GCC SECGEN AFFIRMS RIGHT OF MEMBERS TO SIGN FTA'S

C O N F I D E N T I A L MANAMA 000320 SIPDIS STATE FOR NEA/ARPI, EB STATE PASS USTR FOR J BUNTIN E.O. 12958: DECL: 03/06/2015 TAGS: ETRD ECON ECIN BA SUBJECT: GCC SECGEN AFFIRMS RIGHT OF MEMBERS TO SIGN FTA'S WITH U.S. REF: A. RIYADH 1283 ¶B. RIYADH 1208 ¶C. MANAMA 176 ¶D. MANAMA 065 ¶E. MANAMA 038 Classified by DCM Susan L. Ziadeh for reasons 1.4 (b) and (d). ¶1. (U) Bahrain's Al Ayam Arabic daily newspaper reported March 1 that GCC Secretary General Abdul Rahman Al Atteya confirmed that each GCC member state has the right to sign a free trade agreement with the United States, but the country must notify the other GCC members about the steps taken. He gave his statement on the margins of the GCC Supreme Council Consultative Committee meeting in Manama. (Note: Per Ref E, on January 5, the Bahrain Tribune cited an unnamed Bahraini official claiming "five of the six GCC countries agreed that after the refusal by the U.S. of collective negotiations with the GCC bloc, the members could go ahead with bilateral negotiations in order to ensure the common interests of the region. The accord to consider such conditions in free trade agreements between GCC states and the U.S. as exceptional was reached by the GCC financial and economic committee at its 66th meeting in Manama on December 18." Al Atteya could have based his statement upon the December agreement. End Note.) ¶2. (C) Ministry of Finance Director for Economic Planning Yousuf Humood told EconFSN March 5 that the U.S.-Bahrain FTA is fully within Bahrain's rights and does not violate any Bahraini commitments to the GCC. Other GCC states such as UAE, Oman, and Qatar are following Bahrain's path. Humood commented that Emirati officials have told him that they are willing to accept FTA text that is exactly the same as the U.S.-Bahrain FTA. ¶3. (C) Humood continued that the FTA does not harm the GCC Customs Union because the FTA is a bilateral agreement that has no jurisdiction over re-exported commodities, which are subject to the common tariff mechanism outlined in the Customs Union agreement. He stressed that there is a clear understanding of the mechanics involved, including the final destination principle used by the GCC in determining the payment of tariffs. Under the FTA, American goods that are re-exported will be taxed upon entering Saudi Arabia. This will prevent any "flood" of U.S. goods entering Saudi markets via Bahrain. ¶4. (SBU) The March 5 edition of the Arabic daily Al Wasat reports that the Saudi newspaper "Economics" ran an article stating that Emirati officials involved in the first round of FTA negotiations with the U.S., beginning March 8, expect the American side to demand that the Emirates drop the boycott of Israel and agree to support any U.S. trade and economic embargoes. In the Bahraini context, an implication of the Al Wasat article is that the United States made similar demands of the Bahrainis in the FTA negotiations, and could be viewed as a Saudi attempt to sully Bahrain's image in front of other Arabs. ¶5. (C) Comment: As with any complex set of guidelines, the GCC Customs Union agreement appears to provide supporting arguments for both those in favor of, and against, extra-GCC bilateral trade agreements. The latest wrinkle in this ongoing dispute is the entry of GCC SecGen Al Atteya into the fray. While we defer to Embassies Doha and Riyadh for analysis, the former Qatari MFA official Al Atteya could be voicing his own national perspective by insisting on the right of the smaller GCC member states to negotiate deals separate from Council-wide agreements. MONROE