US embassy cable - 05ABUDHABI4573

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 004573 
 
SIPDIS 
 
STATE FOR NEA, NEA/ARPI 
STATE FOR EB/TPP/BTA 
STATE PASS USTR FOR AMBASSADOR DONNELLY AND DOUG BELL 
 
E.O. 12958: DECL: 11/08/2015 
TAGS: ETRD, ECON, EFIN, AE 
SUBJECT: UAE FTA CO-CHAIRS ON UPCOMING FTA ROUND 
 
REF: A. ABU DHABI 4306 
 
     B. ABU DHABI 4105 
 
Classified By: Ambassador Michele J. Sison for reasons 1.4 (B & D). 
 
1. (U) This is an action request.  Please see para 8. 
 
2. (C) Summary: On November 8, UAE FTA Co-Chairs MinEcon 
Sheikha Lubna and Minstate Finance Dr. Khirbash told 
Ambassador (in separate conversations) that the Emirati side 
is committed to an FTA with the U.S. and that they were 
working to make progress in the upcoming November 12-15 
London round of negotiations.  However, they both expressed 
disappointment with a perceived "lack of movement" on the 
U.S. side and a perceived USG "lack of acknowledgement" of 
movement on the UAE side.  Dr. Khirbash stressed that his 
instructions from the UAE political leadership were to move 
forward on the FTA because of its "strategic importance." 
Both raised the issue of telecom; Ambassador stressed that 
the U.S. has not proposed a market access limitation on 
mobile services.  They clearly appreciated Ambassador's 
statement that the USG viewed this round of negotiations as 
important.  End Summary. 
 
3. (C) On November 8, Ambassador and Econchief met with 
Minister of Economy and Planning Sheikha Lubna Al-Qasimi to 
discuss the upcoming FTA negotiations in London, the third 
round since March 2005.  Ambassador also spoke by telephone 
with UAE FTA Co-Chair MinState for Finance Dr. Mohammed 
Khalfan bin Khirbash the same day.  Dr. Khirbash, who was 
outside of Abu Dhabi, told Ambassador that the UAE 
negotiating team has "direction from our high level 
leadership to go forward, because our government views the 
FTA as an important strategic agreement."  Sheikha Lubna 
emphasized that the FTA's emphasis on transparency was 
important to the UAE, and that she supported FTAs and the WTO 
because they provided good incentives for economic reform. 
Sheikha Lubna said that the UAE is a regional leader in 
economic openness and diversification, noting that the FTA 
could promote further economic reform that would eventually 
enhance the UAE's competitiveness.  As an American Business 
Council member(dating from her days as Tejari.com CEO), she 
added that she believed that the goal of an FTA was to 
improve the business climate for both sides. 
 
4. (C) Both Sheikha Lubna and Dr. Khirbash expressed 
disappointment over the October 7 London meetings, repeating 
many of the points made by Deputy PM/MinState  Foreign 
Affairs Sheikh Hamdan bin Zayed and Minister of Information 
Sheikh Abdullah bin Zayed to Charge and A/S Welch (ref A). 
Dr. Khirbash asserted that the UAE side had come prepared to 
make progress and was disturbed that not all of their 
preparation "appeared to be taken into account."  Sheikha 
Lubna identified labor and security of assets as areas where 
further dialogue on UAE proposals was needed.  She said that 
the UAE had announced that it was interested in following the 
"Oman FTA model" in regard to labor.  She also said that when 
the UAE raised security of assets and having a sidebar 
meeting to move this subject forward, the U.S. negotiators 
responded that it was an OFAC issue that USTR could not 
discuss  Sheikha Lubna noted that OFAC had already agreed in 
principle to discuss the issue, but was awaiting an 
invitation from USTR (see ref B). 
 
5. (C) Sheikha Lubna, indicating that she was "speaking as a 
friend," told the Ambassador that she understood the 
"political reasons" on both sides for wanting the agreement. 
She noted that she wanted an agreement that also served the 
economic interests of both parties.  She cited the 
U.S.-Australia FTA as an example of a "good, high quality 
agreement," noting that it had taken a full three years to 
negotiate.  The Ambassador stressed that the November 12-15 
London round would be critical.  If the negotiations did not 
conclude in 2006, the expiration of Trade Promotion Authority 
(TPA) could delay the agreement considerably.  Sheikha Lubna 
responded that she understood the time constraint, but added 
that the UAE could not sign an agreement if it did not meet 
the UAE,s needs. 
 
6. (C) Ambassador noted to both Sheikha Lubna and Dr. 
Khirbash that we took note that the UAE had moved forward in 
a number of areas, including on the agencies' and companies' 
laws.  Dr. Khirbash explained that the UAEG had had a 
difficult time convincing its stakeholders of the need to 
modify the companies' law for U.S. companies, but did so 
because of the strategic importance of the agreement to the 
UAE.  Ambassador also raised the issue of telecom, explaining 
that the U.S. has not proposed a market access limitation on 
mobile services in the FTA.  Sheikha Lubna disagreed, noting 
that the U.S. side had insisted on total access to the UAE 
market, the ability to provide telecom cross border (rather 
than establishing a physical presence in the UAE), and had 
told the UAE that its companies could not operate GSM 
networks in the U.S. because that segment of the market was 
overcrowded. 
7. (C) Comment:  Sheikha Lubna's conversation with Ambassador 
was frank and spirited.  It is clear that she and Dr. 
Khirbash understand that USTR's room to maneuver is limited 
in some areas, but nonetheless the Emirati side seeks U.S. 
movement where possible.  While the UAE's political 
leadership is looking at the FTA's role in the broader 
strategic relationship, Sheikha Lubna's comments reflect the 
UAEG's need to sell this agreement to its UAE business 
community stakeholders.  End Comment. 
 
8. (C) Action Requests: 
 
-- Since both Sheikha Lubna and Dr. Khirbash raised our close 
strategic partnership in areas ranging from Afghanistan (UAE 
troops on the ground), to Iraq (significant financial support 
and training of Iraqi security forces), to hurricane relief 
($100 million cash donation to the USG), we recommend that 
AUSTR Donnelly lead off the November 12 opening session by 
thanking the UAE for their close cooperation on broader 
geopolitical issues. 
 
-- On the issue of the Abu Dhabi Investment Authority and 
Central Bank's concerns about security of assets, we know 
that OFAC would be happy to meet with the UAE, if USTR 
agrees.  We believe that this has been arranged, but if not, 
it would be a gesture that the U.S. negotiators could make to 
address a real UAE concern. 
 
-- In addition, please provide more detail on the specifics 
of the mobile telephone dispute that we can use in our 
conversations with the UAEG.  End Action request. 
SISON