Identifier
Created
Classification
Origin
05ALGIERS1606
2005-08-06 06:10:00
CONFIDENTIAL
Embassy Algiers
Cable title:  

COMMERCE MINISTER SEEKS CONTINUED US SUPPORT ON

Tags:  ECON AG WTRO USTR WTO 
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C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 001606 

SIPDIS

DEPT PLEASE PASS USTR (DOUG BELL, GREG HICKS)

E.O. 12958: DECL: 08/03/2015
TAGS: ECON AG WTRO USTR WTO
SUBJECT: COMMERCE MINISTER SEEKS CONTINUED US SUPPORT ON
ALGERIA'S WTO ACCESSION

REF: HICKS-PIGNATELLO EMAIL 7/29

Classified By: Ambassador Richard W. Erdman, reasons 1.4(b)(d).

SUMMARY
-------

C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 001606

SIPDIS

DEPT PLEASE PASS USTR (DOUG BELL, GREG HICKS)

E.O. 12958: DECL: 08/03/2015
TAGS: ECON AG WTRO USTR WTO
SUBJECT: COMMERCE MINISTER SEEKS CONTINUED US SUPPORT ON
ALGERIA'S WTO ACCESSION

REF: HICKS-PIGNATELLO EMAIL 7/29

Classified By: Ambassador Richard W. Erdman, reasons 1.4(b)(d).

SUMMARY
--------------


1. (C) In a July 30 courtesy call with Commerce Minister El
Hachemi Djaaboub, Ambassador delivered USTR talking points
(ref) that underscored USG support for Algeria's WTO
accession and raised issues for Algeria to address more
thoroughly in both bilateral market access and multilateral
negotiations. Djaaboub strongly reaffirmed Algeria's
commitment to completing the accession process in the
shortest time possible and instructed External Commerce
Director General Zaaf to provide a revised services offer
before the end of August, as we requested. Djaaboub and Zaaf
commented on issues raised in Geneva, noting that Algeria no
longer maintained monopolies or subsidized failing state
enterprises from the state budget. Zaaf also repeated that
Algeria sought 'observer status' for the Civil Aviation
Agreement, claiming this is what many other new WTO adherents
have done before committing to zero tariffs in this sector.
While Zaaf did not specifically mention audio-visual, he said
there would be a new services offer on energy and that
Algeria was working on proposals for the information
technology, construction equipment, paper, and wood
agreements. Djaaboub welcomed receiving specific comments
from USTR about shortcomings in Algeria's earlier responses;
stated his intention to be as transparent as possible in this
process; and solicited Ambassador for continued US "support
and intervention" during the remainder of the accession
process. Ambassador reiterated USG offers of technical
assistance and encouraged Djaaboub to play a leading role in
government councils in order to ensure rapid progress.
Ambassador also reviewed the USTR talking points the
following day with Privatization Minister Temmar, who
continues to have an informal oversight role on Algeria's
accession. END SUMMARY.

STATUS CHECK: OUTLINING
BOTH PROGRESS AND GAPS
--------------


2. (C) Ambassador met new Commerce Minister El Hachemi

Djaaboub July 30 to discuss WTO accession progress and
deliver USTR talking points on the July 21 informal meeting
in Geneva. The points underscored US support for Algeria's
WTO accession, cited both progress and gaps in bilateral and
multilateral negotiations, and identified several areas where
Algeria should give revised offers and provide additional
information. After reviewing the talking points (in French),
Ambassador, noting he was speaking frankly and as a friend,
said some of the Algerian responses to the questions posed
had lacked clarity or were incomplete, and at least one
question was not answered at all. Some Algerian comments had
also left the impression that GATT Articles 3, 11, and 17 may
not have been properly understood by the Algerian side. This
was partly a matter of communication, since in the past we
had often found Algeria had in fact taken the necessary
steps, when pressed for clarification. External Commerce
Director General Zaaf claimed that the Algerian delegation
did, in fact, address the issues of state subsidies and state
monopolies: there were neither subsidies nor special
privileges for state-owned enterprises (SOEs). Zaaf was
certain that Algeria had answered these questions in the June
21 responses.


3. (C) Djaaboub agreed with Zaaf that the state did not give
handouts to SOEs. Ambassador replied that he had heard state
banks still gave loans to SOEs without applying the same
criteria they would to other applicants, which the Minister
denied. Commercial relations existed between SOEs and the
banks, Djaaboub said, but there was no longer a direct link
between the state budget and SOEs. (Comment: While SOEs may
no longer be paid directly out of the state budget, state
control of the public banks that do the vast majority of
lending implies a political relationship between public banks
and public companies. We do not think the GOA would
prematurely sever SOEs' relationships with public banks and
risk the politically unacceptable results. End Comment.)
However, the Minister added that they were "not trying to
trick anyone." There simply were no subsidies. With
apparent sincerity, he said that it was Algeria's intention
to pursue the accession process in "total transparency," and
Algeria was sure to succeed if it emulated US and EU
leadership on open markets. Thanking the US for its ongoing
support for Algeria's accession efforts, Djaaboub requested
continued US "support and intervention" during the remainder
of the accession process, including the September 16 informal
and October 21 Working Party meetings.

COMMERCE MINISTER CHAIRS A NEW
COMMISSION TO REVIEW ALL WTO WORK
--------------

4. (C) The Minister thanked Ambassador for his frank
presentation. Describing how the question and answer has
worked, he said that questions on specific sectors were
dispatched to the individual Algerian agencies responsible.
Agencies often answered questions in different styles, which
could lead to confused, incomplete answers. The Minister now
chaired a newly formed central commission to edit all WTO
documents and ensure consistency of replies. He added that
the GOA had, in fact, done a thorough "cleaning" of legal
texts by reviewing executive decrees to ensure WTO
conformity. He said his prior experience in responding to
WTO questions as Minister of Industry would give him more
perspective on the process.

