Identifier
Created
Classification
Origin
05DUBAI57
2005-01-05 13:52:00
CONFIDENTIAL
Consulate Dubai
Cable title:  

PRESIDENT OF DUBAI CHAMBER OF COMMERCE EXPRESSES CONCERN

Tags:  ECON ETRD EFIN PREL TC 
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Diana T Fritz 12/06/2006 06:10:33 PM From DB/Inbox: Search Results

Cable 
Text: 
 
 
C O N F I D E N T I A L DUBAI 00057

SIPDIS
CXABU:
 ACTION: ECON
 INFO: DCM P/M POL AMB

DISSEMINATION: ECON
CHARGE: PROG

VZCZCADO423
PP RUEHAD
DE RUEHDE #0057/01 0051352
ZNY CCCCC ZZH
P 051352Z JAN 05
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0755
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0467
RUEHDE/AMCONSUL DUBAI 3514
RUEHZM/GCC COLLECTIVE
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASH DC
C O N F I D E N T I A L SECTION 01 OF 03 DUBAI 000057 

SIPDIS

STATE FOR NEA/ARP, NEA/RA, EB
STATE PASS USTR

E.O. 12958: DECL: 1/5/2015
TAGS: ECON ETRD EFIN PREL TC
SUBJECT: PRESIDENT OF DUBAI CHAMBER OF COMMERCE EXPRESSES CONCERN
ABOUT FTA NEGOTIATIONS

REF: A) DUBAI 5011 B) ABU DHABI 3834 C) DUBAI 4507


CLASSIFIED BY: Jason L. Davis, Consul General, Dubai, UAE.
REASON: 1.4 (b)


C O N F I D E N T I A L SECTION 01 OF 03 DUBAI 000057

SIPDIS

STATE FOR NEA/ARP, NEA/RA, EB
STATE PASS USTR

E.O. 12958: DECL: 1/5/2015
TAGS: ECON ETRD EFIN PREL TC
SUBJECT: PRESIDENT OF DUBAI CHAMBER OF COMMERCE EXPRESSES CONCERN
ABOUT FTA NEGOTIATIONS

REF: A) DUBAI 5011 B) ABU DHABI 3834 C) DUBAI 4507


CLASSIFIED BY: Jason L. Davis, Consul General, Dubai, UAE.
REASON: 1.4 (b)



1. (C) Summary: Obaid Al-Tayer, prominent Dubai businessman and
President of the Dubai Chamber of Commerce and Industry (DCCI),
told Consul General December 29 that the process of negotiating
a US-UAE Free Trade Agreement "will not be easy." That said,
Dubai businessmen were not against the FTA; rather, they just
wanted to ensure that the final product was a good one.
Al-Tayer highlighted several concerns that he said were being
raised by Dubai merchant families. Among them: inadequate
information sharing by the UAEG negotiators; a perception that
the USG position was inflexible; fears that a bilateral FTA
might endanger Dubai's access to the Saudi market and further
isolate Saudi Arabia; concerns about the agency law; and worries
that an FTA might lead to even greater numbers of Indians and
Pakistanis moving to Dubai. End Summary.

Buy-In from Businessmen
--------------


2. (C) DCCI President Obeid Al-Tayer expressed concern to Consul
General December 29 that the concerns of Dubai businessmen and
merchant families were not being taken into account by the UAE
negotiating team. "When we tell them we want to be a part of
the process, they tell us that the U.S. side insists that only
government officials can be a part of the negotiations. But we
are concerned that our bureaucrats may not be our best
negotiators and may not have sufficient knowledge of what is
important to our business community." Warning that "these
negotiations are not going to be easy," Al-Tayer said it would
be very important to secure the buy-in of the business
community, since they were the ones who would be "implementing"
whatever agreements were signed. CG pointed out that while it
might not be possible for business to be present at the
negotiating table, there was no reason they could not provide
the UAEG with input on their views and concerns. It would be
natural for the views of businessmen to be taken into

consideration.


3. (C) Al-Tayer said he thought the businessmen were being cut
out because UAEG officials believed they were against the
agreement. This was not true: as he himself had recently told
Dubai Crown Prince Mohammed bin Rashid (MbR) and UAE Minstate
for Foreign Affairs Hamdan bin Zayid (HbZ),"We recognize that
there has been a political decision to go ahead with the FTA,
and we are not against that decision; we just want to ensure
that the final agreement is in the best long-term interests of
the UAE." Asked how MbR and HbZ had responded, Al-Tayer said
they had been supportive, but had given the impression that
there was little point in discussing the concerns of the
businessmen because the U.S. had a standard FTA that it signed
with every country that couldn't be altered. If Ambassador
Zoellick's comment during his visit that the U.S. "doesn't take
a 'cookie-cutter' approach is true," he said, then "someone must
have misinformed the Sheikhs."

