Identifier
Created
Classification
Origin
04MANAMA1216
2004-08-03 05:30:00
CONFIDENTIAL//NOFORN
Embassy Manama
Cable title:  

(C/NF) BAHRAIN AND TRADE WITH THE UNITED STATES

Tags:  PINR ECON ETRD BA 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 001216

SIPDIS

NOFORN

DEPT FOR INR/I AND NEA/ARP

E.O. 12958: DECL: 07/10/2029
TAGS: PINR ECON ETRD BA
SUBJECT: (C/NF) BAHRAIN AND TRADE WITH THE UNITED STATES
(C-NE4-00522)

REF: STATE 149503

Classified By: CDA SUSAN ZIADEH. REASON 1.4(C).

(C/NF) The Bahraini business community is convinced that the
U.S.-Bahrain FTA is a positive development. Yet they are
perplexed by this new mechanism. Continued public diplomacy
outreach--by both GOB and USG--can help counter some of the
misimpressions about the FTA, what it means, and what it can
help accomplish. The business community and labor leaders
are seeking guidance from all corners on how to turn the FTA
into business deals and to create jobs. Embassy Public
Affairs and Commercial sections will work with MEPI-sponsored
technical assistance teams and the GOB to address these
concerns and help lead the Bahraini business community to
successful FTA implementation. Responses in this cable are
keyed to questions reftel.


A. (C/NF) The business community has run with the
government's pro-FTA message, and now the GOB is trying to
manage what they fear may be unrealistic expectations.


B. (C/NF) The business community believes it should benefit
from the FTA. However, with a few exceptions, business
people do not yet understand how to translate this new policy
into business deals. They have asked for, and will require,
quite a bit of handholding to make implementation a success.

(C/NF) The insurance industry fears outside competition
most--ironically so, given that the sector is relatively open
already and AIG has a long-standing presence in Bahrain. The
textile/garment businesses expect their businesses to grow
most as a result of the FTA. Manama's Pakistani-owned
textile mill has made a substantial investment to expand
capacity to add a fabric finishing process to its repertoire
here in Bahrain and has initiated a joint venture by
purchasing a defunct factory in the United States. However,
garment factories, more likely to be adversely affected by
global competition beginning in 2005, have not made similar
investments but expect the FTA to take care of their business
problems, past and future.

(C/NF) Overall, the sense among the business community is
that the FTA offers many potential commercial opportunities,

but they do not know how to take advantage of these trade
openings.


C. (C/NF) FTA negotiations have been concluded. However,
Post notes that the textile sector was the most vociferous
and organized during FTA negotiations. They pushed for duty
free access, lenient rules of origin, 10-year tariff
preference levels well beyond current levels of trade, and
technical assistance to refocus and revive the sunset
industry.


D. (C/NF) The textile sector placed the onus of potential
job losses resulting from the end of ATC quotas on the
government if negotiators did not secure sufficently
favorable FTA terms to ensure that their sunset industry
would thrive. Business owners and general managers, and to a
lesser extent the labor union, lobbied the Ministry of
Industry, the National Assembly, the Bahrain Chamber of
Commerce and Industry, and U.S. and Bahraini negotiators
directly to make their case. The GOB listened for two
reasons. Textiles are Bahrain's primary non-oil export to
the United States. More importantly, the roughly 3000
Bahraini textile workers (out of a total of 12,000 workers in
the sector) are hard-to-employ, semi-skilled, conservative,
Shi'a women who often support eight family members. These
workers face the possibility of massive layoffs within the
next year due to global competition. Such layoffs would
increase poverty among the already poor and contribute to the
potential for social unrest.

(C/NF) Board members of the Bahrain Chamber of Commerce and
Industry, the Bahrain Export Development Society,
Businessmen's Society and Businesswomen's Society have asked
not only their own government, but the USG as well, to help
them figure out how to take advantage of FTA. The Bahrain
Chamber of Commerce and Industry, the Ministry of Commerce
and the Ministry of Finance and National Economy's Economic
Development Board are taking the lead on joint committees to
help the business community take the next steps, but it is
still too early to see results. There is an explicit need
for specific, project-oriented, U.S.-Bahraini B-2-B
networking, and there is a hope among Bahraini business that
the new AmCham can help facilitate these trade connections.
The Embassy has proposed programs, such as International
Buyer Programs or Reverse Gold Key-style trade delegations,
but the business community's initial interest has not
translated into participation, presumably awaiting final
verification of the FTA.


E. (C/NF) To the extent that local labor pays attention to
economic policy developments, it is also confused about what
the FTA will do for workers. Workers regularly confuse FTA
with WTO. Many garment workers believe that FTA provides an
extension of existing ATC quotas and is a panacea that will
create more and better jobs in their sector. There is a real
need for intensified public diplomacy outreach to labor
leaders and workers.


F. (C/NF) Textile workers expect that FTA will save their
jobs and yield higher pay as well. Some workers have told
EmbOffs that, now that we have 'signed' an FTA with Bahrain,
it is the USG's responsibility to ensure that they have jobs,
since the FTA is all about creating jobs for Bahrain. Yet in
discussions about the FTA,the inclusion of protective labor
clauses is not mentioned. Again, public diplomacy can help
clarify what the FTA can and cannot do for workers.
ZIADEH