US embassy cable - 05ABUDHABI2704

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 002704 
 
SIPDIS 
 
STATE FOR NEA/ARPI, EB/TPP/BTA, EB/IFD/OIA 
STATE FOR EAP/CM 
STATE PASS USTR FOR DOUG BELL 
 
E.O. 12958: DECL: 06/15/2015 
TAGS: ETRD, ECON, EFIN, AS, CH, TC, FTA 
SUBJECT: UAE PROGRESS ON FTA ISSUES -- SLOW BUT STEADY 
 
Classified By: Ambassador Michele J. sison for reasons 1.4 (b & d) 
 
 1. (C) Summary: The UAE continues to make slow, but steady 
progress on outstanding Free Trade Agreement issues in 
advance of the proposed June 27 or 28 DVC between the lead 
negotiators.  We have noticed an up tick in UAE preparations 
as the date of the DVC draws near.  For that reason, Embassy 
suggests that USTR propose another DVC for early September to 
re-energize movement after the summer, but before the 
September round.  The UAEG continues its efforts to promote 
the FTA to Emirati stakeholders.  The telecoms negotiating 
group held the first DVC on June 14 and made some progress. 
The UAE hopes to make its market access offer in a week and 
its services non-conforming measures submission by June 18. 
The UAE is looking for an early July DVC to discuss IPR.  Our 
interlocutors also said that they hoped the GCC-EU FTA 
negotiations would be concluded by the end of 2005, and that 
the GCC was interested in gaining access to China's 
petrochemicals market through the GCC-China FTA negotiations. 
 End Summary. 
 
2. (C) Econchief and econoff held a series of meetings this 
week with various UAE Free Trade Agreement (FTA) negotiating 
team leaders to assess the progress in advance of the 
proposed June 27 or 28 digital video conferences between the 
lead negotiators. (Note: Post prefers the June 28 DVC date in 
view of our senior visitor schedule.) 
 
UAE Continuing Outreach 
----------------------- 
 
3. (U) On June 15, MinState Finance Dr. Mohammed Khalfan bin 
Khirbash gave an interview promoting an FTA with the U.S. 
that was carried in several of the UAE's Arabic papers.  He 
asserted that an FTA with the U.S. would provide real 
opportunities to the UAE industrial sector, explaining that 
it would give the UAE better access to U.S. markets.  It 
would also encourage joint ventures between U.S. and Emirati 
businesses, which would improve UAE access to U.S. technology 
and expertise, he emphasized. 
 
Telecoms wins DVC race - June 14 
-------------------------------- 
 
4. (U) UAE and U.S. negotiators held a productive telecoms 
DVC on June 15, and scheduled an E-Commerce DVC on June 21. 
According to Telecommunications Regulatory Authority Director 
General Mohamed Al-Ghanim, both sides made some progress.  He 
added that he thought it would be easier to make progress on 
the E-Commerce chapter.  He was coordinating with the other 
negotiating groups -- since e-commerce is tied to other 
chapters -- but was optimistic about progress. 
 
Market Access - UAE Hopes to Make Offer in a Week 
--------------------------------------------- ---- 
 
5. (C) On June 14, Econchief met with Director General of the 
UAE Federal Customs Authority Mohamed Al-Mehairi to discuss 
the UAE's goods offer.  Al-Mehari explained that he had 
contacted his U.S. counterpart to say that he still needed a 
week to finish the offer.  He had prepared a draft offer, but 
had not gotten clearances from two stakeholder agencies 
(MinFin and the UAE Federation of Chambers of Commerce).  He 
was working with them and was hopeful that he would get 
clearances shortly.  He planned to present the offer (in 
general terms) to the cabinet for approval at its June 19 
meeting and then would send it to the U.S. 
 
Services Non-Conforming Measures - Hopefully by June 18 
--------------------------------------------- ---------- 
 
6. (SBU) Econchief and Econoff met with MinEcon A/US for 
international Cooperation Abdulla Al-Saleh on June 13 to 
discuss progress with the services chapter.  Al-Saleh had 
just finished the second round of FTA negotiations with the 
Australians and was preparing to go to the G-77 meeting in 
Qatar.  He said that his team was working hard to revise the 
UAEG's Non-Conforming Measures (NCM) submission, and he hoped 
to have it ready before he left for the GCC-China FTA talks 
on June 18. 
 
7 (C) According to Al-Saleh, the UAEG had brought a draft NCM 
submission to the second round of negotiations in Washington 
in May.  The negotiators did not hand it over at that time, 
however, because they were looking for changes to the U.S. 
draft text.  (Note: it appears that some of the changes were 
in chapters other than the services chapter.)  Al-Saleh said 
that he "couldn't give anything away" in services without 
being sure that the other groups were getting what they 
needed.  When the UAE negotiators realized that the U.S. 
lacked flexibility in the text, they knew that they needed to 
revise their list of non-conforming measures.  (Note: 
Al-Saleh also said that the UAE would be preparing a side 
letter on the issue of temporary entry (i.e., visas), since 
this was still a concern.) 
 
