Identifier
Created
Classification
Origin
05MANAMA38
2005-01-05 14:41:00
CONFIDENTIAL
Embassy Manama
Cable title:  

BAHRAIN FTA: FULL SPEED AHEAD DESPITE PROTESTS

Tags:  ECON ECIN ETRD PREL BA 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000038 

SIPDIS

STATE FOR NEA/ARPI BERNS
STATE PLEASE PASS USTR BUNTIN
COMMERCE FOR ITA/MAC/ONE LOUSTAUNAU AND HOFFMAN
GENEVA FOR USTR

E.O. 12958: DECL: 01/05/2015
TAGS: ECON ECIN ETRD PREL BA
SUBJECT: BAHRAIN FTA: FULL SPEED AHEAD DESPITE PROTESTS
FROM SAUDI ARABIA

REF: A. MANAMA 0024

B. 04 MANAMA 1814

Classified By: Ambassador William T. Monroe for reasons
1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 MANAMA 000038

SIPDIS

STATE FOR NEA/ARPI BERNS
STATE PLEASE PASS USTR BUNTIN
COMMERCE FOR ITA/MAC/ONE LOUSTAUNAU AND HOFFMAN
GENEVA FOR USTR

E.O. 12958: DECL: 01/05/2015
TAGS: ECON ECIN ETRD PREL BA
SUBJECT: BAHRAIN FTA: FULL SPEED AHEAD DESPITE PROTESTS
FROM SAUDI ARABIA

REF: A. MANAMA 0024

B. 04 MANAMA 1814

Classified By: Ambassador William T. Monroe for reasons
1.4 (b) and (d).


1. (C) Summary. GOB officials were quick to defend their
right to sign an FTA with the United States after several
news accounts cited Saudi Arabia's Finance Minister as saying
his country would impose duties on re-exported foreign goods
if the U.S.-Bahrain agreement was ratified. Youssef Hamoud
of Bahrain's Ministry of Finance and National Economy said
Bahrain had always understood that re-exporting U.S. goods to
other GCC states would result in tariffs, and that Bahrain's
primary goal was to increase foreign direct investment. He
stated Saudi Arabia is feeling left out and urged Washington
to support Saudi as it seeks to become a member of the WTO.
Business leaders have told us they wish to push ahead with
ratification as quickly as possible despite the Saudi
reaction. End Summary.


2. (U) A January 4 Bahraini Gulf Daily News article cited
Saudi Arabia's Finance Minister as saying his country would
impose duties on foreign goods re-exported through Bahrain if
"it put into effect a recently signed free trade agreement
with the U.S." The UAE Gulf News also covered remarks by the
Saudi Finance Minister on January 4 by citing the minister as
saying, "unilateral preferential trade agreements signed by
some GCC states with countries outside the council undermine
the GCC and weaken its negotiating position." This echoes
comments made by Saudi Foreign Minister Saud Al Faisal at the
December 3 - 5 "Gulf Security Dialogue" conference in Manama
(Ref B).


3. (U) GOB officials and representatives were quick to
respond to the Saudi accusations. In a January 5 Gulf Daily
News article, parliament member Abdulnabi Salman stated,
"Article 31 of the GCC law regulating economic co-operation
fully supports Bahrain's right to sign a bilateral agreement.
(Bahrain) has every right to ratify the agreement and I urge
members of the parliament and Shura Council not to be
influenced by others who try to stop the deal." On January
5, the Bahrain Tribune cited an unnamed official claiming
"five of the six GCC countries have 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."


4. (C) Director of Economic Planning at the Ministry of
Finance and National Economy Youssef Hamoud told Econoff on
January 5 that Bahrain understood going into the negotiations
that re-exporting U.S. goods to other GCC states would result
in application of a tariff. He stated Bahrain signed the
agreement to increase foreign direct investment, not to
re-export goods tax free. He said there is misunderstanding
and misquoting taking place in the newspapers. When asked to
comment on the Saudi reaction, Hamoud stated it is
understandable as they are feeling left out especially since
Oman and UAE also plan to start FTA negotiations soon with
the U.S. Hamoud urged Econoff to inform appropriate USG
officials that Washington should support Saudi Arabia's bid
to become a member of the WTO.


5. (U) Business leaders appear unfazed by the Saudi reaction.
One banker told Econoff that a Saudi lack of economic
liberalization could benefit Bahrain as foreign companies
might be more apt to relocate to Manama from the eastern
province. Other business representatives are urging
immediate ratification of the FTA in order to get a head
start on their neighbors in Oman and the UAE.


6. (C) Comment. Bahrainis from both the public and private
sector reaffirm their commitment to proceeding expeditiously
with ratification and implementation of the FTA. In fact,
the King said so directly to the Ambassador January 3 (Ref
A). However, they also want to do what they can to soothe
their large neighbor to the west. Many Bahrainis have taken
up a call for closer U.S. engagement with the Saudis on WTO
accession, perhaps hoping that progress in Geneva will blunt
Saudi Arabia's more local concerns.

MONROE