US embassy cable - 05ALGIERS1606

C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 001606 
 
SIPDIS 
 
DEPT PLEASE PASS USTR (DOUG BELL, GREG HICKS) 
 
E.O. 12958: DECL: 08/03/2015 
TAGS: ECON, AG, WTRO, USTR, WTO 
SUBJECT: COMMERCE MINISTER SEEKS CONTINUED US SUPPORT ON 
ALGERIA'S WTO ACCESSION 
 
REF: HICKS-PIGNATELLO EMAIL 7/29 
 
Classified By: Ambassador Richard W. Erdman, reasons 1.4(b)(d). 
 
SUMMARY 
------- 
 
1. (C) In a July 30 courtesy call with Commerce Minister El 
Hachemi Djaaboub, Ambassador delivered USTR talking points 
(ref) that underscored USG support for Algeria's WTO 
accession and raised issues for Algeria to address more 
thoroughly in both bilateral market access and multilateral 
negotiations.  Djaaboub strongly reaffirmed Algeria's 
commitment to completing the accession process in the 
shortest time possible and instructed External Commerce 
Director General Zaaf to provide a revised services offer 
before the end of August, as we requested.  Djaaboub and Zaaf 
commented on issues raised in Geneva, noting that Algeria no 
longer maintained monopolies or subsidized failing state 
enterprises from the state budget.  Zaaf also repeated that 
Algeria sought 'observer status' for the Civil Aviation 
Agreement, claiming this is what many other new WTO adherents 
have done before committing to zero tariffs in this sector. 
While Zaaf did not specifically mention audio-visual, he said 
there would be a new services offer on energy and that 
Algeria was working on proposals for the information 
technology, construction equipment, paper, and wood 
agreements.  Djaaboub welcomed receiving specific comments 
from USTR about shortcomings in Algeria's earlier responses; 
stated his intention to be as transparent as possible in this 
process; and solicited Ambassador for continued US "support 
and intervention" during the remainder of the accession 
process.  Ambassador reiterated USG offers of technical 
assistance and encouraged Djaaboub to play a leading role in 
government councils in order to ensure rapid progress. 
Ambassador also reviewed the USTR talking points the 
following day with Privatization Minister Temmar, who 
continues to have an informal oversight role on Algeria's 
accession. END SUMMARY. 
 
STATUS CHECK: OUTLINING 
BOTH PROGRESS AND GAPS 
----------------------- 
 
2. (C) Ambassador met new Commerce Minister El Hachemi 
Djaaboub July 30 to discuss WTO accession progress and 
deliver USTR talking points on the July 21 informal meeting 
in Geneva.  The points underscored US support for Algeria's 
WTO accession, cited both progress and gaps in bilateral and 
multilateral negotiations, and identified several areas where 
Algeria should give revised offers and provide additional 
information.  After reviewing the talking points (in French), 
Ambassador, noting he was speaking frankly and as a friend, 
said some of the Algerian responses to the questions posed 
had lacked clarity or were incomplete, and at least one 
question was not answered at all.  Some Algerian comments had 
also left the impression that GATT Articles 3, 11, and 17 may 
not have been properly understood by the Algerian side.  This 
was partly a matter of communication, since in the past we 
had often found Algeria had in fact taken the necessary 
steps, when pressed for clarification.  External Commerce 
Director General Zaaf claimed that the Algerian delegation 
did, in fact, address the issues of state subsidies and state 
monopolies: there were neither subsidies nor special 
privileges for state-owned enterprises (SOEs).  Zaaf was 
certain that Algeria had answered these questions in the June 
21 responses. 
 
3. (C) Djaaboub agreed with Zaaf that the state did not give 
handouts to SOEs.  Ambassador replied that he had heard state 
banks still gave loans to SOEs without applying the same 
criteria they would to other applicants, which the Minister 
denied.  Commercial relations existed between SOEs and the 
banks, Djaaboub said, but there was no longer a direct link 
between the state budget and SOEs. (Comment: While SOEs may 
no longer be paid directly out of the state budget, state 
control of the public banks that do the vast majority of 
lending implies a political relationship between public banks 
and public companies.  We do not think the GOA would 
prematurely sever SOEs' relationships with public banks and 
risk the politically unacceptable results. End Comment.) 
However, the Minister added that they were "not trying to 
trick anyone."  There simply were no subsidies.  With 
apparent sincerity, he said that it was Algeria's intention 
to pursue the accession process in "total transparency," and 
Algeria was sure to succeed if it emulated US and EU 
leadership on open markets.  Thanking the US for its ongoing 
support for Algeria's accession efforts, Djaaboub requested 
continued US "support and intervention" during the remainder 
of the accession process, including the September 16 informal 
and October 21 Working Party meetings. 
 
COMMERCE MINISTER CHAIRS A NEW 
COMMISSION TO REVIEW ALL WTO WORK 
---------------------------------- 
4. (C) The Minister thanked Ambassador for his frank 
presentation.  Describing how the question and answer has 
worked, he said that questions on specific sectors were 
dispatched to the individual Algerian agencies responsible. 
Agencies often answered questions in different styles, which 
could lead to confused, incomplete answers.  The Minister now 
chaired a newly formed central commission to edit all WTO 
documents and ensure consistency of replies.  He added that 
the GOA had, in fact, done a thorough "cleaning" of legal 
texts by reviewing executive decrees to ensure WTO 
conformity.  He said his prior experience in responding to 
WTO questions as Minister of Industry would give him more 
perspective on the process. 
 
