UAE PROGRESS ON FTA ISSUES -- SLOW BUT STEADY

C O N F I D E N T I A L SECTION 01 OF 03 ABU DHABI 002704

SIPDIS

STATE FOR NEA/ARPI, EB/TPP/BTA, EB/IFD/OIA
STATE FOR EAP/CM
STATE PASS USTR FOR DOUG BELL

E.O. 12958: DECL: 06/15/2015
TAGS: ETRD ECON EFIN AS CH TC FTA
SUBJECT: UAE PROGRESS ON FTA ISSUES -- SLOW BUT STEADY

Classified By: Ambassador Michele J. sison for reasons 1.4 (b & d)


1. (C) Summary: The UAE continues to make slow, but steady
progress on outstanding Free Trade Agreement issues in
advance of the proposed June 27 or 28 DVC between the lead
negotiators. We have noticed an up tick in UAE preparations
as the date of the DVC draws near. For that reason, Embassy
suggests that USTR propose another DVC for early September to
re-energize movement after the summer, but before the
September round. The UAEG continues its efforts to promote
the FTA to Emirati stakeholders. The telecoms negotiating
group held the first DVC on June 14 and made some progress.
The UAE hopes to make its market access offer in a week and
its services non-conforming measures submission by June 18.
The UAE is looking for an early July DVC to discuss IPR. Our
interlocutors also said that they hoped the GCC-EU FTA
negotiations would be concluded by the end of 2005, and that
the GCC was interested in gaining access to China's
petrochemicals market through the GCC-China FTA negotiations.
End Summary.


2. (C) Econchief and econoff held a series of meetings this
week with various UAE Free Trade Agreement (FTA) negotiating
team leaders to assess the progress in advance of the
proposed June 27 or 28 digital video conferences between the
lead negotiators. (Note: Post prefers the June 28 DVC date in
view of our senior visitor schedule.)

UAE Continuing Outreach
--------------


3. (U) On June 15, MinState Finance Dr. Mohammed Khalfan bin
Khirbash gave an interview promoting an FTA with the U.S.
that was carried in several of the UAE's Arabic papers. He
asserted that an FTA with the U.S. would provide real
opportunities to the UAE industrial sector, explaining that
it would give the UAE better access to U.S. markets. It
would also encourage joint ventures between U.S. and Emirati
businesses, which would improve UAE access to U.S. technology
and expertise, he emphasized.

Telecoms wins DVC race - June 14
--------------


4. (U) UAE and U.S. negotiators held a productive telecoms
DVC on June 15, and scheduled an E-Commerce DVC on June 21.
According to Telecommunications Regulatory Authority Director
General Mohamed Al-Ghanim, both sides made some progress. He
added that he thought it would be easier to make progress on
the E-Commerce chapter. He was coordinating with the other
negotiating groups -- since e-commerce is tied to other
chapters -- but was optimistic about progress.

Market Access - UAE Hopes to Make Offer in a Week
-------------- --------------


5. (C) On June 14, Econchief met with Director General of the
UAE Federal Customs Authority Mohamed Al-Mehairi to discuss
the UAE's goods offer. Al-Mehari explained that he had
contacted his U.S. counterpart to say that he still needed a
week to finish the offer. He had prepared a draft offer, but
had not gotten clearances from two stakeholder agencies
(MinFin and the UAE Federation of Chambers of Commerce). He
was working with them and was hopeful that he would get
clearances shortly. He planned to present the offer (in
general terms) to the cabinet for approval at its June 19
meeting and then would send it to the U.S.

Services Non-Conforming Measures - Hopefully by June 18
-------------- --------------


6. (SBU) Econchief and Econoff met with MinEcon A/US for
international Cooperation Abdulla Al-Saleh on June 13 to
discuss progress with the services chapter. Al-Saleh had
just finished the second round of FTA negotiations with the
Australians and was preparing to go to the G-77 meeting in
Qatar. He said that his team was working hard to revise the
UAEG's Non-Conforming Measures (NCM) submission, and he hoped
to have it ready before he left for the GCC-China FTA talks
on June 18.

7 (C) According to Al-Saleh, the UAEG had brought a draft NCM
submission to the second round of negotiations in Washington
in May. The negotiators did not hand it over at that time,
however, because they were looking for changes to the U.S.
draft text. (Note: it appears that some of the changes were
in chapters other than the services chapter.) Al-Saleh said
that he "couldn't give anything away" in services without
being sure that the other groups were getting what they
needed. When the UAE negotiators realized that the U.S.
lacked flexibility in the text, they knew that they needed to
revise their list of non-conforming measures. (Note:
Al-Saleh also said that the UAE would be preparing a side
letter on the issue of temporary entry (i.e., visas),since
this was still a concern.)

