesses expect their businesses to grow 
most as a result of the FTA.  Manama's Pakistani-owned 
textile mill has made a substantial investment to expand 
capacity to add a fabric finishing process to its repertoire 
here in Bahrain and has initiated a joint venture by 
purchasing a defunct factory in the United States.  However, 
garment factories, more likely to be adversely affected by 
global competition beginning in 2005, have not made similar 
investments but expect the FTA to take care of their business 
problems, past and future. 
 
(C/NF) Overall, the sense among the business community is 
that the FTA offers many potential commercial opportunities, 
but they do not know how to take advantage of these trade 
openings. 
 
C. (C/NF)  FTA negotiations have been concluded.  However, 
Post notes that the textile sector was the most vociferous 
and organized during FTA negotiations.  They pushed for duty 
free access, lenient rules of origin, 10-year tariff 
preference levels well beyond current levels of trade, and 
technical assistance to refocus and revive the sunset 
industry. 
 
D. (C/NF)  The textile sector placed the onus of potential 
job losses resulting from the end of ATC quotas on the 
government if negotiators did not secure sufficently 
favorable FTA terms to ensure that their sunset industry 
would thrive.  Business owners and general managers, and to a 
lesser extent the labor union, lobbied the Ministry of 
Industry, the National Assembly, the Bahrain Chamber of 
Commerce and Industry, and U.S. and Bahraini negotiators 
directly to make their case. The GOB listened for two 
reasons.  Textiles are Bahrain's primary non-oil export to 
the United States.  More importantly, the roughly 3000 
Bahraini textile workers (out of a total of 12,000 workers in 
the sector) are hard-to-employ, semi-skilled, conservative, 
Shi'a women who often support eight family members.  These 
workers face the possibility of massive layoffs within the 
next year due to global competition.  Such layoffs would 
increase poverty among the already poor and contribute to the 
potential for social unrest. 
 
(C/NF) Board members of the Bahrain Chamber of Commerce and 
Industry, the Bahrain Export Development Society, 
Businessmen's Society and Businesswomen's Society have asked 
not only their own government, but the USG as well, to help 
them figure out how to take advantage of FTA.  The Bahrain 
Chamber of Commerce and Industry, the Ministry of Commerce 
and the Ministry of Finance and National Economy's Economic 
Development Board are taking the lead on joint committees to 
help the business community take the next steps, but it is 
still too early to see results.  There is an explicit need 
for specific, project-oriented, U.S.-Bahraini B-2-B 
networking, and there is a hope among Bahraini business that 
the new AmCham can help facilitate these trade connections. 
The Embassy has proposed programs, such as International 
Buyer Programs or Reverse Gold Key-style trade delegations, 
but the business community's initial interest has not 
translated into participation, presumably awaiting final 
verification of the FTA. 
 
E. (C/NF) To the extent that local labor pays attention to 
economic policy developments, it is also confused about what 
the FTA will do for workers.  Workers regularly confuse FTA 
with WTO.  Many garment workers believe that FTA provides an 
extension of existing ATC quotas and is a panacea that will 
create more and better jobs in their sector.  There is a real 
need for intensified public diplomacy outreach to labor 
leaders and workers. 
 
F. (C/NF) Textile workers expect that FTA will save their 
jobs and yield higher pay as well.  Some workers have told 
EmbOffs that, now that we have 'signed' an FTA with Bahrain, 
it is the USG's responsibility to ensure that they have jobs, 
since the FTA is all about creating jobs for Bahrain.  Yet in 
discussions about the FTA,the inclusion of protective labor 
clauses is not mentioned.  Again, public diplomacy can help 
clarify what the FTA can and cannot do for workers. 
ZIADEH