SPECIAL OMAN ONLINE: A/USTR NOVELLI DEMYSTIFIES FTA

UNCLAS SECTION 01 OF 02 MUSCAT 000495

SIPDIS

DEPARTMENT FOR NEA/ARPI (TROBERTS),NEA/PPD (CWHITTLESEY),NEA/P
(FFINVER),IIP/G/NEA
DEPARTMENT PLEASE PASS USTR(CNOVELLI)

E.O. 12958: N/A
TAGS: KPAO SOCI MU
SUBJECT: SPECIAL OMAN ONLINE: A/USTR NOVELLI DEMYSTIFIES FTA
DURING ONLINE DISCUSSION


1. Summary: The Omani Internet chat rooms "al-Sablah" and "al-
Majarra" are the liveliest and most comprehensive Arabic-language
fora for political and social discourse in the country, touching
on issues and personalities rarely addressed in the conventional
media. While not totally free, nor wholly reflective of Omani
public opinion, these popular sites nevertheless offer a
worthwhile window into the hot topics and unvarnished views of
the day. This edition of Oman Online contains the following
topics:

FTA Round One Negotiations Between Oman and The United States

End summary.

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Appreciation for Access
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2. Assistant U.S. Trade Representative for Europe and the
Mediterranean and head of the FTA negotiating team in Oman
Catherine Novelli addressed the pros and cons of the FTA
agreement and its impact on Oman during a web chat hosted by al-
Sablah. One Sablah member greeted Ms. Novelli stating, "We
welcome you and appreciate your talking to us, the ordinary
people of Oman." Ms. Novelli responded, "We believe that this
agreement is going to bring about feasible benefits to both
America and the Sultanate. It is going to open the market for
both sides." Another member stated, "This is really an ironic
situation, our being able to talk to one of the United States'
top officials, while our own government does not care enough to
provide us with information."

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Responses Soothe Concerns
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3. Many members expressed fears and concerns over the "joining
of the weak and loose economy of Oman with the strongest economy
and market in the world of the U.S.," as one participant put it.
Ms. Novelli's responses seemed to help calm the fears of the
participants, especially in regard to political questions like
the involvement of the Americans in the internal politics of
Oman, or the potential for the U.S. to pressure Oman to normalize
it's relations with Israel as part of the negotiation
requirements.

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Dynamic Dialogue
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4. The following is the summary of the questions and the
responses between Ms. Novelli and the members of al-Sablah:

-- Why not sign an FTA with the GCC collectively?

The United States strongly supports the GCC as a positive force
for economic integration and openness. Regarding free trade
agreements, we work with countries based on their specific
situation in terms of economic development and decision-making.
Our goal is to conclude FTAs with all GCC nations at the earliest
opportunity. We fully support regional integration, and our FTA
partners have assured us that the agreement does not conflict
with GCC goals.

-- Would an FTA allow harmful or prohibited goods into Oman?

An FTA does not require a country to allow entry of prohibited
goods. Nothing in the agreement requires Oman to change the
current situation with respect to regulating harmful or
prohibited goods.

-- Would the FTA harm Oman's relations with Saudi Arabia?

We currently have reached a free trade agreement with one GCC
member (Bahrain),we are negotiating with two others (Oman and
UAE),and we are in serious discussions with two other states
(Kuwait and Qatar) about future FTA talks. A majority of the GCC
states support bilateral FTA's with the U.S. With respect to
Saudi Arabia, we are working closely with the Kingdom on its
accession to the World Trade Organization. We fully support the
GCC, and an FTA with Oman will not threaten that union.
Political relations among GCC members must be worked out among
themselves.

-- Can Omani products compete with American products?

Omani goods will have an advantage over similar goods from non-
FTA countries because an FTA mandates the elimination of all
duties on agriculture, textiles, and other goods. The United
States represents the largest market for goods in the world, and
currently has a $600 billion trade deficit with the rest of the
world. Oman currently enjoys a $300 million trade surplus with
the U.S.

-- How will Omani textiles survive after the end of quotas? Will
the FTA help?

Ending textile quotas was a worldwide agreement. The FTA will
give Omani textile producers preferential treatment in the U.S.
market by removing all tariffs, to which non-FTA states will
still be subject. Again, the U.S. is the largest marketplace in
the world.

-- How will the FTA affect Foreign Direct Investment in Oman?

The United States has long-standing, good relations with Oman
stretching for almost 200 years, and we foresee no problems in
our future relations. American companies continue to show their
long-term confidence in Oman through large investments: Dow
Chemical ($3 billion),Bechtel ($1.3 billion),and Occidental all
envision massive investment increases in the Sultanate in the
coming years.

-- Will American products swamp our market?

The U.S.-Jordan FTA has been in force for four years. Imports
from Jordan to the U.S. have increased in that time from $11
million annually to $1.2 billion annually, and the rate of that
growth has increased each year. U.S. exports to Jordan have also
increased, but not nearly at the exponential rate as Jordanian
exports to the U.S.

-- Will the FTA impact the boycott against Israel?

The FTA is a bilateral agreement between the U.S. and Oman that
does not involve third parties. The GCC renounced the secondary
and tertiary boycotts of Israel long before the beginning of FTA
discussions.

-- What is your frank assessment of the drawbacks of the FTA to
Oman?

We do not see any drawbacks. The free trade agreement is a win-
win situation. In Jordan, 40,000 new jobs were created as a
result of the free trade agreement and none were lost as a result
of it. Trends are increasingly positive in Jordan. An FTA will
lead to greater prosperity here in Oman also. We should picture
our trade relations as a pie with finite slices. Our aim is for
that pie to keep on growing, so everyone's slice gets bigger.

-- What is the difference between WTO membership and the FTA?

Our free trade agreements are built upon the foundation of our
WTO commitments. The FTA, however, involves even deeper
commitments. Under WTO, for example, countries can keep tariff
barriers, whereas in an FTA we agree to eliminate these tariffs.

-- What is the impact if Oman signs FTA's with China or Germany?

We are happy to have competition in the marketplace. We fully
support economic liberalization, and we have no objection to Oman
signing FTAs with other nations.

-- Can you disclose the text of the agreement?

We do not disclose texts during ongoing negotiations, since these
are strictly government-to-government talks. But after we agree
on a text, and even before the agreement is signed, we post the
entire text on our website which is accessible to all:
www.ustr.gov.

-- Do recent arrests in Oman have any relation to the FTA talks?

Absolutely not. There is no connection whatsoever.

-- Are you testing public opinion by posting a message on Sablah?

We believe strongly in transparency, and feel it is important
that the public knows what we are doing. In the United States,
we have formal processes for soliciting input and comments. We
value public opinion, and we take it seriously.

-- Will there be any impact of Qualified Industrial Zones on
Oman's policies?

There is no impact on Oman. QIZs are special projects authorized
by the U.S. Congress that involve only Egypt and Israel, and
Jordan and Israel.

BALTIMORE