UAEG PREPARATIONS FOR ROUND TWO OF FTA TALKS

C O N F I D E N T I A L SECTION 01 OF 02 ABU DHABI 001951

SIPDIS

STATE FOR EB/TPP/BTA ADN EB/IFD/OIA
STATE FOR NEA, NEA/ARPI, NEA/PI
STATE PASS USTR FOR DOUG BELL

E.O. 12958: DECL: 05/03/2015
TAGS: ETRD ECON EFIN TC FTA
SUBJECT: UAEG PREPARATIONS FOR ROUND TWO OF FTA TALKS

Classified By: Classified by Ambassador Michele J. Sison for reasons 1.
4 (b and d)


1. (C) Summary: Ambassador and EconChief discussed FTA round
two with lead UAE negotiator, MinEcon Sheikha Lubna Al-Qasimi
and MinFin FTA coordinator Khalid Al-Bustani on May 1.
Sheikha Lubna confirmed the UAEG's commitment to a successful
second round, although she predicted that the complexity of
the issues and the UAE's economy and political system made
third and fourth rounds highly likely for both sides to agree
on an FTA that best met the needs of each party. The UAEG
has prepared extensively for the second round, bracketing
text, identifying potential alternative language and
providing explanations of its concerns. End Summary.

Press Highlights UAE Preparedness for FTA Negotiations
-------------- --------------


2. (U) The UAE's English and Arabic press, on May 3,
highlighted extensive UAEG preparations for the second round
of U.S.-UAE FTA negotiations. The papers, citing a Ministry
of Finance spokesman, also noted the close public - private
sector consultation highlighting issues to be resolved to
ensure progress toward "a FTA that will serve the interests
of both countries." The articles also focused on the
benefits of an FTA to the UAE economy.

Sheikha Lubna leads Delegation, Governor Al-Suwaidi Deputy
-------------- --------------


3. (SBU) During the Ambassador's May 1 meeting, Sheikha Lubna
confirmed that she would be leading the delegation to the
second round of FTA talks in Washington, replacing MinState
Finance Khirbash, who is suffering ill health. She confirmed
that Central Bank Governor Sultan Nasser Al-Suwaidi would be
attending the negotiations as well. (Note: MinState Finance
Khirbash has been seriously ill for almost two months and
visited London for unspecified tests.) Econchief later asked
MinFin A/US Khalid Al-Bustani to explain the likely division
of responsibilities between Sheikha Lubna and Al-Suwaidi.
Al-Bustani explained that the two would likely focus on their
respective areas of strength, with Al-Suwaidi concentrating
on the important financial services negotiations. He added
that Al-Suwaidi would likely also serve as Sheikha Lubna's
deputy and would accompany her to any meetings with AUSTR
Novelli or USTR Portman. (Comment: The presence of
Al-Suwaidi at the first round of talks greatly facilitated
discussion of key issues and moving through the draft text.)
Sheikha Lubna stressed to Ambassador that one reason the UAE
was bringing such a big team to Washington was to ensure that
all of the experts were there.


4. (C) Sheikha Lubna and Al-Bustani both stressed that they
were committed to making real progress during the second
round of negotiations and looking forward to the meetings.
They said that they understood that the Bahraini and Omani
negotiations had moved much more quickly than the UAE
negotiation, but stressed that the UAE economy was larger and
more complicated than that of those two countries. Sheikha
Lubna explained that this was one of the reasons that the
UAEG was carefully scrutinizing the text. She commented that
texts that were appropriate for Bahrain and Oman, might not
fit the UAE's situation exactly. In addition, she noted that
the federal system of government in the UAE, like that in the
U.S., required wide consultation to ensure that any agreement
would be implementable. Sheikha Lubna explained that given
the issues involved, she believed that a 4th round, would be
likely. She stressed that the UAEG was committed to a FTA
with the U.S., but wanted to be sure that it understood its
commitments and that the FTA met the needs of both parties.

