US embassy cable - 04MUSCAT2012

UNCLAS SECTION 01 OF 02 MUSCAT 002012 
 
SIPDIS 
 
STATE FOR EB/TPP/BTA, NEA/PI, AND NEA/ARPI 
STATE PLEASE PASS USTR/CNOVELLI AND JBUNTIN 
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT 
TREASURY FOR OASIA 
USDA FOR FAS 
LABOR FOR ILAB/TFAULKNER 
 
E.O. 12958: N/A 
TAGS: ETRD, BEXP, ECON, ELAB, EINV, MU, Economic Affairs, U.S.-Oman Relations 
SUBJECT: CODEL THOMAS DISCUSSES POTENTIAL FTA WITH TOP OMANI 
LEADERSHI P 
 
1.  SUMMARY: In lengthy meetings with Sultan Qaboos and Oman's 
Foreign Minister, as well as a brief but productive final meeting 
with the Omani Commerce Minister, CODEL Thomas took advantage of 
the opportunity to explore Oman's readiness to jump into full- 
blown free trade agreement (FTA) negotiations over the next 6-8 
months. Chairman Thomas emphasized the need to look carefully at 
Oman's labor legislation to make sure it meets core international 
standards, as well as the need for complete transparency 
regarding the criteria for foreign investment in Oman. Sultan 
Qaboos pledged that Oman would work closely with the U.S. in 
addressing these concerns, a message reiterated by the other 
ministers. Chairman Thomas outlined his support for expediting 
Oman's FTA timetable, and pledged to work constructively with the 
Sultanate in the coming months as the process blazes forward. End 
Summary. 
 
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Full Speed Ahead 
---------------------- 
 
2.  During their 2-day visit to Oman November 8-9, five lawmakers 
from the House Ways and Means Committee met with top Omani 
leaders to discuss trade relations and the possibility of 
negotiating an expedited FTA between Oman and the U.S. Led by 
Chairman Bill Thomas (R-CA) and including Reps. Mike McNulty (D- 
NY) , Nancy Johnson (R-CT) , Phil English (R-PA) , and Ron Lewis 
(R-KY) , the delegation had an afternoon audience with Sultan 
Qaboos, dinner with Minister Responsible for Foreign Affairs 
Yusuf bin Alawi, and a brief meeting with Minister of Commerce 
and Industry Maqbool bin Ali bin Sultan. In all three encounters, 
Chairman Thomas clearly expressed his desire to move forward on 
FTA talks within the next 6-8 months, before the expiration of 
Trade Promotion Authority in July 2005. 
 
3. Thomas buttressed his remarks by saying that Oman has proven 
to be a staunch ally in the region, with extremely positive 
bilateral military relations. There is no reason, he asserted, 
that trade relations between the two countries should not blossom 
in similar fashion. Moreover, the high quality of the commitments 
that Oman made in its accession to the WTO in 2000 means that the 
Sultanate has already taken many strong steps toward liberalizing 
its trade regime. Looking at potential trading partners around 
the world, Thomas and his colleagues believe that very few could 
manage an ambitious timetable for completing FTA negotiations in 
the next 6-8 months; Oman is one of them, and it is critical to 
seize the window of opportunity. Sultan Qaboos and the other 
interlocutors expressed satisfaction with this perspective, and 
offered any and all assistance in seeing the process through. 
"It's to our advantage [to conclude an FTA], and we look forward 
to working with you," declared the Sultan. 
 
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Labor as Key Stumbling Block 
-------------------------------------- 
 
4. Chairman Thomas explicitly mentioned the caveat that all FTAs 
require bipartisan support to pass Congress. Labor is one area 
where Oman could face difficulty in this regard, and CODEL Thomas 
did not hesitate to raise this issue with Sultan Qaboos and his 
ministers. In spite of a new labor law passed in 2003, Thomas and 
his colleagues still need to verify that Oman is adhering to core 
labor standards as defined by the ILO. Of particular concern are 
the right to strike, to bargain collectively, to take labor cases 
to an independent court, and to form unions. 
 
