US embassy cable - 03OTTAWA1863

C O N F I D E N T I A L SECTION 01 OF 03 OTTAWA 001863 
 
SIPDIS 
 
FOR EB 
DEPARTMENT PLEASE PASS USTR 
 
E.O. 12958: DECL: 06/30/2013 
TAGS: ECON, ECIN, EFIN, ETRD, EINV, ETTC, CVIS, PREL, PTER, PINR, LE, XF, ETRN, Terrorist Finance 
SUBJECT: A/S WAYNE'S MEETING WITH LEBANESE MINISTER OF 
ECONOMY AND TRADE HAMADEH 
 
 1.  (SBU)  Summary:  During a bilateral meeting held June 25 
on the margins of the International Arab Banking Summit in 
Montreal, A/S Anthony Wayne and Lebanese Minister of Economy 
and Trade Marwan Hamadeh discussed the regional economic 
situation with a focus on the fight against terrorist 
financing; cooperation on Iraq; implementation of Paris II; 
and trade issues including IPR protection and the President's 
initiatives on the Middle East Free Trade Agreement (MEFTA) 
and Middle East Partnership Initiative (MEPI).  There was 
also discussion of the visa status of Minister of Finance 
Siniora and the recent cancellation of Air Canada's 
Beirut-Montreal flight.  End summary. 
 
USG Action 
---------- 
 
2.  (SBU) Action requests for information to provide to 
Minister Hamadeh are in para 13 (status of the visa review 
for Minister of Finance Siniora) and para 14 (contact 
information on the Baghdad Forum). 
 
No Economic Collapse, but Some Stumbling Blocks 
--------------------------------------------- --- 
 
3.  (U) A/S Wayne opened the meeting by expressing his 
pleasant surprise at the perseverance of the Lebanese 
economy, noting that the economic collapse many feared had 
not come about.  Hamadeh explained that Lebanon has an 
economy not of figures, but of atmosphere, climate, and the 
confidence of the Lebanese, and cited the secure Pound, the 
increasing balance of payments, and the level of Central Bank 
reserves as positive signs.  He confirmed that Paris II 
implementation is proceeding well -- most countries have 
honored their commitments -- but it has been complicated by 
the situation in Iraq. 
 
4.  (U) GOL privatization plans have been delayed by the war 
in Iraq (as they do not want to sell at depressed prices) but 
are continuing.  The GOL will call for adjudication of firms 
in the telecom field very shortly, and already has 
pre-qualified a number of companies, mainly from the region 
and Europe.  However, if the financial offers are weak the 
GOL may start with partial privatizations, for example 
spinning off only the management function of certain firms. 
All privatization revenue will be dedicated to debt reduction 
and go into a special fund for that purpose.  He added that 
the GOL needs to cut military expenses but that is difficult 
when "the region is still boiling." 
 
Ambitious Plans on Trade (and IPR Protection) 
--------------------------------------------- 
 
5.  (U) Hamadeh stressed the GOL focus on three main tasks: 
 
1.  Positioning Lebanon in the emerging Arab common market; 
2.  Concluding an accord de participation with the EU; 
 
3.  Acceding to the WTO. 
 
In the context of the EU agreement he highlighted IPR 
protection and quality control as areas that will need work. 
He later expanded on this, detailing complaints made by EU 
firms, with specific mention of Chanel and Louis Vuitton. 
Pointing out that it makes most sense to cut off the flow of 
illegal goods at the point of origin (China), he added that 
the scale of counterfeiting makes that infeasible.   As a 
result, Lebanese customs is increasing its efforts to prevent 
entry or transit of counterfeit goods. 
 
6.  (U) A/S Wayne detailed continuing USG concerns about IPR 
protection (pharmaceuticals, optical disk piracy, cable TV 
piracy, etc.), noting that Lebanon was named to the Special 
301 Priority Watch List.  Hamadeh acknowledged that Lebanon 
ranked 13th in our report, and that is "not a good position." 
 He added that IPR protection is "foreign to the Lebanese 
mind," and the laissez-faire attitude has gone to 
unacceptable extremes. 
 
