US embassy cable - 05ABUDHABI1951

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 001951 
 
SIPDIS 
 
STATE FOR EB/TPP/BTA ADN EB/IFD/OIA 
STATE FOR NEA, NEA/ARPI, NEA/PI 
STATE PASS USTR FOR DOUG BELL 
 
E.O. 12958: DECL: 05/03/2015 
TAGS: ETRD, ECON, EFIN, TC, FTA 
SUBJECT: UAEG PREPARATIONS FOR ROUND TWO OF FTA TALKS 
 
Classified By: Classified by Ambassador Michele J. Sison for reasons 1. 
4 (b and d) 
 
 1. (C) Summary: Ambassador and EconChief discussed FTA round 
two with lead UAE negotiator, MinEcon Sheikha Lubna Al-Qasimi 
and MinFin FTA coordinator Khalid Al-Bustani on May 1. 
Sheikha Lubna confirmed the UAEG's commitment to a successful 
second round, although she predicted that the complexity of 
the issues and the UAE's economy and political system made 
third and fourth rounds highly likely for both sides to agree 
on an FTA that best met the needs of each party.  The UAEG 
has prepared extensively for the second round, bracketing 
text, identifying potential alternative language and 
providing explanations of its concerns.  End Summary. 
 
Press Highlights UAE Preparedness for FTA Negotiations 
--------------------------------------------- --------- 
 
2. (U) The UAE's English and Arabic press, on May 3, 
highlighted extensive UAEG preparations for the second round 
of U.S.-UAE FTA negotiations.  The papers, citing a Ministry 
of Finance spokesman, also noted the close public - private 
sector consultation highlighting issues to be resolved to 
ensure progress toward "a FTA that will serve the interests 
of both countries."  The articles also focused on the 
benefits of an FTA to the UAE economy. 
 
Sheikha Lubna leads Delegation, Governor Al-Suwaidi Deputy 
--------------------------------------------- ------------- 
 
3. (SBU) During the Ambassador's May 1 meeting, Sheikha Lubna 
confirmed that she would be leading the delegation to the 
second round of FTA talks in Washington, replacing MinState 
Finance Khirbash, who is suffering ill health.  She confirmed 
that Central Bank Governor Sultan Nasser Al-Suwaidi would be 
attending the negotiations as well.  (Note: MinState Finance 
Khirbash has been seriously ill for almost two months and 
visited London for unspecified tests.)  Econchief later asked 
MinFin A/US Khalid Al-Bustani to explain the likely division 
of responsibilities between Sheikha Lubna and Al-Suwaidi. 
Al-Bustani explained that the two would likely focus on their 
respective areas of strength, with Al-Suwaidi concentrating 
on the important financial services negotiations.  He added 
that Al-Suwaidi would likely also serve as Sheikha Lubna's 
deputy and would accompany her to any meetings with AUSTR 
Novelli or USTR Portman.  (Comment:  The presence of 
Al-Suwaidi at the first round of talks greatly facilitated 
discussion of key issues and moving through the draft text.) 
Sheikha Lubna stressed to Ambassador that one reason the UAE 
was bringing such a big team to Washington was to ensure that 
all of the experts were there. 
 
4. (C) Sheikha Lubna and Al-Bustani both stressed that they 
were committed to making real progress during the second 
round of negotiations and looking forward to the meetings. 
They said that they understood that the Bahraini and Omani 
negotiations had moved much more quickly than the UAE 
negotiation, but stressed that the UAE economy was larger and 
more complicated than that of those two countries.  Sheikha 
Lubna explained that this was one of the reasons that the 
UAEG was carefully scrutinizing the text.  She commented that 
texts that were appropriate for Bahrain and Oman, might not 
fit the UAE's situation exactly.  In addition, she noted that 
the federal system of government in the UAE, like that in the 
U.S., required wide consultation to ensure that any agreement 
would be implementable.  Sheikha Lubna explained that given 
the issues involved, she believed that a 4th round, would be 
likely.  She stressed that the UAEG was committed to a FTA 
with the U.S., but wanted to be sure that it understood its 
commitments and that the FTA met the needs of both parties. 
 
