US embassy cable - 03AMMAN3991

UNCLAS SECTION 01 OF 04 AMMAN 003991 
 
SIPDIS 
 
SENSITIVE 
 
USTR FOR NOVELLI/SAUMS 
TREASURY FOR OASIA 
USDOC 4520/ITA/MAC/ONE/PTHANOS 
PASS OPIC 
 
E.O. 12958: N/A 
TAGS: ETRD, EINV, JO, XF 
SUBJECT: Secretary Powell/Trade Rep Zoellick Discuss 
Middle East Free Trade Initiative with Arab Ministers 
 
 
SENSITIVE BUT UNCLASSIFIED 
 
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Introduction and Summary 
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1.  (SBU) King Abdullah convened a breakfast meeting June 
23 with Secretary Powell and Trade Representative 
Zoellick at the World Economic Forum (WEF) meeting in 
Jordan to discuss the President's Middle East free trade 
initiative with the heads of Arab delegations to the WEF. 
Participating Arab ministers responded enthusiastically 
to presentations by Secretary Powell and USTR Zoellick on 
the President's free-trade vision and the steps required 
to realize it.  They noted the linkages between trade, 
economic and social development, and regional peace and 
security.  They also made constructive points about the 
practicalities of implementing the ambitious agenda and 
the opportunity offered by free trade between the region 
and the United States.  End Summary 
 
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King Abdullah Welcomes U.S. Initiative 
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2.  (SBU) The King opened the discussion by welcoming the 
trade initiative for the Middle East that the President 
announced in his University of South Carolina speech.  He 
described how Jordan's economy had benefited from opening 
to international trade and investment, including the Free 
Trade Agreement and Bilateral Investment Treaty it 
concluded with the United States.  Annual trade between 
the U.S. and Jordan increased from under $20 million to 
over $500 million in five years.  Over 30,000 new jobs 
were created and over $100 million in new Foreign Direct 
Investment (FDI) was attracted to the country.  At the 
same time, the King warned that opening an economy was 
hard work: Jordan enacted new laws protecting 
intellectual property, the environment and labor rights, 
and had reformed its investment and trade laws and 
regulations. 
 
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Secretary: Trade Part of the President's Vision for Region 
 
SIPDIS 
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3.  (SBU) Secretary Powell described how the President's 
goal of a free trade area in the Middle East within ten 
years fits with  our vision for engaging with the region. 
Building peace means creating economic security and 
opportunity for the large number of young people entering 
the region's workforce.  As countries drop trade 
barriers, the Middle East Partnership Initiative (MEPI) 
would help countries invest in their future through 
programs supporting education, political reform and 
empowering women.  The Secretary said that it was 
important that countries act now, and pointed to Jordan 
as an example of the great potential of trade to generate 
income and jobs when a country takes the initiative to 
change.  The President, the Secretary affirmed, is 
totally committed to this vision for the region. 
 
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Zoellick:  A Step by Step Process to Regional Free Trade 
--------------------------------------------- ----------- 
 
4.  (SBU) Foreshadowing the speech to the WEF plenary 
assembly he would deliver later that morning, USTR 
Zoellick took the floor to describe how the United States 
foresaw realizing the President's regional trade vision. 
He said that the United States needed first to listen and 
learn from its partners in the region.  Since different 
countries were at different stages in opening to 
international trade, it would be necessary to customize 
our interaction to their individual needs.  Thus, 
Ambassador Zoellick foresaw the following order of 
actions. 
 
  1) Working to bring countries not currently members of 
     the WTO into that organization. 
 
  2) Expanding the region's use of Generalized System of 
     Preferences (GSP) benefits.  (The Ambassador 
     compared the $300 million the region currently 
     exports to the U.S. under GSP with the $2 billion 
     per year exported by Brazil under the program.) 
  3) Negotiating Trade and Investment Framework 
     Agreements (TIFAs) with countries that do not 
     Currently have such agreements with the United 
     States. 
 
  4) Concluding Bilateral Investment Treaties (BITs) with 
     countries that do not yet have them. 
 
  5) Building a comprehensive FTA relationship with and 
     among the countries of the region and the United 
     States. 
 