GCC Concerns: Don't Alienate Saudis
--------------


4. (C) Al-Tayer asked why the FTA could not be negotiated with
the entire GCC rather than bilaterally with each country. There
was a perception, he added, that the U.S. was strong-arming
countries into doing it bilaterally in order to divide and
thereby weaken the GCC. Assuring Al-Tayer that there was no
truth to that conspiracy theory, CG said it was his
understanding that the decision to negotiate bilaterally had
been strongly supported by the UAEG because it was the only
realistic way of getting an FTA in a timely fashion. Weren't
those in Dubai who talked about the need to go through the GCC
essentially saying that they were opposed to the FTA in
principle, and arguing for GCC involvement in the belief that
doing so would delay the agreement indefinitely?


5. (C) Acknowledging that there might be some truth to this
perception, Al-Tayer nonetheless argued that there was much more
to it than that. The biggest concern in Dubai was to avoid
endangering Dubai's access to the Saudi market. Whatever
happened with the FTA, it would be critical to "contain" or
manage the Saudi reaction. Dubai was extremely vulnerable in
this regard; Saudi Arabia was Dubai's second biggest export
market after Iran. According to certificates of origin issued
in Dubai, Dubai's re-exports to Saudi Arabia last year were UAED
10.5 billion, and by early December this year they had already
reached UAED 13.5 billion -- and that didn't even include
"national products," i.e those with at least 40 percent value
added in Dubai (according to the GCC customs union rules,
"national products" are allowed duty-free entry to other GCC
countries, whereas re-exports are subject to 5 percent duty,
collected by the receiving country.) Dubai had a manufacturing
sector that was dependent on the Saudi market for up to 70
percent of its sales, particular in the food sector. "If the
Saudis were to retaliate to a bilateral FTA by requiring their
imports to go through Saudi ports, and not through Dubai, we
would be finished," Al-Tayer suggested.


6. (C) There were other reasons why it made sense to "work with
the Saudis rather than pushing them to close up," Al-Tayer
proposed. "We want the Saudis to be more integrated with us, not
less; we believe that through engagement with them we can slowly
change their culture -- just as we have become more tolerant and
cosmopolitan through our history of interaction with other
cultures."

Agency Law
--------------


7. (C) Al-Tayer said there were many misperceptions regarding
Dubai's concerns about the Agency Law. First among them was
that this was a "Dubai only" issue. In reality, at least 50
percent of registered agency relationships were in Abu Dhabi.
Secondly, many in Dubai were wondering why it was necessary to
"scrap" the Agency Law altogether, which was the only solution
the UAEG negotiators seemed willing to consider. It would be
one thing to offer a waiver to US companies as part of the give
and take that the FTA would bring. But why should negotiations
with the U.S. lead to instant benefits, in exchange for nothing,
to European or Indian companies? That is what would happen if
the Agency Law were "cancelled" as part of the FTA negotiating
process. In response to a direct question, Al-Tayer confirmed
CG's impression that there was essentially no one in Dubai who
was opposed to granting new-to-market US companies wanting to do
business in Dubai an exemption to the Company and Agency Laws in
the context of an FTA; the only concern was finding a mechanism
for protecting existing agency and company relationships. Even
in those cases there was no desire to force an unsatisfied
company to remain with agent that was not providing acceptable
service; rather there was a desire to find a mechanism for
ensuring that the relationship was being broken due to genuine
failure on the part of the agent rather than something more
"arbitrary."

Immigration Concerns
--------------


8. (C) A final concern raised by Al-Tayer was a fear among
Dubayyans that an FTA with the U.S. might lead to a huge influx
of Indians moving to Dubai from their home country. The danger,
as he saw it, was that Indian-Americans would use the FTA as a
mechanism for moving their extended families from their home
countries to Dubai. "It is one thing if we are talking about a
manufacturing operation, but our fear is that they Americans of
Indian descent will open grocery stores and shops and then bring
all of their cousins and nephews to staff them...this
(immigration from India) is a very sensitive matter for us."
When CG questioned why an FTA with the U.S. would have any
bearing on UAE policies regarding admission of guest workers
from India, Al-Tayer said that UAE nationals who owned
businesses here had the right to bring in guest workers, and
that it was his understanding that granting "national treatment"
to US companies would allow them to do the same.

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


9. (C) Some of Al-Tayer's concerns appear to reflect a
fundamental misunderstanding of a bilateral FTA (namely that the
U.S. would negotiate market access on behalf of other countries
and that national treatment equates to an unrestricted
immigration right). USG officials have addressed both questions
in informal conversations with the UAEG, and we believe that
they understand that neither is the case. Given the UAEG's
concerns about demographic imbalances, we do not believe that
they will -- even inadvertently -- assume that national
treatment equates to an unlimited immigration right.
Al-Tayer's comments about access to the Saudi market demonstrate
the effectiveness of the Saudi campaign in raising tension among
Dubai businesses. In our conversations with the UAEG, however,
they have stressed their intention to move forward with a FTA
and their belief that the "Saudi problem" is one that can and
should be addressed at the technical level and for which there
are reasonable solutions.


10. (U) This message was coordinated with Embassy Abu Dhabi.

DAVIS