UAE Preparing Hard for Round
--------------


5. (C) In a separate meeting with Al-Bustani on May 1 to
discuss preparations for the round, he showed EconChief a
number of UAEG bracketed texts and said that the UAEG would
pass them to the U.S. as soon as the negotiating council
approved them. Al-Bustani also said that the UAE was
prepared to exchange market access offers with the U.S. and
that the UAE Commercial Attach in Washington already had
these offers. EconChief urged Al-Bustani to have the head
negotiator for market access contact his counterpart to
arrange for exchanging the offers, which he agreed to do.
Al-Bustani subsequently told Econchief that the UAEG would be
forwarding texts and other documents to the USG the week of
May 1. On May 2, Ambassador urged Sheikha Lubna to forward
the texts as quickly as possible. Some of the texts have
been forwarded to USTR and we have forwarded to NEA/ARPI.

Higher Council For Economic Development
--------------


6. (SBU) Sheikha Lubna explained the role of the new Higher
Council for Economic Development in reviewing FTA's. She
said that she is the chair of the Council and Sheikh Mohammed
bin Zayed is the honorary chair. The membership includes the
heads of the economic departments of each emirate. The
Council is charged to look at FTAs and economic reforms,
including changes to laws and regulations. She added that
when the UAE ratified an FTA, the federal government sent it
to the rulers of the seven emirates for ratification. The
offices of the rulers would then send it to their economic
departments for recommendations. Bringing in the economic
departments early, she added, improved the UAEG's ability to
build consensus behind reforms. Sheikha Lubna noted that the
Council would establish a secretariat, which would be housed
at the Ministry of Economy.


The Text is Important
--------------


7. (C) On May 2, EconChief met with William Brown, Senior
Legal Advisor to the Abu Dhabi Investment Authority (ADIA)
and Dr. Robert Peake, Tax Advisor to ADIA (Protect Both).
They stated that ADIA had drafted the UAEG's response to
three of the negotiating chapters: Dispute Settlement,
Investment, and Financial Services. Brown said that his
understanding was that MinFin would forward the Dispute
Settlement and Investment chapters to USTR directly. The
Central Bank was still reviewing the ADIA proposals on
financial services. Brown and Peake would be meeting with
the Central Bank on May 3, but thought that they had
addressed the Central Bank's concerns. (Note: On May 3,
Al-Bustani confirmed that the Central Bank was reviewing the
Financial Services text and said that the lawyers were
reviewing the proposed changes to the investment and dispute
settlement texts.) Brown explained that ADIA as the
investment arm and "the ultimate checkbook" for Abu Dhabi,
and by extension the UAE, had a number of concerns. For
example, ADIA was concerned about whether the FTA would
increase ADIA's exposure to potential asset freezes (under
the Patriot Act or other U.S. law) or frivolous law suits.
Brown noted that he was collecting information on the
increase in law suits that followed U.S. FTAs with other
countries. For the sake of transparency, he noted, ADIA had
addressed its concerns, in the context of the FTA, in side
letters to the chapters. He said he understood that some of
the issues might not fit into the FTA framework, but that
they were all valid bilateral trade and investment issues.
The side letters were designed to be separable so that the
UAE negotiators could also discuss them with other USG
agencies that might be more appropriate. Brown stressed that
his goal was to identify the key issues for both sides, work
to resolve them and then help senior government officials
properly understand the cost/benefit of unresolved issues.


8. (C) Peake noted that some of the UAE negotiators had
responded negatively to the U.S.' perceived unwillingness to
move from its prepared text. He said that he understood the
legal constraints on USTR, but urged that, where possible,
the U.S. negotiators look at UAEG concerns with an open mind
and try to see how to resolve them, either within the context
of an FTA or by referring the issue to other offices in the
USG. He suggested that this would be more conducive to
concluding an agreement then by declaring something "dead on
arrival." Brown said that he and Peake had pushed some of
the other negotiators to try and "think beyond" their
reflexive resistance to change, by explaining that the USG
negotiators would try to understand and deal with legitimate
concerns.

Differences in Negotiating Style
--------------


10. (C) Brown and Peake highlighted cultural differences
between the UAEG and USG negotiators. Peak, a long time Abu
Dhabi resident, noted that the UAE worked on a Majlis
(council) consensus building basis, everyone wanted to be
sure that his opinion was considered. The UAE had made a
tactical error during the first round by trying to focus
first on "big picture concepts" This had been akin to
speaking a different language to U.S. negotiators who were
ready to negotiate and finalize text.
SISON