FTA WITH UAE ON HOLD

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C O R R E C T E D C O P Y - ADDED EO DATE AND CLASSIFIER LINE

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DEPT for NEA/ARP, EB/IFD/OIA
DEPT PASS TO USTR FOR AUSTR DONNELLY
COMMERCE FOR A/S BOHIGIAN, A/S PADILLA, U/S LAVIN
NSC FOR MCCORMICK

E.O. 12958: 12/19/2016
TAGS: ETRD EINV AE
SUBJECT: FTA WITH UAE ON HOLD

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CLASSIFIED BY CDA MARTIN QUINN FOR REASONS 1.4 (B) AND (D)


1. (C) Summary: On November 7, MinState Finance Kharbash and MinEcon
Al-Qasimi told AUSTR Donnelly that given the time constraints imposed
by the expiration of U.S. Trade Promotion Authority (TPA),the UAE
did not believe that an FTA with the United States could be completed
before TPA expired. The Ministers expressed their strong support for
eventually completing an FTA with the United States and their
interest in what steps could be taken in lieu of an FTA to strengthen
the UAE-U.S. economic relationship. Donnelly agreed that it was
important to focus on the path forward. The parties agreed that to
work out a coordinated outreach strategy to manage private sector and
public expectations on the FTA in the near future, preferably by
January. The principals also agreed that their staff would begin the
process of identifying specific policy initiatives for moving
UAE-U.S. trade and investment forward and how to institutionalize
this effort. End Summary.


2. (C) On December 7, AUSTR Shaun Donnelly met with MinState Finance
Dr. Mohammed Khalfan bin Kharbash, the Chair of the UAE-US FTA
negotiating team and MinEcon Sheikha Lubna Al-Qasimi, the negotiating
Co-Chair. Ambassador and Econchief accompanied Donnelly. MinEcon
U/S Abdullah Al-Saleh, MinFinance A/US Khalid Al-Bustani, and UAE
Embassy (Washington) Commercial Attach Reem Al-Hashimy also attended
the meeting. This meeting was subsequent to the separate
mid-September meetings AUSTR Donnelly had held with the UAE Foreign
Minister and with Shaikha Lubna in New York, in which Donnelly shared
the USG position that either dramatic steps would be necessary to
reinvigorate the FTA negotiations, or the two sides would need to
pursue alternatives to an FTA.

Commitment to FTA - but timeframe too short
--------------


3. (C) Dr. Kharbash stressed the strategic importance of the
bilateral relationship. He said that UAE Foreign Minster Sheikh
Abdullah bin Zayed Al-Nahyan (AbZ)had described the FTA as part of
this overall relationship and told the negotiators that he (AbZ) did
not want anything to jeopardize that relationship. Sheikha Lubna
said, given the time constraints imposed by the expiration of U.S.
Trade Promotion Authority (TPA),the UAE wanted to understand the
alternatives if an FTA could not be concluded in time. She added
that she did not want to see the tremendous work both sides had put
into the negotiations lost. Donnelly agreed that there was a need to
look at the path forward. He reiterated the two possible paths: one)
finding a way to sign the FTA in the very short time period
remaining, which would be very difficult; and two) developing an
alternative set of initiatives that would advance the relationship,
capitalize on existing work and maintain momentum with the goal of
achieving an FTA in the medium-term.


4. (C) Donnelly asked whether the UAEG thought it would be possible
to conclude an FTA in the next few months. Dr. Kharbash noted that,
although the negotiations had made good progress in a number of
areas, there were still gaps to be bridged in areas such as
investment. Kharbash noted that the Labor chapter was essentially
concluded. He acknowledged that given the time frame, it would "be
difficult to say we can conclude" an FTA.

What are the options?
--------------


5. (C) Donnelly explained that USTR was examining options on how both
sides could capture the benefits of the negotiations and maintain
momentum. Donnelly explained that the Trade and Investment Framework
(TIFA) process had been successful for the U.S. and the UAE. It
might be possible to enhance that as a way to signal continued
cooperation. Donnelly also noted that there were other possible
areas to manage engagement, including through anti-counterfeiting
cooperation, e-commerce standards, which could demonstrate serious
substantive commitments. In response to Donnelly's request for UAE
ideas, Dr. Kharbash said that he agreed that keeping the FTA and
engagement alive was necessary to send a strong message to the public
and the business community in both countries.


6. (C) Dr. Kharbash suggested that since the FTA's investment
provisions were proving so problematic to negotiate, both sides could
explore the value of negotiating a Bilateral Investment Treaty (BIT)
as a way to make progress over a time-period not dictated by TPA.
Al-Qasimi noted that while a stumbling block for the FTA, the
investment sector was a priority for both countries. Donnelly
cautioned that, while there were important procedural differences
between a BIT and an FTA, the two sides would face the same
substantive issues (i.e., including the energy sector, dispute
settlement, and investor-state arbitration). He explained that the
State Department and USTR shared the negotiating lead on BITs.
Donnelly said that the USG had not approached the U.S. business
community about a BIT with the UAE, as it was already negotiating an

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FTA. Donnelly said that he would explore the BIT concept with his
colleagues in Washington. The Abu Dhabi National Oil Company
(ADNOC)and the Abu Dhabi Investment Authority (ADIA),he stressed,
should not think that the U.S. position on a BIT versus FTA
investment chapter would be fundamentally different. Both sides
agreed that a rigorous exploration of possible next steps needs to
take place soon so that concrete alternatives to an FTA can be agreed
to, and that an appropriate strategy needs to be developed for
communicating these changes to the public.


7. (U) Text of Press Release
--------------

Dec 7, 2006 - 07:26 - Dubai, Dec. 7th, 2006 (WAM) - As part of a
regional trip to the Gulf region, Assistant U.S. Trade Representative
Shaun Donnelly met in Dubai with Dr. Mohammed Khalfan bin Kharbash,
Minister of State for Finance and Industry, Chair of the U.S. -UAE
Free Trade Negotiating Council and Sheikha Lubna Al-Qasimi, Minister
of Economy, Co-Chair of the U.S.-UAE Free Trade Negotiating Council.

Attending the meeting were Michele J. Sison, U.S Ambassador to the
UAE, and Oliver John, Economic Attach. Emirati attendees were
Abdulla Al-Saleh, Under Secretary of the Ministry of Economy, Khalid
Al-Bustani, Assistant Under Secretary for Revenue and Budget, Reem
Al-Hashimy, Commercial Attach at the UAE Embassy to the U.S. in
Washington DC.

The parties discussed the progress of the negotiations on the Free
Trade Agreement between the United Arab Emirates and the United
States, which began in March 2005.

The parties reviewed the progress of the major issues of the
negotiations and the progress achieved by the negotiating teams,
formed by both sides. The sides reaffirmed the importance of
continued efforts to broaden and deepen the economic and trade
relations between the United States and the United Arab Emirates.


8. (U) This message has been cleared by AUSTR Donnelly.

Quinn