US embassy cable - 05MUSCAT495

UNCLAS SECTION 01 OF 02 MUSCAT 000495 
 
SIPDIS 
 
DEPARTMENT FOR NEA/ARPI (TROBERTS), NEA/PPD (CWHITTLESEY), NEA/P 
(FFINVER), IIP/G/NEA 
DEPARTMENT PLEASE PASS USTR(CNOVELLI) 
 
E.O. 12958: N/A 
TAGS: KPAO, SOCI, MU, Economic Affairs, Public Affairs 
SUBJECT: SPECIAL OMAN ONLINE: A/USTR NOVELLI DEMYSTIFIES FTA 
DURING ONLINE DISCUSSION 
 
1. Summary:  The Omani Internet chat rooms "al-Sablah" and "al- 
Majarra" are the liveliest and most comprehensive Arabic-language 
fora for political and social discourse in the country, touching 
on issues and personalities rarely addressed in the conventional 
media.  While not totally free, nor wholly reflective of Omani 
public opinion, these popular sites nevertheless offer a 
worthwhile window into the hot topics and unvarnished views of 
the day.  This edition of Oman Online contains the following 
topics: 
 
FTA Round One Negotiations Between Oman and The United States 
 
End summary. 
 
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Appreciation for Access 
----------------------- 
 
2. Assistant U.S. Trade Representative for Europe and the 
Mediterranean and head of the FTA negotiating team in Oman 
Catherine Novelli addressed the pros and cons of the FTA 
agreement and its impact on Oman during a web chat hosted by al- 
Sablah.  One Sablah member greeted Ms. Novelli stating, "We 
welcome you and appreciate your talking to us, the ordinary 
people of Oman."  Ms. Novelli responded, "We believe that this 
agreement is going to bring about feasible benefits to both 
America and the Sultanate.  It is going to open the market for 
both sides."  Another member stated,  "This is really an ironic 
situation, our being able to talk to one of the United States' 
top officials, while our own government does not care enough to 
provide us with information." 
 
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Responses Soothe Concerns 
------------------------- 
 
3.  Many members expressed fears and concerns over the "joining 
of the weak and loose economy of Oman with the strongest economy 
and market in the world of the U.S.," as one participant put it. 
Ms. Novelli's responses seemed to help calm the fears of the 
participants, especially in regard to political questions like 
the involvement of the Americans in the internal politics of 
Oman, or the potential for the U.S. to pressure Oman to normalize 
it's relations with Israel as part of the negotiation 
requirements. 
 
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Dynamic Dialogue 
---------------- 
 
4. The following is the summary of the questions and the 
responses between Ms. Novelli and the members of al-Sablah: 
 
-- Why not sign an FTA with the GCC collectively? 
 
The United States strongly supports the GCC as a positive force 
for economic integration and openness.  Regarding free trade 
agreements, we work with countries based on their specific 
situation in terms of economic development and decision-making. 
Our goal is to conclude FTAs with all GCC nations at the earliest 
opportunity.  We fully support regional integration, and our FTA 
partners have assured us that the agreement does not conflict 
with GCC goals. 
 
-- Would an FTA allow harmful or prohibited goods into Oman? 
 
An FTA does not require a country to allow entry of prohibited 
goods.  Nothing in the agreement requires Oman to change the 
current situation with respect to regulating harmful or 
prohibited goods. 
 
-- Would the FTA harm Oman's relations with Saudi Arabia? 
 
We currently have reached a free trade agreement with one GCC 
member (Bahrain), we are negotiating with two others (Oman and 
UAE), and we are in serious discussions with two other states 
(Kuwait and Qatar) about future FTA talks.  A majority of the GCC 
states support bilateral FTA's with the U.S.  With respect to 
Saudi Arabia, we are working closely with the Kingdom on its 
accession to the World Trade Organization.  We fully support the 
GCC, and an FTA with Oman will not threaten that union. 
Political relations among GCC members must be worked out among 
themselves. 
 
-- Can Omani products compete with American products? 
 
Omani goods will have an advantage over similar goods from non- 
FTA countries because an FTA mandates the elimination of all 
duties on agriculture, textiles, and other goods.  The United 
States represents the largest market for goods in the world, and 
currently has a $600 billion trade deficit with the rest of the 
world.  Oman currently enjoys a $300 million trade surplus with 
the U.S. 
 
-- How will Omani textiles survive after the end of quotas?  Will 
the FTA help? 
 
Ending textile quotas was a worldwide agreement.  The FTA will 
give Omani textile producers preferential treatment in the U.S. 
market by removing all tariffs, to which non-FTA states will 
still be subject.  Again, the U.S. is the largest marketplace in 
the world. 
 
-- How will the FTA affect Foreign Direct Investment in Oman? 
 
The United States has long-standing, good relations with Oman 
stretching for almost 200 years, and we foresee no problems in 
our future relations.  American companies continue to show their 
long-term confidence in Oman through large investments: Dow 
Chemical ($3 billion), Bechtel ($1.3 billion), and Occidental all 
envision massive investment increases in the Sultanate in the 
coming years. 
 
-- Will American products swamp our market? 
 
The U.S.-Jordan FTA has been in force for four years.  Imports 
from Jordan to the U.S. have increased in that time from $11 
million annually to $1.2 billion annually, and the rate of that 
growth has increased each year.  U.S. exports to Jordan have also 
increased, but not nearly at the exponential rate as Jordanian 
exports to the U.S. 
 
-- Will the FTA impact the boycott against Israel? 
 
The FTA is a bilateral agreement between the U.S. and Oman that 
does not involve third parties.  The GCC renounced the secondary 
and tertiary boycotts of Israel long before the beginning of FTA 
discussions. 
 
-- What is your frank assessment of the drawbacks of the FTA to 
Oman? 
 
We do not see any drawbacks.  The free trade agreement is a win- 
win situation.  In Jordan, 40,000 new jobs were created as a 
result of the free trade agreement and none were lost as a result 
of it.  Trends are increasingly positive in Jordan.  An FTA will 
lead to greater prosperity here in Oman also.  We should picture 
our trade relations as a pie with finite slices.  Our aim is for 
that pie to keep on growing, so everyone's slice gets bigger. 
 
-- What is the difference between WTO membership and the FTA? 
 
Our free trade agreements are built upon the foundation of our 
WTO commitments.  The FTA, however, involves even deeper 
commitments.  Under WTO, for example, countries can keep tariff 
barriers, whereas in an FTA we agree to eliminate these tariffs. 
 
-- What is the impact if Oman signs FTA's with China or Germany? 
 
We are happy to have competition in the marketplace.  We fully 
support economic liberalization, and we have no objection to Oman 
signing FTAs with other nations. 
 
-- Can you disclose the text of the agreement? 
 
We do not disclose texts during ongoing negotiations, since these 
are strictly government-to-government talks.  But after we agree 
on a text, and even before the agreement is signed, we post the 
entire text on our website which is accessible to all: 
www.ustr.gov. 
 
-- Do recent arrests in Oman have any relation to the FTA talks? 
 
Absolutely not.  There is no connection whatsoever. 
 
-- Are you testing public opinion by posting a message on Sablah? 
 
We believe strongly in transparency, and feel it is important 
that the public knows what we are doing.  In the United States, 
we have formal processes for soliciting input and comments.  We 
value public opinion, and we take it seriously. 
 
-- Will there be any impact of Qualified Industrial Zones on 
Oman's policies? 
 
There is no impact on Oman.  QIZs are special projects authorized 
by the U.S. Congress that involve only Egypt and Israel, and 
Jordan and Israel. 
 
BALTIMORE