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
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