AREAS FOR IMPROVEMENT:
BILATERAL NEGOTIATIONS
--------------


5. (C) Civil Aviation Agreement: Orally translating the
talking points, Ambassador said the USG would provide Algeria
with a specific request on manufacturing tariffs following
verification of Algeria's incorporation of Civil Aviation
Agreement zero tariffs into the offer. Zaaf replied that,
with 3,000 items in the Agreement, the Agreement was too
lengthy for a "developing country" like Algeria to address.
He said that Algeria would like to do "what other countries
have done," which is to agree to observer status before
taking on broad commitments in this area. In the areas of
information technology, construction equipment, paper, and
wood, Algeria was already crafting proposals to join
agreements.


6. (C) Energy: Ambassador said that progress on services
depended on our receipt of a revised offer. Zaaf replied
that Algeria was reviewing proposals for energy to include in
its services offer. He said there would likely be an answer
in time for the September 16 meeting, prompting Djaaboub to
instruct Zaaf on the spot to produce the paper before the end
of August, so the US could have time to review the energy
proposal before the meeting. As an indication of the GOA's
commitment to the accession process, Djaaboub noted that
Commerce staff were giving up their vacations to work on this
and other issues. (In fact, one Commerce participant in an
International Visitors Sub-Regional Program on Free Trade has
withdrawn from the two-week visit to the US, on orders from
Secretary General Chelgham, in order to work on accession

SIPDIS
documents.) (Comment: In a two-on-one meeting with Temmar
August 1, Ambassador said that Zaaf had been reluctant during
the Geneva meeting to adjust the Algerian position on some
smaller issues, and agreed to alter his stance only after
intervention by Algeria's Ambassador Jazairy. This
reluctance, Ambassador noted, was typical of someone at a
director-level who had failed to see "the big picture" and
let small issues obstruct progress. Jazairy had played a
helpful role, Ambassador continued, and it would be critical
to have strong leadership moving forward so that Algeria's
mid-level directors and negotiators see the same "big
picture" as Algeria's senior leadership.)


7. (C) Audio-Visual: Neither Djaaboub nor Zaaf addressed
audio-visual, leading us to believe Algeria may need to make
a concerted effort in this area. (Comment: July 2 press
reports that the position of Minister of Communication will
be temporarily filled and later completely dissolved indicate
the GOA is seeking a smaller role in regulating information
and media, a change which could have salutary effects on
opening the audio-visual market.)


8. (C) Timeline: As per talking points, Ambassador noted that
the USTR team in Geneva would be prepared to meet on
September 16 if they receive the requested information by the
end of August. Djaaboub and Zaaf again agreed that Algeria's
new submissions would have to be completed before the end of
August in order to allow time for translation and review
prior to the September 16 informal meeting.

AREAS FOR IMPROVEMENT:
MULTILATERAL NEGOTIATIONS
--------------


9. (C) Working Party Draft Report: Ambassador noted that,
while much progress had been made, the draft Working Party
report needed a great deal of work both to reflect the
current state of play in Algeria's efforts to accede and to
address outstanding issues. Djaaboub did not have a specific
reaction to the status of the draft report.


10. (C) Interministerial Leadership: Ambassador underscored
the importance of Djaaboub's personal leadership during the
accession process not only within the Commerce Ministry but
also among other ministries that have roles to play in
accession on issues such as foreign exchange controls, import
licensing, pricing policies, rules of origin, state
enterprises, subsidies, SPS, TBT, trading rights, and
transparency.


11. (C) Technical Assistance: Emphasizing US support for
Algerian accession, Ambassador said USTR was willing to help
Algeria address and resolve the remaining issues. For
instance, USTR promised to provide Algeria with non-papers on
SPS and the GATT articles relevant to state enterprises and
trading rights to help them better understand what remains to
be done. USTR was also prepared to provide a list of Member
questions that Algeria received through the Secretariat that
USTR believes must be answered more completely. Zaaf said
that this kind of list would be important to have moving
forward, and Ambassador said we would provide it.

DJAABOUB: STRONG SUPPORTER
OF ECONOMIC REFORM
--------------


12. (C) As evidence of his support for ongoing economic
reform, Djaaboub cited his recent interaction with students
who challenged him on WTO accession: Was the government
really going to let foreign firms into Algeria, and why was
WTO accession important? He said he encouraged the students
to see no difference between Algerian companies and foreign
ones. All companies looked after their own interests and
served as economic drivers, so all firms were essentially the
same. Regarding WTO accession, Djaaboub pointed out that he
"never heard of a country that had lost" the quest for
economic growth after acceding to the WTO. Proof was in the
results. He noted for Ambassador that many Algerians have
come to accept certain facets of economic reform, for example
that insolvent state firms must declare bankruptcy. As
former Finance Minister Benachenhou had once declared,
Djaaboub said, Algeria did indeed suffer from a "complex of
destruction complexes." Ambassador noted the process could
be viewed as one of "creative destruction," where failing
firms were allowed to die and then be replaced by more
dynamic and competitive entities. While this caused short
term disruptions that had to be managed, in the long term it
would produce more jobs and more growth. Factories were not
museums for preserving the past, but living economic
organisms. As Darwin had noted, it was the species that
failed to adapt that did not survive.

ERDMAN