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