AREAS FOR IMPROVEMENT: 
BILATERAL NEGOTIATIONS 
---------------------- 
 
5. (C) Civil Aviation Agreement: Orally translating the 
talking points, Ambassador said the USG would provide Algeria 
with a specific request on manufacturing tariffs following 
verification of Algeria's incorporation of Civil Aviation 
Agreement zero tariffs into the offer.  Zaaf replied that, 
with 3,000 items in the Agreement, the Agreement was too 
lengthy for a "developing country" like Algeria to address. 
He said that Algeria would like to do "what other countries 
have done," which is to agree to observer status before 
taking on broad commitments in this area.  In the areas of 
information technology, construction equipment, paper, and 
wood, Algeria was already crafting proposals to join 
agreements. 
 
6. (C) Energy: Ambassador said that progress on services 
depended on our receipt of a revised offer.  Zaaf replied 
that Algeria was reviewing proposals for energy to include in 
its services offer. He said there would likely be an answer 
in time for the September 16 meeting, prompting Djaaboub to 
instruct Zaaf on the spot to produce the paper before the end 
of August, so the US could have time to review the energy 
proposal before the meeting.  As an indication of the GOA's 
commitment to the accession process, Djaaboub noted that 
Commerce staff were giving up their vacations to work on this 
and other issues. (In fact, one Commerce participant in an 
International Visitors Sub-Regional Program on Free Trade has 
withdrawn from the two-week visit to the US, on orders from 
Secretary General Chelgham, in order to work on accession 
 
SIPDIS 
documents.)  (Comment: In a two-on-one meeting with Temmar 
August 1, Ambassador said that Zaaf had been reluctant during 
the Geneva meeting to adjust the Algerian position on some 
smaller issues, and agreed to alter his stance only after 
intervention by Algeria's Ambassador Jazairy.  This 
reluctance, Ambassador noted, was typical of someone at a 
director-level who had failed to see "the big picture" and 
let small issues obstruct progress.  Jazairy had played a 
helpful role, Ambassador continued, and it would be critical 
to have strong leadership moving forward so that Algeria's 
mid-level directors and negotiators see the same "big 
picture" as Algeria's senior leadership.) 
 
7. (C) Audio-Visual: Neither Djaaboub nor Zaaf addressed 
audio-visual, leading us to believe Algeria may need to make 
a concerted effort in this area.  (Comment: July 2 press 
reports that the position of Minister of Communication will 
be temporarily filled and later completely dissolved indicate 
the GOA is seeking a smaller role in regulating information 
and media, a change which could have salutary effects on 
opening the audio-visual market.) 
 
8. (C) Timeline: As per talking points, Ambassador noted that 
the USTR team in Geneva would be prepared to meet on 
September 16 if they receive the requested information by the 
end of August.  Djaaboub and Zaaf again agreed that Algeria's 
new submissions would have to be completed before the end of 
August in order to allow time for translation and review 
prior to the September 16 informal meeting. 
 
AREAS FOR IMPROVEMENT: 
MULTILATERAL NEGOTIATIONS 
------------------------- 
 
9. (C) Working Party Draft Report: Ambassador noted that, 
while much progress had been made, the draft Working Party 
report needed a great deal of work both to reflect the 
current state of play in Algeria's efforts to accede and to 
address outstanding issues.  Djaaboub did not have a specific 
reaction to the status of the draft report. 
 
10. (C) Interministerial Leadership: Ambassador underscored 
the importance of Djaaboub's personal leadership during the 
accession process not only within the Commerce Ministry but 
also among other ministries that have roles to play in 
accession on issues such as foreign exchange controls, import 
licensing, pricing policies, rules of origin, state 
enterprises, subsidies, SPS, TBT, trading rights, and 
transparency. 
 
11. (C) Technical Assistance: Emphasizing US support for 
Algerian accession, Ambassador said USTR was willing to help 
Algeria address and resolve the remaining issues.  For 
instance, USTR promised to provide Algeria with non-papers on 
SPS and the GATT articles relevant to state enterprises and 
trading rights to help them better understand what remains to 
be done.  USTR was also prepared to provide a list of Member 
questions that Algeria received through the Secretariat that 
USTR believes must be answered more completely.  Zaaf said 
that this kind of list would be important to have moving 
forward, and Ambassador said we would provide it. 
 
DJAABOUB: STRONG SUPPORTER 
OF ECONOMIC REFORM 
-------------------------- 
 
12. (C) As evidence of his support for ongoing economic 
reform, Djaaboub cited his recent interaction with students 
who challenged him on WTO accession: Was the government 
really going to let foreign firms into Algeria, and why was 
WTO accession important?  He said he encouraged the students 
to see no difference between Algerian companies and foreign 
ones.  All companies looked after their own interests and 
served as economic drivers, so all firms were essentially the 
same.  Regarding WTO accession, Djaaboub pointed out that he 
"never heard of a country that had lost" the quest for 
economic growth after acceding to the WTO.  Proof was in the 
results.  He noted for Ambassador that many Algerians have 
come to accept certain facets of economic reform, for example 
that insolvent state firms must declare bankruptcy.  As 
former Finance Minister Benachenhou had once declared, 
Djaaboub said, Algeria did indeed suffer from a "complex of 
destruction complexes."  Ambassador noted the process could 
be viewed as one of "creative destruction," where failing 
firms were allowed to die and then be replaced by more 
dynamic and competitive entities.  While this caused short 
term disruptions that had to be managed, in the long term it 
would produce more jobs and more growth.  Factories were not 
museums for preserving the past, but living economic 
organisms.  As Darwin had noted, it was the species that 
failed to adapt that did not survive. 
 
ERDMAN