IPR Some Progress
--------------


8. (SBU) On June 11, econchief and econoff met with Ali
Al-Baloushi, Director of the Copyright Department of the
Ministry of Information to discuss progress on IPR
discussions and to try and schedule a videoconference with
U.S. negotiators. Al-Baloushi said that he was still waiting
for other agencies to provide comments on pending issues in
the IPR text. He said he would be working with MinState
Finance Dr. Khirbash to expedite movement from other
agencies. On June 15, Al-Baloushi told econchief that he was
still working with other agencies, but promised to provide
USTR with some UAEG comments, which he subsequently did.
Al-Baloushi also suggested that the UAE would be ready for a
videoconference the first week in July with the IPR teams.

Investment/Financial Services
--------------


9. (C) Econchief talked to Abu Dhabi Investment Authority Tax
Advisor Dr. Robert Peake (strictly protect) on June 15.
Peake said that ADIA was close to finalizing its
proposal/explanation on Federal-Emirate jurisdiction that it
planned to use with both the Australians and the USG. He
commented that it was a complicated issue and he would prefer
to discuss it in person rather than over a videoconference.
Unfortunately, he added, the Ministry of Finance had
expressed its strong preference that the ADIA representatives
not travel to the U.S. without the rest of the negotiating
team. When Econchief raised this issue with MinFin A/US for
Revenue and Budget Khalid Al-Bustani, he explained that the
UAEG preferred not to have negotiations where only some
members of the UAE team were present to reduce the
possibility of confusion.

Rules of Origin
--------------


10. (U) At the request of the U.S. negotiator on the rules of
origin chapter, econoff arranged for in-person meetings with
Ali Fayel Mubarak, head of the Certificate of Origin section
at MinEcon. Two U.S. negotiators will meet with their
Emirati counterparts in Dubai on June 28 and 29.

FTA a Learning Process
--------------


11. (SBU) All of our interlocutors stressed that the U.S. FTA
was a more complicated undertaking than they had originally
realized, and that the USG had had less flexibility than they
had originally hoped. They note that the UAEG negotiators
are using the lessons learned from the U.S. experience in
their FTA negotiations with other countries. Al-Saleh
suggested that the preferred USTR format of multiple,
simultaneous negotiating groups overstretched UAEG resources.
He compared it to the negotiations with Australia, which
were divided into three groups (goods, services, IPR). This
allowed the UAEG to bring in a core team of negotiators,
supplemented when necessary by technical experts. In the
negotiations with the U.S., many of the lead negotiators were
concerned that they were not seeing the whole picture and
needed to undertake extra consultations before being
comfortable agreeing with text.

GCC-EU FTA by the End of the Year?
--------------


12. (C) Al-Saleh also told us that he had attended a services
round between the GCC and the EU the week of May 29, which he
thought had gone well. He said that he hoped that the
negotiations were on track for signature in time for the GCC
summit in December. The UAE, France, Germany, and the UK
were pushing for a rapid conclusion to the negotiations.
Al-Saleh opined that, if the negotiations continued to drag
on, the UAE would lose interest. He noted that the UAEG and
the GCC were pursuing other FTA negotiations and that an FTA
with the EU represented an opportunity, but not one that the
UAEG would wait on indefinitely.

GCC-China FTA, It's Petrochemicals
--------------


13. (C) Al-Saleh briefly discussed the upcoming GCC-China FTA
talks, adding that he would be leaving on June 18 to
participate in the negotiations. He said that the GCC was
very interested in FTA talks with China, especially in
getting access to the Chinese petrochemical market, where he
said, tariffs were high.

Comment
--------------


14. (SBU) The UAEG is continuing to take steps forward on the
FTA. Many of the negotiators are stretched with other FTA
commitments, which has slowed progress somewhat, as has the
relative inexperience of the negotiators. That said, post
believes that the June 27 or 28 video conference between
AUSTR Novelli and MinState Finance Khirbash and MinEcon
Al-Qasimi will be a useful session. We have seen that it has
served as a "forcing event" for the UAEG to take a number of
steps. Given that the UAE is moving into the summer season,
we would strongly suggest a second video conference be held
in early September to "jump start" the work in advance of the
September round.
SISON