US embassy cable - 03AMMAN2562

UNCLAS AMMAN 002562 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, JO, IZ 
SUBJECT: JORDAN:  TRADING WITH IRAQ 
 
REF: A. SECSTATE 104141 
     B. AMMAN 2068 
     C. AMMAN 1651 
 
Sensitive but unclassified. 
 
1.  (sbu)  The following responses to the questions asked ref 
A are based on our ongoing dialogue with Jordanian officials 
and business leaders on their business and trade 
relationships with Iraq.  Refs B and C are recent reports on 
these issues. 
 
2.  (sbu)  Jordan was not one of the countries that concluded 
a "free trade agreement" with Iraq in recent years.  However, 
according to the Ministry of Trade, Jordan and Iraq have a 
bilateral trade agreement dating from the 1980's that exempts 
all, or nearly all, trade in goods from duties and tariffs. 
Since the start of UN sanctions, however, Iraq has applied an 
ad valorum tax of approximately 20% to all imports from 
Jordan and other countries.  The proceeds of this "war tax" 
were purportedly used to compensate the Iraqi people for the 
cost of sanctions.  The Ministry hopes that, with the change 
in the Iraqi government, the liberal provisions of the 
earlier agreement will apply to Jordanian exports. 
 
3.  (sbu)  The bulk of Jordan's trade with Iraq since 1991 
was with the Iraqi government under the UN Oil for Food 
program and the Jordan-Iraq bilateral oil for goods barter 
protocol, under which Iraq supplied Jordan with deeply 
discounted oil, with Jordan paying for the non-discounted 
portion by shipping Jordanian products.  Exchanges under the 
protocol stopped when hostilities began in March.  According 
to the Amman Chamber of Industry, about 5% of Jordan's total 
exports to Iraq were purchased by private Iraqi companies. 
Annual statistics on Jordanian exports to Iraq are available 
on the Central Bank of Jordan and Department of Statistics 
websites. 
 
4.  (sbu)  The Jordanian government and business community 
are hopeful that they will be able to re-establish and build 
upon Jordan's close traditional trading and business 
relationship with Iraq.  Jordanian businesses and companies 
have longstanding contacts in the Iraqi government and 
private sector, as well as family and personal relationships 
with Iraqis.  In addition, private Iraqis have invested in 
manufacturing facilities in Jordan that were used to supply 
the Iraqi market under the OFF and barter protocol programs. 
Jordanian companies and the government also hope that the 
seaport in Aqaba and international airport in Amman will 
serve as major logistical hubs for provisioning the Iraqi 
economy. 
 
5.  (sbu)  The Chamber of Industry and the government 
recognize that many Jordanian businesses that exported to 
Iraq under the bilateral barter protocol will not be 
competitive in a market environment.  They expect, however, 
that other Jordanian industries and companies will be able to 
compete successfully, as they currently do in other regional 
markets, including GCC countries and Egypt. 
 
6.  (sbu)  Jordanian businesspeople believe that Iraqi 
companies and government agencies will require extensive 
assistance in order to resume exporting.  For example, an 
Amman-based grain trader who has had long experience selling 
to Iraq told us that his Iraqi counterparts were telling him 
that all of the records of the "Foodstuffs Authority," the 
Iraqi agency responsible for grain procurement, had been 
destroyed.  The remaining officials do not even have points 
of contact with foreign suppliers.  The Jordanian business 
community believes that it is well-placed to assist its Iraqi 
private sector counterparts develop their capabilities.  The 
American Chamber of Commerce in Jordan, for example, has 
discussed its interest in helping establish a counterpart 
AmCham organization in Iraq. 
GNEHM