US embassy cable - 04ABUDHABI3834

UNCLAS SECTION 01 OF 03 ABU DHABI 003834 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ARP, NEA/RA, EB 
STATE PASS USTR 
 
E.O. 12958: DECL 
TAGS: ECON, ETRD, EFIN, PREL, PTER, IZ, TC 
SUBJECT: UAEG GIVES USTR ZOELLICK HIGH-LEVEL COMMITMENT TO 
RELATIONSHIP 
 
1. (SBU) Summary:  UAEG leaders assured USTR Ambassador 
Zoellick that the UAE remained interested in negotiating an 
FTA with the U.S.  They also assured him that the UAEG was 
taking steps to end implementation of the secondary and 
tertiary aspects of the Arab League boycott and would 
ensure that the revised labor laws would be ILO compliant. 
They said that they understood the USG's requirement for 
national treatment for U.S. investors, but indicated that 
they would be looking for a short transition period for 
existing agency relationships.  Finally, they officially 
informed Ambassador Zoellick that MinState for Finance Dr. 
Mohammed Khalfan Khirbash would be the point person on any 
FTA negotiations.  End Summary. 
 
2. (U) On October 13, Ambassador Zoellick met in Abu Dhabi 
with Deputy Prime Minister/Minister of State for Foreign 
Affairs Sheikh Hamdan bin Zayed Al-Nahyan (HBZ); Minister 
of Economy and Commerce, Sheikh Fahim Al-Qasimi; Abu Dhabi 
Deputy Crown Prince, Sheikh Mohammed bin Zayed Al-Nahyan 
(MBZ); Chairman of the Abu Dhabi Department of Economy, 
Sheikh Hamed bin Zayed; and in Dubai with Minister of 
Finance, Sheikh Hamdan bin Rashed Al-Maktoum (HBR); 
Minister of State for Finance, Dr. Mohammed Khalfan bin 
Khirbash; and U.S. and Emirati private sector 
representatives.  Ambassador Zoellick also visited the port 
of Jebel Ali and conducted press interviews. 
 
3. (SBU) During his meetings, Ambassador Zoellick 
emphasized that the U.S. sought high quality, "state of the 
art" FTAs.  He stated that the U.S. preference was to 
negotiate FTAs with reform leaders, both as a way of 
recognizing their reforms and as a way to provide an 
example that would encourage other countries to raise their 
standards. Ambassador Zoellick's UAEG interlocutors agreed 
with this approach and stressed that the UAE was committed 
to economic reform and to a FTA with the U.S.  Sheikh 
Mohammed bin Zayed, for example, said that the UAE viewed 
itself as a positive example for the region and believed 
that a U.S.-UAE FTA would have regional benefits.  He wryly 
noted that "we (the UAE) get jealous when we see another 
country signing an FTA with you."  MinEconomy Al-Qasimi 
added that at the October 12 GCC Economic Ministers 
meeting, all but Saudi Arabia favored moving forward with 
bilateral trade negotiations with the U.S. rather than 
negotiating a multilateral GCC agreement.  He noted that 
he, personally, favored ways of improving regional 
integration, but that if any country could not meet the 
high standards required in a FTA, other countries (i.e., 
the UAE) should move forward on their own (and encourage 
the others to catch up). 
 
4. (SBU) Ambassador Zoellick told his interlocutors that he 
was very impressed with the progress made in the TIFA 
Council discussions with the UAE.  He outlined in general 
terms the requirements of our FTAs, including complete 
coverage on goods and services, customs, environment, etc. 
Ambassador Zoellick specifically highlighted areas where we 
have concerns including the Arab League Boycott, and 
investment issues (Companies and Agencies laws, and 
restrictions in banking and insurance), and labor.  He 
noted the generally good IPR environment in the UAE, but 
asked to work more closely together on dealing with 
counterfeit products. 
 
5. (U) Ambassador Zoellick also provided the UAE a possible 
timeline if both parties decided to move to FTA 
negotiations.  He explained that he would need to formally 
notify Congress of the Administration's intent to negotiate 
with the UAE.  After this notification, there would be a 
mandatory 90-day waiting period before negotiations could 
start.  Depending on the complexity of the negotiations, 
they could take about a year.  There would then be another 
90-day period before the USG could sign the agreement and 
send it to Congress for an "up-or-down" vote.  He said 
that, if the decision was made to move forward, he thought 
negotiations could start in early 2005 and be presented to 
Congress in 2006.  He stressed that the UAE needed to make 
its case, both with the USG and with the business 
community, for an FTA. 
 
6. (SBU) The UAEG leadership stressed eagerness to move 
forward with FTA negotiations as quickly as possible and 
keen interest in resolving issues.  Sheikh Hamdan bin 
Zayed, who was clearly well briefed, without prompting 
raised the key areas of concern for the U.S. and stressed 
that the UAE was coordinating the efforts of all relevant 
federal and local entities to ensure that the UAE took the 
necessary steps for an FTA.  He added that, due to his 
success leading the UAE TIFA team, MinState for Finance Dr. 
Mohammed Khalfan bin Khirbash would be the UAE's point 
person for the FTA negotiations, and that MinEcon Sheikh 
Fahim Al-Qasimi would also play a key role.  In Dubai, 
Sheikh Hamdan bin Rashid Al-Maktoum indicated that there 
had been an internal debate over some of the more sensitive 
issues under discussion, particularly labor issues and the 
agency law, but that all parties were fully committed to 
moving forward to an FTA with the U.S. 
 
