US embassy cable - 03AMMAN3830

UNCLAS SECTION 01 OF 02 AMMAN 003830 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR FOR NED SAUMS 
GENEVA FOR USDEL WTO 
USDOC FOR 4520/ITA/MAC/ONE/PTHANOS 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, IS, JO 
SUBJECT: A/USTR NOVELLI'S JUNE 21 MEETING WITH TRADE 
MINISTER BASHIR 
 
1.  (sbu)  Summary:  A/USTR Novelli discussed the President's 
MEFTA plans, US-Jordan FTA follow-up, and QIZ's with Trade 
Minister Salah Eddin al Bashir in a June 21 meeting on the 
margins of the World Economic Forum at the Dead Sea.  Novelli 
and Bashir also discussed the possibility of expeditiously 
working out a bilateral Government Procurement Agreement 
(GPA) to provide for better access into procurement markets 
in each country while Jordan negotiates its accession into 
the WTO's GPA.  Finally, Bashir asked for additional USG 
assistance to improve Jordan's capacity to produce 
agricultural products acceptable to the US market.  End 
summary. 
 
MEFTA 101 
 
2.  (sbu)  A/USTR Novelli outlined the President's goals for 
the Middle East Free Trade Area, highlighting the USG's 
desire to create a free trade area encompassing all willing 
partners in the region within ten years.  Novelli explained 
the USG's strategy to move partner countries along the path 
to free trade in stages depending on their current level of 
reform - i.e., bringing non-WTO member countries into the 
WTO; creating conditions precedent for an FTA in liberalizing 
countries, and concluding FTA's with countries with the 
appropriate level of reforms in place.  She added that 
Jordan, along with Morocco and ultimately Bahrain, would be 
the "poles" around which neighboring countries in the Levant, 
Maghreb and Gulf, respectively, would cluster in creating 
compatible free trade infrastructures.  These free trade 
"clusters" would ultimately be united in a greater free trade 
area that would adopt the most rigorous standards from each 
agreement.  Novelli noted that Egypt represented a special 
challenge, and that it was still unclear how the free trade 
relationship with Egypt would develop. 
 
BASHIR WELCOMES MEFTA, BILATERAL FTA COOPERATION 
 
3.  (sbu)  Bashir said the GOJ looked forward to having 
regional FTA partners to cooperate with, noting especially 
that new opportunities for cumulation of origin among FTA 
partners would help boost intra-regional trade.  He noted 
that Singapore had expressed interest in signing an FTA with 
Jordan (its first with a middle eastern country), and that 
the GOJ was considering the offer favorably.  Bashir asked 
Novelli if it would be possible for Jordan to cumulate origin 
with Iraq, given the centrality of Iraq to Jordan's trade 
future.  Novelli responded that cumulation was currently only 
being considered among countries that enjoyed FTA's with the 
U.S., primarily because opening cumulation up to countries 
that had not made appropriate commitments to reform would 
degrade the integrity of the FTA's themselves. 
 
4.  (sbu)  Following up on the December 17, 2002 Joint 
Committee meeting, Bashir said the GOJ had nearly completed 
the list of tariff line items for which it was requesting 
accelerated tariff reduction under the FTA.  He added that 
the GOJ was ready to move forward expeditiously to hold the 
first Joint Environmental Forum meeting.  Novelli said the 
USG was ready to work with the GOJ to conclude all the 
outstanding items from the December meetings, and urged 
Bashir to submit any requests as early as possible.  She 
emphasized, though, that under the terms of the Trade 
Promotion Authority granted by the U.S. Congress, USTR would 
have to look for some measure of reciprocity in any request 
for further tariff reductions. 
 
NEWS FROM THE QIZ's 
 
5.  (sbu)  Bashir informed Novelli that the GOJ and Israeli 
governments would soon pass to USTR applications for QIZ 
designation for two new sites in Jordan, as well as an 
application to expand the al Tajammouat QIZ in Amman.  He 
said a recent visit to Amman by Israeli QIZ chief Gaby Bar 
had set the stage for Israel's trade minister to sign off on 
the new QIZ's.  Bashir noted the visit also brought the GOI 
and GOJ closer to an agreement to adjust the Israeli input 
percentage requirement under the QIZ initiative.  He 
described a "sliding scale" incorporating marginal rates for 
progressively higher-cost goods (i.e., goods would be 
assessed 11% input requirement on the first $2 of value, 8% 
on the next $2, and so on, to a floor of 2% for every dollar 
of value above an agreed limit - e.g., $10).  Bashir said he 
was confident the two sides could reach a final agreement on 
the mechanism "within weeks."  Finally, Bashir said he was 
trying to put together a conference for current and potential 
textile sector investors, aiming for a mid-October date.  He 
promised to keep USTR apprised of QIZ developments. 
 
BILATERAL GPA POSSIBLE? 
 
6.  (sbu)  Novelli recounted remarks she heard in other 
events regarding difficulties U.S.-Jordanian joint ventures 
are experiencing when bidding on government procurement 
contracts in the U.S., and expressed willingness to work with 
the GOJ to expedite the opening of procurement markets on a 
bilateral, and reciprocal, basis.  Bashir noted that the GOJ 
had submitted its initial entities offer to the WTO's GPA 
committee, but acknowledged that negotiations on final 
accession could take some time.  He agreed with Novelli that 
a bilateral agreement with the U.S. would be a useful interim 
measure, and said the GOJ would follow up through the embassy. 
 
AG SECTOR DEVELOPMENT 
 
7.  (sbu)  Bashir said the GOJ is taking a greater interest 
in building capacity in the agricultural sector, with an eye 
to exporting Jordanian ag products to the U.S. and other 
western markets.  He noted the GOJ recently established its 
own autonomous food and drug administration, and added that 
Jordan's health ministry is developing a relationship with 
the U.S. Department of Health and Human Services. 
 
8.  (u)  A/USTR Novelli did not have an opportunity to clear 
this message. 
GNEHM