5. The policy of Omanization could also be a sticking point, 
particularly in fields where Omanis may show unwillingness to 
work despite having positions set aside for them. Such 
distortions in the labor market, claimed Thomas, could lead to 
situations where Omanis exaggerate their bargaining leverage. 
Members of the CODEL also seemed interested in the Omani programs 
designed to promote entrepreneurship and self-employment, such as 
the SANAD Fund, the Youth Fund, and other similar programs run by 
the Omani government whereby young people can apply for soft 
loans to start small businesses in their communities. 
 
----------------------------------- 
Transparency and Investment 
----------------------------------- 
 
6. Another concern clearly spelled out by Chairman Thomas was the 
lack of an objective, transparent standard for foreign investment 
above the 70 percent level. Although Minister Maqbool sought to 
reassure Thomas that "all American investment is welcome" and 
that the real concern was a flood of small-scale investments 
(groceries, barber shops, etc.) from South Asia, Thomas insisted 
that the criteria for investment must be universal and 
transparent if an FTA is to win approval in the U.S. Congress. 
Otherwise, Oman risks the perception of discriminatory treatment 
of investment. Using the examples of insurance and banking, where 
Oman has taken strong steps to reassure foreign investors and 
establish clear rules and regulations, Thomas urged Oman to 
examine its foreign investment laws to guarantee maximum 
transparency leading up to FTA talks. In response to a query from 
Minister Maqbool regarding possibly finding a way to welcome 
American companies and investment without a full opening to the 
subcontinent, Chairman Thomas suggested that Oman look carefully 
at the Bahrain and Morocco agreements, where similar exceptional 
circumstances were addressed. Not all FTAs are alike, explained 
Thomas, but the important element is that they do not fall below 
certain baselines. 
 
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Strong Commitment 
------------------------- 
 
7. Without exception, CODEL Thomas heard from Oman's leaders that 
an FTA is desirable as soon as possible, and that the Omani 
government is willing to address the specific concerns brought 
forth by the USG. Sultan Qaboos emphasized that Oman would do its 
part: "I'll make sure [the ministers] feel concern to get it 
done," he told the CODEL. Minister Maqbool elaborated by stating 
his desire to discuss "what we're not doing right and what we 
need to work on." Thomas reciprocated by stating his intentions 
to move as quickly as possible, provided that Oman maintains 
strict adherence to the tightest of timelines. Thomas promised to 
work closely with the Omani government and USTR in the coming 
weeks and months. 
 
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Power of Example 
----------------------- 
 
8. One recurring theme was the advantage enjoyed by Oman in that 
the U.S. already has strong, recent agreements with Bahrain and 
Morocco. Thomas urged the Omanis to review these agreements to 
avoid reinventing the wheel. Moreover, accompanying staffers from 
CODEL Thomas passed along copies of correspondence from the 
Moroccan government to the USG regarding steps taken by Morocco 
to address labor concerns; the Embassy will share this 
correspondence with the Omani government as an example of how the 
adoption of a proactive stance on labor can significantly improve 
the chances of finalizing an FTA. Rep. English commented that the 
Morocco FTA demonstrated the importance of America's trading 
partners being aware of the political constraints involved in 
negotiating FTAs, particularly in areas such as labor and the 
environment. 
 
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Comment 
------------ 
 
9. As the CODEL heard repeatedly, the very top political 
leadership in Oman stands firmly behind FTA negotiations and 
recognizes the mutual benefit to be derived from free trade. This 
visit served to highlight the key areas in an FTA that will draw 
Congressional scrutiny, and Chairman's Thomas' forthright style 
laid most of the stickiest points plainly on the table. Once the 
Omanis return from an extended Eid and National Day holiday, we 
expect to engage them at every opportunity to review areas where 
Omani legislation and enforcement currently fall short of FTA 
baselines, and to devise means of delivering technical assistance 
and conducting consultations where appropriate. 
 
10. The delegation has cleared this cable. 
 
BALTIMORE