US embassy cable - 05MANAMA320

C O N F I D E N T I A L MANAMA 000320 
 
SIPDIS 
 
STATE FOR NEA/ARPI, EB 
STATE PASS USTR FOR J BUNTIN 
 
E.O. 12958: DECL: 03/06/2015 
TAGS: ETRD, ECON, ECIN, BA 
SUBJECT: GCC SECGEN AFFIRMS RIGHT OF MEMBERS TO SIGN FTA'S 
WITH U.S. 
 
REF: A. RIYADH 1283 
 
     B. RIYADH 1208 
     C. MANAMA 176 
     D. MANAMA 065 
     E. MANAMA 038 
 
Classified by DCM Susan L. Ziadeh for reasons 1.4 (b) and (d). 
 
1.  (U) Bahrain's Al Ayam Arabic daily newspaper reported 
March 1 that GCC Secretary General Abdul Rahman Al Atteya 
confirmed that each GCC member state has the right to sign a 
free trade agreement with the United States, but the country 
must notify the other GCC members about the steps taken.  He 
gave his statement on the margins of the GCC Supreme Council 
Consultative Committee meeting in Manama.  (Note:  Per Ref E, 
on January 5, the Bahrain Tribune cited an unnamed Bahraini 
official claiming "five of the six GCC countries agreed that 
after the refusal by the U.S. of collective negotiations with 
the GCC bloc, the members could go ahead with bilateral 
negotiations in order to ensure the common interests of the 
region.  The accord to consider such conditions in free trade 
agreements between GCC states and the U.S. as exceptional was 
reached by the GCC financial and economic committee at its 
66th meeting in Manama on December 18."  Al Atteya could have 
based his statement upon the December agreement.  End Note.) 
 
2.  (C)  Ministry of Finance Director for Economic Planning 
Yousuf Humood told EconFSN March 5 that the U.S.-Bahrain FTA 
is fully within Bahrain's rights and does not violate any 
Bahraini commitments to the GCC.  Other GCC states such as 
UAE, Oman, and Qatar are following Bahrain's path.  Humood 
commented that Emirati officials have told him that they are 
willing to accept FTA text that is exactly the same as the 
U.S.-Bahrain FTA. 
 
3.  (C) Humood continued that the FTA does not harm the GCC 
Customs Union because the FTA is a bilateral agreement that 
has no jurisdiction over re-exported commodities, which are 
subject to the common tariff mechanism outlined in the 
Customs Union agreement.  He stressed that there is a clear 
understanding of the mechanics involved, including the final 
destination principle used by the GCC in determining the 
payment of tariffs.  Under the FTA, American goods that are 
re-exported will be taxed upon entering Saudi Arabia.  This 
will prevent any "flood" of U.S. goods entering Saudi markets 
via Bahrain. 
 
4.  (SBU) The March 5 edition of the Arabic daily Al Wasat 
reports that the Saudi newspaper "Economics" ran an article 
stating that Emirati officials involved in the first round of 
FTA negotiations with the U.S., beginning March 8, expect the 
American side to demand that the Emirates drop the boycott of 
Israel and agree to support any U.S. trade and economic 
embargoes.  In the Bahraini context, an implication of the Al 
Wasat article is that the United States made similar demands 
of the Bahrainis in the FTA negotiations, and could be viewed 
as a Saudi attempt to sully Bahrain's image in front of other 
Arabs. 
 
5.  (C) Comment:  As with any complex set of guidelines, the 
GCC Customs Union agreement appears to provide supporting 
arguments for both those in favor of, and against, extra-GCC 
bilateral trade agreements.  The latest wrinkle in this 
ongoing dispute is the entry of GCC SecGen Al Atteya into the 
fray.  While we defer to Embassies Doha and Riyadh for 
analysis, the former Qatari MFA official Al Atteya could be 
voicing his own national perspective by insisting on the 
right of the smaller GCC member states to negotiate deals 
separate from Council-wide agreements. 
 
MONROE