In this process, countries like Jordan, Morocco, and 
Bahrain -- which either already have or will be 
negotiating and concluding FTAs with the United States -- 
will serve as models and sub-regional hubs for building a 
regional system. 
 
5.  (SBU) This process would, the Ambassador said, 
encourage not only greater trade between the United 
States and the region, but greater trade within the 
region as well.  Cumulation of origin among countries 
that are working toward FTA's with countries that already 
have FTA's would be an important way to encourage intra- 
regional trade.  Countries with cumulation might then be 
drawn together into regional arrangements.  At the same 
time, the United States would provide assistance, 
particularly through the MEPI program, to help countries 
develop their capacities to negotiate and implement free 
trade agreements and to develop their economies and 
societies to be ready to take greater advantage of a 
stronger relationship with the international trading 
system.  For example, U.S. assistance could help 
countries develop stronger institutions to oversee 
investment. 
 
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Arab Ministers Welcoming and Constructive 
----------------------------------------- 
 
6.  (SBU) Ministers from Arab countries attending the 
breakfast joined King Abdullah in welcoming the 
President's initiative and appreciated the presentations 
of Secretary Powell and Ambassador Zoellick.  They also 
made the following specific points: 
 
-- Palestinian Trade Minister Maher Masri said that there 
had been an implicit agreement at the Camp David talks 
that the PNA should become an observer in the WTO.  He 
hoped that this would occur and appreciated the technical 
and political support of breakfast participants to that 
end.  Ambassador Zoellick called this an "excellent idea" 
on which he hoped to work closely with Secretary Powell. 
He noted the U.S. support provided through USAID to 
reform Palestinian commercial law and promote small 
business. 
 
-- Foreign Minister Hamad bin Jassem of Qatar proposed a 
committee be formed to meet on a regular basis to work 
out how to solve issues in countries and regions and keep 
up the momentum of the initiative.  Noting a hundred-fold 
increase in U.S.-Qatari investment, he added that Qatar 
was in the process of creating an investment authority. 
 
-- Observing that different counties were at different 
stages in their discussions of FTAs with the U.S., 
Egypt's Foreign Minister Muhammad Maher asked if the 
President's idea was to have a set of bilateral 
agreements that would eventually be bound up in a 
regional agreement, or for the two processes to proceed 
in parallel.  Ambassador Zoellick replied it was most 
likely that bilateral agreements would be connected over 
time, perhaps initially on a sub-regional level. 
Referring to a recent move by the Egyptian foreign 
ministry to overrule the trade ministry on a key trade 
decision, Zoellick also said it was critical that 
countries be completely committed to the process of 
economic opening.  The initiative and momentum had to 
come from the countries within the region, he said. 
 
-- Finance and National Economy Minister Saif of Bahrain 
especially welcomed U.S. assistance on capacity building 
and technical assistance to help increase trade flows. 
He hoped agencies like the U.S. Export Import Bank and 
OPIC would expand their activities in the region.  He 
also suggested "offset" agreements were potentially 
useful tools to encourage investment in the region. 
 
-- Omani Foreign Minister Yusef bin Alawi said Oman was 
interested in "joining hands" with the United States, 
potentially through a TIFA, but hoped the United States' 
commitment over time would match its words now. 
Ambassador Zoellick said the President's effort to obtain 
Trade Promotion Authority and extension of preferential 
arrangements including GSP showed his commitment to free 
trade.  Jordan had shown it was possible move quickly in 
trade negotiations.  Waiting for legislation like the 
Baucus/McCain proposals (which would legislatively create 
new regional trade preferences) could take a long time, 
Zoellick said. 
 
-- Foreign Cooperation Minister al-Fasi said Morocco had 
been very pleased that in its FTA negotiations the United 
States had been willing to take into account Morocco's 
level of development and the sensitivity of certain 
sectors, particularly agriculture.  He hoped programs 
like the Millennium Challenge Account and MEPI would help 
Morocco and other countries get through the difficult 
period of social and economic transition to free trade. 
Ambassador Zoellick agreed the key to success was 
creating jobs, and noted the increased interest U.S. 
companies were showing in investing in Morocco since the 
start of FTA negotiations. 
 