7. (U) On the status of the legislation amending the 
Industrial Property Law, Hamadeh said that it is moving 
forward.  Although the Ministry of Health has the lead, it 
involves a wide range of GOL agencies so progress is slow. 
However, he is doing his utmost to keep it moving forward and 
committed to continue his efforts.    (There was no comment 
on whether the MOH would stop registering unauthorized copies 
of pharmaceutical products.) 
 
8. (C) A/S Wayne stressed the need to bring piracy of 
copyrighted material, especially cable TV content and optical 
media, under control and asked what we can do to support GOL 
efforts to combat piracy.  Hamadeh said that in response to 
USG concerns he will personally look into the pirate factory 
reportedly operating in a Hizballah region.  "I can assure 
you that we are making big efforts in three areas (qualifying 
for WTO and the trade agreements with the EU and GCC).  We 
know this (IPR) is a major battlefield and we will engage. 
We are committed.  However, our means are not always up to 
our determination.  I'll put more pressure on, and the Prime 
Minister really wants to do something."  In response to the 
offer of USG assistance, he said, "there are daily visits of 
your people in our Ministry." 
 
9.  (U) Note:  over the course of the conversation Hamadeh 
expressed his appreciation for USG support, with specific 
mention of USAID assistance with Lebanon's WTO accession and 
USG guidance on cracking down on IPR violations.  He referred 
several times to his close coordination with Embassy Beirut 
and Ambassador Battle.  End note. 
 
Continued Commitment to Counter Terrorist Financing 
--------------------------------------------- ------ 
 
10. ( SBU) A/S Wayne thanked Hamadeh for Lebanon's strong 
cooperation on the fight against terrorist financing and in 
blocking Iraqi assets.  Hamadeh emphasized that the GOL is 
committed to doing whatever is necessary to prevent the flow 
of terrorist funds through the Lebanese financial system. 
 
11. (SBU) While expressing strong commitment to the fight 
against terrorist financing, Hamadeh asked for USG 
understanding of the nuances of dealing with Hizballah.  He 
stressed that the USG's supporters in Lebanon should not be 
pushed to "perilous choices."  He acknowledged  that the USG 
is showing some patience regarding Hizballah, but the people 
consider it successful in removing the Israelis (so do not 
support punitive moves).  He advised that Lebanon should be 
treated with a lot of delicatesse.  "We should not always be 
penalized for things we are not directly responsible for. 
You have friends in the Middle East.  They deserve to be 
treated with patience and good will." 
 
Beirut-Montreal Flight Was Safe 
------------------------------- 
12. (SBU) Hamadeh raised the Canadian government's recent 
cancellation of Air Canada's Montreal-Beirut flight, saying 
unofficial Canadian channels suggest it was due to USG 
pressure, and that "we see it as reflecting your view of 
Hizballah."  He stressed that Beirut airport is one of the 
safest in the world and that flights from all over Europe 
travel in and out without incident.  The cancellation does 
not stop travel between Montreal and Beirut; people just 
transit Europe.  A/S Wayne responded that we try to be 
understanding, but we consider Hizballah a terrorist 
organization.  (Note:  Cancellation of the Beirut-Montreal 
flight came up frequently during the course of the day, 
always with the knowing assumption that the GOC acted in 
response to USG arm-twisting.  End note.) 
 
MinFin's Visa 
------------- 
 
13. (C) On Finance Minister Siniora's visa situation, A/S 
Wayne confirmed that we know and respect the work he has done 
to strengthen US-Lebanon ties; that we are conducting a 
thorough review, and expect a determination shortly. 
Hamadeh, who was familiar with the situation, suggested that 
the problem arose during Ramadan when Ministers are inundated 
with requests for charitable contributions at iftar dinners, 
and try to be equitable in contributions to Sunni and Shiite 
charities.  He went into some detail on the history and 
affiliation of various Shiite leaders, making a distinction 
between those who are involved with Hizballah and those, such 
as the one to whom he believes the contribution was made, who 
have distanced themselves from the organization, notably 
Fadlallah (sp?).  Wayne undertook to check on the status of 
USG action on the visa situation. 
 
