Identifier
Created
Classification
Origin
05BAGHDAD3066
2005-07-24 14:15:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Baghdad
Cable title:  

JCRED AMMAN: Trade Session Discussion focuses on

Tags:  ETRD ECON EAGR SOCI IZ 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 BAGHDAD 003066 

SIPDIS

SENSITIVE

STATE FOR NEA/I, EB/EX WAYNE, D STAFF

E.O. 12958: N/A
TAGS: ETRD ECON EAGR SOCI IZ ECON
SUBJECT: JCRED AMMAN: Trade Session Discussion focuses on
PDS, GSP, WTO Accession


SENSITIVE BUT UNCLASSIFIED USG DIST ONLY NOT FOR
INTERNET DISTRIBUTION

UNCLAS SECTION 01 OF 02 BAGHDAD 003066

SIPDIS

SENSITIVE

STATE FOR NEA/I, EB/EX WAYNE, D STAFF

E.O. 12958: N/A
TAGS: ETRD ECON EAGR SOCI IZ ECON
SUBJECT: JCRED AMMAN: Trade Session Discussion focuses on
PDS, GSP, WTO Accession


SENSITIVE BUT UNCLASSIFIED USG DIST ONLY NOT FOR
INTERNET DISTRIBUTION


1. (SBU) Summary: The inaugural U.S.-Iraqi Joint Committee
on Reconstruction and Economic Development (JCRED) meeting
held in Amman, Jordan on July 10-11, 2005 saw detailed
discussions of developments in Iraq's trade and agriculture
sectors. Delegates discussed the imminent July submission
of Iraq's initial World Trade Organization accession
document, means by which Iraq can take advantage of
recently awarded Generalized System of Preferences (GSP)
privileges for dates and how to begin to reform the Public
ic
Distribution (food ration) System (PDS) administered by the
Ministry of Trade and the largest subsidy in the Iraqi
budget for 2005. The Ministry of Finance announced plans
to double the current 5 percent "Reconstruction Levy" to 10
percent and recast it as a tariff as early as 2006. The
Ministers of Finance and Trade expressed their desire to
see market conditions in Iraq improve so that the
government could scale back its role in food subsidies.
End Summary.

--------------
The Public Distribution (Food Ration) System
--------------


2. (SBU) Finance Minister Allawi opened the JCRED Session
on Trade by acknowledging U.S. encouragement that the Iraqi
Transitional Government (ITG) initiate reform of the PDS
system. According to Allawi, the ITG is exploring ways to
reduce the scope of the program, but monetization, a reform
suggested under the previous government is not the current
preferred method. Instead, the ITG is exploring the
gradual reduction of foodstuffs distributed by the system.
Minister Allawi asked Minister of Trade Abdul Bassit Kareem
to elaborate on the current status of the PDS. Minister
Kareem reported that upon assuming his post as Minister he
found the PDS short of supplies, with some food items
undistributed for three months. Kareem stated his belief
that the majority of Iraq's population remains dependent in
some form on the PDS system. He stressed that any reform
initiatives had to be initiated by the Iraqi Cabinet and
legislature (Transitional National Assembly) but that

market conditions need to improve before the Iraqi private
sector can step in to take over functions that PDS now
performs.


3. (SBU) In order to achieve private sector growth Kareem
highlighted the Ministry's efforts to create an investment
environment that is "clearly articulated" with
"protections" for investors where administrative procedures
are rationalized and technical barriers to trade are
removed. As proof of progress in this area Kareem pointed
to changes in Iraqi investment laws granting local
treatment for all international investments in Iraq. In
addition, a Trade Center at the Ministry of Trade provides
information and a monthly magazine that highlights
investment opportunities in Iraq. Minister Kareem also
spoke of the creation of an Investment Promotion Board that
will be responsible for investment issues in Iraq. He
stressed that while the Ministry of Trade is spearheading
these efforts, security still precludes many potential
investors of taking advantage of these services, and that
he stated, is not the responsibility of the Ministry of
Trade.

-------------- --
Iraq's WTO Accession and use of GSP preferences
-------------- --


4. (SBU) Minister Kareem went on to discuss Iraq's
preparation of the Memorandum of Free Trade Regime (MFTR)
the initial document to begin its WTO accession process.
Kareem reported the creation of an interministerial
committee that worked for 8 months to prepare a document
that is now with the Minister for final review. He assured
delegates that the MFTR would be submitted to the WTO's
offices in Geneva by the end of July 2005. He reported
excellent cooperation between various ITG entities
including the Central Bank of Iraq (CBI),Trade Bank of
Iraq (TBI),Ministries, private sector and consultants in
the preparation of the document.


5. (SBU) In opening the session's discussion of the GSP,
Assistant USTR, Ambassador Ashley Wills, praised Iraq's
progress on the MFTR, encouraged its timely submission,
offered USG help in identifying the various sources of
accession preparation assistance and urged the Iraqi side
to move quickly to chose a Working Party Chairman for their
accession process. Wills noted that a WP Chair will best
be able to aggressively push an Iraqi reform-minded agenda
in the WTO. A question that Iraq will have to answer early
in its accession process will be the level of its tariffs.
Finance Minister Allawi informed delegates that Iraq
intends to double the current "Reconstruction Levy" to 10
percent and recast it as a tariff as early as 2006. Allawi
stated that this is intended as a revenue raising measure.
Wills also encouraged the Iraqi side to move quickly in
appointing an Ambassador to the WTO to shepherd the
accession process along with the WP Chair.


6. (SBU) Ambassador Wills encouraged the Iraqi side to take
advantage of newly added GSP privileges for dates, one of
the country's major export crops. Agricultural Counselor
James Smith added that Embassy Baghdad had prepared a short
paper outlining the various steps Iraqi dates would need to
go through in order to enter the U.S. market. He spoke of
USDA's possible assistance with food safety issues as well
as market analysis and encouraged the Iraqi side to work
with Embassy Baghdad to "walk through the process".


7. (SBU) Deputy Secretary Zoellick added that both sides
were eager to make export of dates under the GSP process
work so that Iraq can offer a concrete example of
successful exports. USDA would be urged to make addressing
the GSP issues a priority. He asked that the Iraqi sie
provide contact information to Mr. Smith of the appropriate
officials with which to continue to pursue the date export
issue and noted that this would be a good example for Iraqi
producers and would lead to other exports. When Minister
Allawi pointed out that only a small percentage of Iraqi
dates might be of sufficient quality for U.S. export, the
Deputy Secretary stated his strong conviction that with
U.S. support Iraq will be able to take advantage of GSP
opportunities in the very near future.


8. (SBU) Iraqi Minister of Agriculture, Dr. Ali Al-Behadli
commented that the Iraqi date crop was predicted to be of
good quality this year and discussed the Ministry's efforts
in developing a new date palm pest-control plan that will
possibly utilize gamma radiation for pest eradication
rather than other chemical methods that preclude export to
the U.S. and other nations. The Deputy Secretary stated
that the agricultural sector is a key engine for future
Iraqi economic growth and encouraged the ITG to work
closely with the Embassy on agricultural issues.


9. (SBU) Deputy Secretary Zoellick urged the Iraqi side to
begin to work both multilateral and bilateral negotiations
in their WTO accession process. He stressed that good
leadership, via a strong Working Party Chair and Ambassador
to the WTO will allow Iraq to defend their trade agenda in
Geneva. At the same time he stressed, Iraq can work
diligently to bring domestic legislation into WTO
conformity.

KHALILZAD