-- Arab League Secretary General Amer Moussa said the 
President's initiative was highly commendable and called 
on Arab countries to engage.  He thought the Arab League 
could play a role in helping members share experiences 
and prepare for negotiations.  He added that he thought 
regional negotiations with the U.S. would need to be 
coordinated with parallel trade negotiations with the 
European Union.  Finally, he hoped that these processes 
would give "a shot in the arm" to the Arab League's 
effort to negotiate a regional free trade agreement by 
2005 (see 02 Amman 5212). 
 
-- Mohamed Jouini, Tunisia's Development and 
International Cooperation Minister, pointed to Tunisia's 
positive experience in opening its economy, having been 
the first in the region to negotiate an EU Partnership 
Agreement.  He highlighted the connection between trade 
and investment and noted the importance of investing in 
human resources, especially to take advantage of high 
value-added opportunities. 
 
-- Taking the floor for the PNA, Foreign Minister Nabil 
Sha'ath called on Secretary Powell to make trade the 
"first priority" in the Road Map to peace through 
relaxations of controls on movements of Palestinians. 
 
-- Finally, Jordan's Trade Minister Salah al-Bashir 
suggested that to keep up the momentum of this meeting, 
ministers agree to meet again with U.S. representatives 
to discuss ways to move forward. 
 
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Conclusion and Comment 
---------------------- 
 
7.  (SBU) In a press conference with Secretary Powell, 
Ambassador Zoellick, and Trade Minister al-Bashir 
immediately following the breakfast, Jordanian Foreign 
Minister Marwan Muasher read an agreed statement that 
expressed the hope that the dialogue begun over breakfast 
would continue.  Participating Arab ministers seemed both 
enthusiastic about the U.S. initiative and sober-minded 
about the challenges such an effort would entail.  A 
recurring theme of the breakfast was also the mutually 
supportive relationships between the Free Trade 
Initiative, MEPI and the efforts to establish broad peace 
and security in the region. 
 
8.  (U) (USTR did not have the opportunity to clear this 
report prior to departing the region.) 
 
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Participants 
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King Abdullah of Jordan 
Prince Hamza, Crown Prince of Jordan 
Prince Feisal, Chief of Staff, Royal Jordanian Air Force 
Prime Minister Ali Abul Ragheb of Jordan 
Trade and Industry Minister Salah Bashir of Jordan 
Foreign Minister Marwan Muasher of Jordan 
Planning Minister Bassem Awadallah of Jordan 
 
Mr. Abdulla Hassan Saif, Finance and National Economy 
Minister of Bahrain 
HH Hamad bin Jassem, Foreign Minister of Qatar 
Mr. Ahmad Maher, Foreign Minister of Egypt 
Mr. Yousef bin Alawi, Foreign Minister of Oman 
Dr. Nabil Shaath, Foreign Minister, PNA 
Mr. Maher Masri, Economy Minister, PNA 
Sheikh Fahem Kasemi, Economy & Trade Minister, UAE 
Mohamed Al Nouri Aljuweini, Development and International 
Cooperation Minister, Tunisia 
Mr. Khaled Rajeh al-Sheikh, Trade and Industry Minister, 
Yemen 
Mr. Al-Tayeb Al-Fahri Al-Fasi, Minister of State for 
Foreign Affairs, Morocco 
Mr. Abdullah al-Yarza, Minister of State, Saudi Arabia 
     (head of delegation) 
Prince Sultan bin Salman Abdul Aziz, Saudi Arabia 
Prince Turki bin Faisal, Director of Islamic Research 
Studies, Saudi Arabia 
Mr. Amre Moussa, Secretary General of the Arab League 
 
Secretary of State Colin Powell 
 
SIPDIS 
U.S. Trade Representative Robert Zoellick 
Ambassador Edward Gnehm 
Assistant Secretary of State William Burns 
Assistant Secretary of State Richard Boucher 
Assistant U.S. Trade Representative Catherine Novelli 
Assistant U.S. Trade Representative Christopher Padilla 
Deputy Assistant Secretary of State Shaun Donnelly 
Deputy Assistant Secretary of State Elizabeth Cheney 
Craig Kelly, Advisor to Secretary Powell 
National Security Council Director Daniel Sullivan 
Emb Amman Econ Counselor Tom Goldberger (notetaker) 
 
Gnehm