Looking forward to continued cooperation on Iraq:  tracing 
assets and increasing trade 
--------------------------------------------- ----------- 
 
14. (SBU) Lebanese traders are extremely interested in 
getting involved in Iraq, but Hamadeh is urging them to be 
cautious, citing the risk of becoming involved with militia 
or unethical operators.  Ambassador Battle has assured him 
that there is "no veto" against participation by Lebanese 
companies in Iraqi reconstruction.  A/S Wayne noted that 
there is not yet a system for coordinating commercial 
facilitation, and suggested the GOL or Lebanese companies 
find a means to participate in the Forum in Baghdad that was 
recently established for such tasks.  He promised to provide 
Hamadeh with a contact point and more information on the 
Forum. 
 
15. (SBU) Hamadeh confirmed that Lebanon will continue to 
cooperate closely in the search for Iraqi assets; will do 
what is necessary to block and return Iraqi assets; and will 
welcome the visit from forensic accountants once that is 
requested by the Iraqi Central Bank.  He revealed that the 
Iraqi Ambassador had tried repeatedly to withdraw large 
amounts of cash from an account (before the freeze was 
announced), but the GOL had limited him to approximately 
$10,000 a month to pay salaries, or to transfers to an 
account in another financial institution (an option of which 
the Ambassador did not avail himself). 
 
Time for a Syria-Lebanon Annex to Road Map 
------------------------------------------ 
 
16. (U) Hamadeh stressed that it is "high time to think of a 
Syria-Lebanon annex for the Road Map," saying that is a view 
that has been conveyed many times to Secretary Powell. 
Bringing in the Syrians would provide a better approach on 
the Palestinian front and a more relaxed situation in Lebanon. 
 
Great Interest in Details of MEFTA 
---------------------------------- 
 
17. (SBU) Hamadeh showed great interest in the details of 
MEFTA (Middle East Free Trade Agreement) and listened closely 
to A/S Wayne's description of the President's vision.  (Note: 
 based on questions during the panel discussion and 
throughout the day; Hamadeh's interest reflects a thirst for 
detail in the region.  End note.)  After hearing A/S Wayne's 
explanation of the various methods by which the initial FTAs 
in the region could be expanded, he said Lebanon would 
probably favor the option of cumulative addition of countries 
to existing FTAs.  He explained that Lebanon faces serious 
problems with trade through both Syria and Jordan, saying 
they do not properly implement their FTAs with Lebanon and 
are charging high transshipment duties.  He said the GCC has 
indicated a willingness to include Lebanon in its plans for 
an emerging common market (implying that Lebanon has more in 
common with the trading nations of the Gulf than with its 
immediate neighbors). 
 
18. (SBU) A/S Wayne described MEPI (Middle East Partnership 
Initiative), and praised Lebanon's heritage of higher 
education, saying it is unique in the region and probably a 
major reason Lebanon's economy has survived as well as it 
has.  Hamadeh responded somewhat grimly that "we have to 
defend daily that heritage," and that there are strong forces 
that continue to resist both education and economic reforms. 
 
Bio 
--- 
19. (U) On the English version of his business card Hamadeh 
spells his name "Hamad" (with an accent grave on the final 
e).  He started his working life as a journalist, including a 
stint in Vietnam from 1967-68, and entered parliament in the 
early '80s.  His past ministerial posts include Tourism, 
Health, and Displaced People.  This is his second stint as 
Minister of the Economy.  Hamadeh is extremely fluent 
English. 
 
20. (U)  A/S Wayne cleared this cable. 
CELLUCCI