UAE Preparing Hard for Round 
---------------------------- 
 
5. (C) In a separate meeting with Al-Bustani on May 1 to 
discuss preparations for the round, he showed EconChief a 
number of UAEG bracketed texts and said that the UAEG would 
pass them to the U.S. as soon as the negotiating council 
approved them.  Al-Bustani also said that the UAE was 
prepared to exchange market access offers with the U.S. and 
that the UAE Commercial Attach in Washington already had 
these offers.  EconChief urged Al-Bustani to have the head 
negotiator for market access contact his counterpart to 
arrange for exchanging the offers, which he agreed to do. 
Al-Bustani subsequently told Econchief that the UAEG would be 
forwarding texts and other documents to the USG the week of 
May 1.  On May 2, Ambassador urged Sheikha Lubna to forward 
the texts as quickly as possible.  Some of the texts have 
been forwarded to USTR and we have forwarded to NEA/ARPI. 
 
Higher Council For Economic Development 
--------------------------------------- 
 
6. (SBU) Sheikha Lubna explained the role of the new Higher 
Council for Economic Development in reviewing FTA's.  She 
said that she is the chair of the Council and Sheikh Mohammed 
bin Zayed is the honorary chair.  The membership includes the 
heads of the economic departments of each emirate.  The 
Council is charged to look at FTAs and economic reforms, 
including changes to laws and regulations.  She added that 
when the UAE ratified an FTA, the federal government sent it 
to the rulers of the seven emirates for ratification.  The 
offices of the rulers would then send it to their economic 
departments for recommendations.  Bringing in the economic 
departments early, she added, improved the UAEG's ability to 
build consensus behind reforms.  Sheikha Lubna noted that the 
Council would establish a secretariat, which would be housed 
at the Ministry of Economy. 
 
 
The Text is Important 
--------------------- 
 
7. (C) On May 2, EconChief met with William Brown, Senior 
Legal Advisor to the Abu Dhabi Investment Authority (ADIA) 
and Dr. Robert Peake, Tax Advisor to ADIA (Protect Both). 
They stated that ADIA had drafted the UAEG's response to 
three of the negotiating chapters: Dispute Settlement, 
Investment, and Financial Services.  Brown said that his 
understanding was that MinFin would forward the Dispute 
Settlement and Investment chapters to USTR directly.  The 
Central Bank was still reviewing the ADIA proposals on 
financial services.  Brown and Peake would be meeting with 
the Central Bank on May 3, but thought that they had 
addressed the Central Bank's concerns.  (Note: On May 3, 
Al-Bustani confirmed that the Central Bank was reviewing the 
Financial Services text and said that the lawyers were 
reviewing the proposed changes to the investment and dispute 
settlement texts.)  Brown explained that ADIA as the 
investment arm and "the ultimate checkbook" for Abu Dhabi, 
and by extension the UAE, had a number of concerns.  For 
example, ADIA was concerned about whether the FTA would 
increase ADIA's exposure to potential asset freezes (under 
the Patriot Act or other U.S. law) or frivolous law suits. 
Brown noted that he was collecting information on the 
increase in law suits that followed U.S. FTAs with other 
countries.  For the sake of transparency, he noted, ADIA had 
addressed its concerns, in the context of the FTA, in side 
letters to the chapters.  He said he understood that some of 
the issues might not fit into the FTA framework, but that 
they were all valid bilateral trade and investment issues. 
The side letters were designed to be separable so that the 
UAE negotiators could also discuss them with other USG 
agencies that might be more appropriate.  Brown stressed that 
his goal was to identify the key issues for both sides, work 
to resolve them and then help senior government officials 
properly understand the cost/benefit of unresolved issues. 
 
8. (C) Peake noted that some of the UAE negotiators had 
responded negatively to the U.S.' perceived unwillingness to 
move from its prepared text.  He said that he understood the 
legal constraints on USTR, but urged that, where possible, 
the U.S. negotiators look at UAEG concerns with an open mind 
and try to see how to resolve them, either within the context 
of an FTA or by referring the issue to other offices in the 
USG.  He suggested that this would be more conducive to 
concluding an agreement then by declaring something "dead on 
arrival."  Brown said that he and Peake had pushed some of 
the other negotiators to try and "think beyond" their 
reflexive resistance to change, by explaining that the USG 
negotiators would try to understand and deal with legitimate 
concerns. 
 
Differences in Negotiating Style 
-------------------------------- 
 
10. (C) Brown and Peake highlighted cultural differences 
between the UAEG and USG negotiators.  Peak, a long time Abu 
Dhabi resident, noted that the UAE worked on a Majlis 
(council) consensus building basis, everyone wanted to be 
sure that his opinion was considered.  The UAE had made a 
tactical error during the first round by trying to focus 
first on "big picture concepts"  This had been akin to 
speaking a different language to U.S. negotiators who were 
ready to negotiate and finalize text. 
SISON