IPR Some Progress 
----------------- 
 
8. (SBU) On June 11, econchief and econoff met with Ali 
Al-Baloushi, Director of the Copyright Department of the 
Ministry of Information to discuss progress on IPR 
discussions and to try and schedule a videoconference with 
U.S. negotiators.  Al-Baloushi said that he was still waiting 
for other agencies to provide comments on pending issues in 
the IPR text.  He said he would be working with MinState 
Finance Dr. Khirbash to expedite movement from other 
agencies.  On June 15, Al-Baloushi told econchief that he was 
still working with other agencies, but promised to provide 
USTR with some UAEG comments, which he subsequently did. 
Al-Baloushi also suggested that the UAE would be ready for a 
videoconference the first week in July with the IPR teams. 
 
Investment/Financial Services 
----------------------------- 
 
9. (C) Econchief talked to Abu Dhabi Investment Authority Tax 
Advisor Dr. Robert Peake (strictly protect) on June 15. 
Peake said that ADIA was close to finalizing its 
proposal/explanation on Federal-Emirate jurisdiction that it 
planned to use with both the Australians and the USG.  He 
commented that it was a complicated issue and he would prefer 
to discuss it in person rather than over a videoconference. 
Unfortunately, he added, the Ministry of Finance had 
expressed its strong preference that the ADIA representatives 
not travel to the U.S. without the rest of the negotiating 
team.  When Econchief raised this issue with MinFin A/US for 
Revenue and Budget Khalid Al-Bustani, he explained that the 
UAEG preferred not to have negotiations where only some 
members of the UAE team were present to reduce the 
possibility of confusion. 
 
Rules of Origin 
--------------- 
 
10. (U) At the request of the U.S. negotiator on the rules of 
origin chapter, econoff arranged for in-person meetings with 
Ali Fayel Mubarak, head of the Certificate of Origin section 
at MinEcon.  Two U.S. negotiators will meet with their 
Emirati counterparts in Dubai on June 28 and 29. 
 
FTA a Learning Process 
---------------------- 
 
11. (SBU) All of our interlocutors stressed that the U.S. FTA 
was a more complicated undertaking than they had originally 
realized, and that the USG had had less flexibility than they 
had originally hoped.  They note that the UAEG negotiators 
are using the lessons learned from the U.S. experience in 
their FTA negotiations with other countries.  Al-Saleh 
suggested that the preferred USTR format of multiple, 
simultaneous negotiating groups overstretched UAEG resources. 
 He compared it to the negotiations with Australia, which 
were divided into three groups (goods, services, IPR).  This 
allowed the UAEG to bring in a core team of negotiators, 
supplemented when necessary by technical experts.  In the 
negotiations with the U.S., many of the lead negotiators were 
concerned that they were not seeing the whole picture and 
needed to undertake extra consultations before being 
comfortable agreeing with text. 
 
GCC-EU FTA by the End of the Year? 
---------------------------------- 
 
12. (C) Al-Saleh also told us that he had attended a services 
round between the GCC and the EU the week of May 29, which he 
thought had gone well.  He said that he hoped that the 
negotiations were on track for signature in time for the GCC 
summit in December.  The UAE, France, Germany, and the UK 
were pushing for a rapid conclusion to the negotiations. 
Al-Saleh opined that, if the negotiations continued to drag 
on, the UAE would lose interest.  He noted that the UAEG and 
the GCC were pursuing other FTA negotiations and that an FTA 
with the EU represented an opportunity, but not one that the 
UAEG would wait on indefinitely. 
 
GCC-China FTA, It's Petrochemicals 
---------------------------------- 
 
13. (C) Al-Saleh briefly discussed the upcoming GCC-China FTA 
talks, adding that he would be leaving on June 18 to 
participate in the negotiations.  He said that the GCC was 
very interested in FTA talks with China, especially in 
getting access to the Chinese petrochemical market, where he 
said, tariffs were high. 
 
Comment 
------- 
 
14. (SBU) The UAEG is continuing to take steps forward on the 
FTA.  Many of the negotiators are stretched with other FTA 
commitments, which has slowed progress somewhat, as has the 
relative inexperience of the negotiators.  That said, post 
believes that the June 27 or 28 video conference between 
AUSTR Novelli and MinState Finance Khirbash and MinEcon 
Al-Qasimi will be a useful session.  We have seen that it has 
served as a "forcing event" for the UAEG to take a number of 
steps.  Given that the UAE is moving into the summer season, 
we would strongly suggest a second video conference be held 
in early September to "jump start" the work in advance of the 
September round. 
SISON