UAEG FTA CONCERNS POST-DUBAI PORTS WORLD

C O N F I D E N T I A L ABU DHABI 001772 SIPDIS SIPDIS STATE FOR NEA/ARP, EB STATE PLEASE PASS TO USTR FOR SDONNELLY AND DBELL NSC FOR MMALVESTI E.O. 12958: DECL: 04/30/2016 TAGS: ETRD EINV EPET EFIN AE SUBJECT: UAEG FTA CONCERNS POST-DUBAI PORTS WORLD Classified By: Ambassador Michele J.Sison for reasons 1.4 (b) and (d). ¶1. (C) Summary. The UAEG views the upcoming investment chapter talks as crucial to the success of an FTA, especially in light of the recent Dubai Ports World episode. On April 22, Foreign Minister Abdullah bin Zayed Al Nahyan (AbZ) told visiting Assistant to the President for Homeland Security and Counterterrorism (APHSCT) Frances Townsend that unless the UAEG and the USG can make progress on the investment chapter during the upcoming May meetings, the FTA will fail. On April 23, Minister of Labor Ali Al Kaabi also expressed concerns about an FTA to the Ambassador. In the wake of the Dubai Ports World controversy, many Emiratis appear to be questioning the value of an FTA and whether it would positively affect UAE businesses. During its recent Trade Policy Review negotiations, the WTO pushed the UAE to further liberalize its economic, trade and service sectors. End Summary. ¶2. (C) On April 22, Ambassador and APHSCT Townsend met with Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan (MbZ), Foreign Minister Abdullah bin Zayed Al Nahyan (AbZ),and Yousef Al Otaiba, MbZ's International Affairs Director. During the lunch meeting, AbZ said, "if we end up without an FTA, oil and gas will be the reason.... The UAE has been as cooperative and creative as possible, but this issue is very serious for our national security." AbZ noted that the U.S.-UAE negotiations are the first between the U.S. and a major OPEC exporter, and he anticipates this problem will be an issue in U.S. FTA negotiations with other oil-producing countries as well. AbZ also told the Ambassador in an aside, "if you cannot sign an FTA with the UAE, you will never get one with Qatar, Kuwait, or Saudi Arabia." ¶3. (C) Additionally, Yousef Al Otaiba told APHSCT Townsend that the challenges with negotiating an FTA are no longer just due to ADIA and ADNOC,s position on the natural resources issue. He said that many UAE businessmen do not see the benefit of an FTA and are using the DP World incident as ammunition. In addition, AbZ said the private sector is "trying to push the FTA away." Recounting a recent meeting between UAE Minister of Economy Sheikha Lubna Al Qasimi and all of the UAE Chambers of Commerce, AbZ said that the UAE business community was "trying to make use of the DPW fiasco as the basis for claiming that a U.S.-UAE FTA will hurt the UAE business community." ¶4. (C) On April 23, Minister of Labor Ali Al Kaabi also told the Ambassador he is worried about an FTA, especially in light of the recent DP World controversy. The Minister said he would not invest in the U.S. for fear of being blocked by Congress since he is from a "terrorist country." Al Kaabi said he does not see any benefit from an FTA for Emirati businessmen. This same sentiment has been voiced to emboffs by several Emiratis in the private sector, including Khalifa Al Muhairi, an influential Emirati businessman who serves on the board of the Abu Dhabi Chamber of Commerce. Al Muhairi believes an FTA should have an escape clause in case either side wants to withdraw from the agreement at a later date. ¶5. (C) The UAE is engaging in a public outreach campaign to inform its citizens that many of the upcoming regulatory changes are part of the UAE's broader obligations under the World Trade organization (WTO). During its recent Trade Policy Review negotiations, the WTO urged the UAE to further liberalize its economic, trade and services policies. According to local press reports, some members of the WTO raised serious objections to the absence of competition legislation in the UAE, which requires foreign companies to hire a local agent. Additionally, WTO members are concerned about UAEG ownership of large businesses, the lack of telecom liberalization and low private sector participation in infrastructure development and management. The WTO encouraged the UAE to further liberalize its services sector and to separate the regulatory functions of state enterprises from their commercial activities. Press reports of the WTO talks included a statement by Dr. Mohammad Khalfan bin Kharbash, Minister of State for Financial and Industrial Affairs and Co-Chairman of the UAE FTA negotiating team, saying the UAE and the U.S. will hold FTA negotiations in Abu Dhabi May 9-11. ¶6. (C) Comment: The above statements by key UAEG officials and Emirati businessmen regarding an FTA may be tangible evidence of negative fallout from the DP World controversy. End comment. SISON