Arab League Boycott 
------------------- 
 
7. (SBU) In his meeting with Sheikh Hamdan bin Zayed and 
Sheikh Fahim Al-Qasimi and his meeting with Sheikh Hamdan 
bin Rashed, Ambassador Zoellick stated that he understood 
that the UAE had renounced the secondary and tertiary 
aspects of the Arab League boycott against Israel. 
However, noting that prohibited boycott language continues 
to appear in contracts, he underscored that these boycott 
requests would have to cease for an FTA to move forward. 
Sheikh Hamdan bin Zayed stressed that the UAEG would adhere 
to its commitments and would not/not implement the 
secondary and tertiary aspects of the boycott, and that the 
UAE was committed to resolving the issue, was already 
notifying companies that they needed to modify their 
contracts, and that the UAEG would be following-up to 
ensure this happens.  Sheikh Al-Qasimi, whose Commerce 
Ministry implements the boycott, noted that many UAE 
companies used old forms, but promised that "this issue 
will not come up again.  Instructions have been prepared." 
During Ambassador Zoellick's meeting with U.S. businesses, 
one company complained that it still faced boycott 
language.  The company representative noted that, although 
the company  was able to remove the offending language from 
tender documents, it was a long process and sometimes the 
company lost business because of the time required to fix 
the forms.  (Note: post will continue to follow up with the 
UAEG and U.S. businesses to be sure that this problem is 
resolved quickly.) 
 
Agencies and Companies Laws 
--------------------------- 
 
8. (SBU) Ambassador Zoellick highlighted USG concerns about 
UAE legislation such as the Agencies and Companies laws 
that limit U.S. ownership of businesses in the UAE outside 
the free zones and discourage foreign investment.  His 
comments found a ready audience with U.S. businesses, which 
highlighted this as a concern and specifically noted the 
costs involved in "getting out" of a franchising 
relationship.  Both Sheikh Hamdan bin Zayed and Hamdan bin 
Rashed noted that this was a sensitive area for the UAE, 
but recognized that ultimately any solution would have to 
provide U.S. investors with national treatment.  Sheikh 
Hamdan bin Zayed stressed that all new investors under an 
FTA would receive national treatment, but noted that some 
of the established local agents would be opposed to change 
and noted that the UAE would be seeking a short transition 
period (until 2006) for existing agency agreements.  One 
UAE businessman also implied that this was a sensitive area 
for the UAE, when he urged the U.S. not to take "a cookie 
cutter approach" to the FTA. 
 
Labor 
----- 
 
9. (SBU) In all of his meetings with UAE leaders, 
Ambassador Zoellick stressed that the USG requires its FTA 
partners to enforce their own labor laws, but also expects 
that these laws will be consistent with international 
standards, as defined by the ILO.  He explained that the 
USG understood the UAE's demographic and security concerns 
and urged UAE leaders to work with the USG and the ILO on 
developing labor laws and labor union laws that met UAE 
security concerns and ILO standards.  There was no intent 
to use labor and environmental concerns as barriers to 
trade; negotiations over these issues would thus take the 
form of a "problem-solving exercise." Sheikh Hamdan bin 
Zayed and Sheikh Mohamed bin Zayed both said that the UAEG 
understood the requirement and would meet the ILO's 
concerns, and Sheikh Hamdan bin Zayed stressed "there will 
be unions."  MinState Khirbash also stated that the UAE's 
labor laws would be ILO compliant. Hamdan bin Rashid in 
noted that any new approach on labor would need to take 
into account the fact that many of the laborers in the UAE 
were here only temporarily, for a year or two, and would 
soon be returning to their home countries. During a brief 
sidebar discussion, MFA U/S Abdullah Rashid Al-Noaimi 
explained to AUSTR Cathy Novelli and Ambassador his 
concerns about passing the text of the draft law to the 
USG, before the cabinet had a chance to review it.  He 
committed to sharing all relevant information verbally with 
the USG, and that they would take U.S. concerns into 
account.  (Note: Post will work with the UAEG, the 
Department and USTR to put the relevant experts together.) 
 
 
Jebel Ali Port and Free Zone 
---------------------------- 
 
10. (U) Ambassador Zoellick also met with Sultan bin 
Sulayem, the Chair of the Dubai Ports, Customs, and Free 
Zone Corporation at the Jebel Ali port.  Bin Sulayem noted 
that the Dubai's two ports (Jebel Ali and Port Rashid) were 
moving 6.2 million TEU and 14,000 ships a year between 
them(Port Rashid 1.2 Million TEU).  In addition, Dubai 
ports moved 400,000 new and used cars .  The port of Jebel 
Ali employed 8,400 people and the attached free zone had 
3,800 companies based in it, almost 200 of them American. 
 
11. (U) Bin Sulayem explained that Dubai was seeing China 
become a much stronger trading partner, adding that it had 
taken over from Japan as the number one partner.  (Note: 
this presumably excludes oil, which ships out of Abu Dhabi, 
end note.)  Other major partners included Japan, the UK and 
the U.S. (number 5).  Bin Sulayem said Dubai ports viewed 
regional competition as a good thing, especially since 
transportation capacity was not growing as quickly as 
global trade flows.  He cited Dubai's plans to increase 
port capacity to 20 million TEU by 2020. 
 
Comment 
------- 
 
12. (SBU) This was a very successful visit on in all 
respects.  Ambassador Zoellick clearly explained the 
requirements for an FTA and laid out concerns that the UAE 
will need to address.  For their part, UAE leaders welcomed 
his message and undertook to resolve problems in a 
positive, cooperative spirit.  They also reiterated -- at a 
political level -- the UAEG's interest in negotiating an 
FTA with the USG and their willingness to address the 
concerns raised by Ambassador Zoellick.  End Comment. 
 
This cable has been cleared by Ambassador Zoellick's party. 
 
Albright