JORDAN TRADE MINISTRY LAYS OUT FTA TRADE ISSUES FOR

UNCLAS SECTION 01 OF 03 AMMAN 002494

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SUBJECT: JORDAN TRADE MINISTRY LAYS OUT FTA TRADE ISSUES FOR
JC


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1. (SBU) SUMMARY: In preparation for the U.S.-Jordan
Joint Committee meeting, Ministry of Industry and Trade
official Amer Hadidi March 25 reviewed key trade issues with
the TIJARA coalition of trade and business groups and sought
their views on issues for the JC. Issues included
accelerating tariff reductions, discussing WTO issues,
reviewing guidelines on rules of origin, FTA implementation,
renewed interest in a bilateral government procurement
agreement, and seeking cumulation of content for products in
the region, including with Iraq. Also highlighted was the
GOJ's concern about the end of the Multifiber Agreement
(MFA) at the close of 2004, with the GOJ likely to seek
additional U.S. assistance to counter anticipated ill
effects. END SUMMARY.

GPA: Renewed Interest
--------------


2. (SBU) Hadidi, a senior MOIT trade negotiator and
Director of the Department of Industrial Development, led
off with a proposed government procurement agreement (GPA).
Jordan has already presented its initial entity offer in the
WTO, he said. But the process takes a long time, an
average of at least two years. A bilateral GPA could be the
same as the WTO agreement or it could be "GPA plus," he
said. With the growing U.S.-Jordan partnership, a bilateral
GPA was of great interest to Jordan, he continued, and the
GOJ would be raising GPA at the JC. (NOTE: This is a
renewed expression of interest that had flagged over the
last six months. Hadidi told Econoff that the GOJ is
sensitive to the problems the leading Jordanian exporter of
air conditioning units, Petra Engineering, is facing with
"Buy America" legislation at the state and local levels in
the United States. A GPA would help secure millions in
additional contracts for the firm, while opening Jordan's
markets wider to U.S. firms. END NOTE.)


3. (SBU) On acceleration of the tariff reductions, now
scheduled in the FTA to be completed in 2010, Hadidi said
the GOJ would raise its July 2003 request for zero tariffs
on certain garments in HST codes 61, 62, and 63. (NOTE:
The Trade Ministry has just forwarded to the Cabinet a
national strategy on the garment industry in Jordan in which
accelerated reductions in clothing tariffs on the U.S.
market under the FTA play a key role. Details to come
septel. Hadidi said privately that DPM Halaiqa will speak
to the Israelis as soon as possible about the possible
effects of this move on QIZ trade, but had emphasized that
the political situation between Jordan and Israel had not
improved since FM Shalom's "postponed" visit in January.
Halaiqa would arrange a private consultation with Israeli
DPM Olmert, probably by phone, he said. END NOTE.)

Cumulation of Content With "Adjacent Nations" and Singapore
-------------- --------------


4. (SBU) The FTA rules of origin already mention
"adjacent" nations as potentially being able to participate
in cumulation of content. Hadidi said the GOJ was very
interested in pursuing content cumulation in Jordanian
products that included Iraq. The similar relationship with
Israel in the Qualifying Industrial Zones (QIZs) -- whereby
Jordan's 35 percent value added can be supplemented with 8
percent Israeli content to secure both duty-free and quota-
free access to the U.S. market -- was "very beneficial" to
Jordan, he said to the closed assembly. Jordan would also
seek to cumulate content with Morocco, he added. Jordan had
recently concluded an AGADIR trade agreement with Tunisia,
Egypt, and Morocco, he said, and wanted to propose something
along similar lines. Acknowledging that the rules of origin
in the U.S.-Morocco FTA were "quite different," Hadidi said
the GOJ would seek potential synergies and then try to work
together with the U.S. to develop them into concrete trade
proposals.


5. (SBU) As Jordan expected to sign an FTA with Singapore
in May, the GOJ wanted to explore bringing Singapore into
the discussion on cumulation, especially on pharmaceutical
R&D and in hi-tech areas, he said.


6. (SBU) Pointing to yet another U.S. FTA -- this time
with Chile -- Hadidi noted that under the trade agreement
the U.S. gave full exemptions to Chile on all duties for
three big garment categories starting immediately.
Commenting that this was "slightly better" than Jordan's FTA
with the U.S., he expressed the hope that Jordan-U.S. talks
at the JC could "improve on the FTA." (NOTE: In March 9
discussions with Econoff, Hadidi had said that this issue
would only be raised if acceleration of tariff reductions
were not approved. He had acknowledged the different
FTA's had different rules of origin and that Morocco had
agreed to a metric volume cap. END NOTE.) Hadidi was not
as enthusiastic about the connections under the proposed
Middle East Free Trade Area (MEFTA),saying only that the
GOJ would have to wait to see where the potential is.
The End of the Multi-Fiber Agreement: A Hot Issue
-------------- --------------


7. (SBU) Hadidi dwelled on the end of the MFA, which he
said was a "hot issue" in Jordan. (NOTE: Jordan's USD 560
million in QIZ exports to the U.S. last year were almost
entirely in the garments sector. END NOTE.) Hadidi said
that the QIZs had attracted some manufacturers who were
interested only in Jordan's unique quota-free system, an
advantage that would disappear with the end of the MFA on
December 31. He pointed to some China-based companies which
had set up factories in Jordan only to fill the gaps in
their large orders from U.S. buyers, having met quota
ceilings in other countries where their factories are
located. The GOJ wanted to be proactive to address the
looming problem of quota-free competition, Hadidi said. A
national strategy for the textiles and garment industry was
being finalized that very day, he said, and would be
submitted to the Prime Ministry for review by the GOJ
cabinet. He assured the group that the GOJ was keenly aware
of the problem and wanted to establish close relations with
the affected businesses.


8. (SBU) Hadidi said that the GOJ would, during the June
JC, ask the U.S. on what bases it would approach the end of
the MFA. Jordan was aware of certain safeguard measures and
bilateral agreements with China that might limit the effects
of the end of the MFA. However, Hadidi asserted, the GOJ
would ask the United States government for direct assistance
to deal with competition from low-wage nations. (NOTE:
Privately, Hadidi asserted that A/USTR had assured the GOJ
that the U.S. would be taking certain steps to counter any
threats, such as from China. END NOTE.)

FTA Implementation: Jordan "Lagging"
--------------


9. (SBU) In the JC, Jordan would raise implementation in
three key areas: IPR, labor, and customs. Any deviation
from mutual commitments would be reviewed carefully, he
said. Jordan would brief on the current status of their
efforts on each issue, and seek USTR views on where it is
lagging. Hadidi acknowledged that the GOJ was behind in
certain areas; the GOJ was committed to serious discussion.

Other Issues, Iraq
--------------


10. (SBU) The GOJ would raise the WTO Doha round,
technical assistance on behalf of Jordan's FDA and in other
areas, and guidelines on rules of origin, which are
mentioned in the text of the Free Trade Agreement but have
not yet been developed, said Hadidi.


11. (SBU) Noting that the reconstruction of Iraq offered a
challenge and an opportunity for Iraq, Hadidi said the
government's role was to facilitate access for businesses.
He noted that Iraq would be raised at the JC, and again
referred to possible trade arrangements. He said that the
objective of the discussions would be to work with the U.S.
to facilitate both trade and access to prime contractors as
sources of sub-contracts for Jordanian businesses.

Private Sector Still Reviewing Issues
--------------

12. (SBU) The chairman of the Jordan American Business
Association (JABA) focused on two key points of the JC:
acceleration of tariff reductions, and the DAMAN pre-
shipment inspection program. One importer noted that
telephone equipment was now included under electronics and
would have to be pre-inspected before being exported to
Jordan. JABA would be assembling a group of importers
affected by DAMAN in April. Hadidi acknowledged that DAMAN,
a difficult issue, was under review at the highest levels of
the GOJ, and would probably come up in the context of the
JC. (NOTE: In a private conversation, Hadidi elaborated
that the GOJ wanted to get rid of the ill effects of DAMAN
toward the U.S., but was concerned about the WTO issue of
discriminatory treatment toward other trading nations. END
NOTE.)


13. (SBU) Others aired their concerns about on-time
delivery of goods and the poor response to the FTA
opportunities by Jordanian businessmen, who may not know
about the market-access advantages offered by the FTA. One
member reported that an active subcommittee of concerned
TIJARA members was grappling with an enhanced FTA awareness
campaign, including more Arabic-text literature and
websites.

Gnehm