VISIT OF SECRETARY OF COMMERCE CARLOS GUTIERREZ TO

UNCLAS SECTION 01 OF 04 KABUL 001022 SIPDIS DEPARTMENT FOR SA/FO, SA/A, EB/CBA FOR TGILLMAN TREASURY FOR PARAMESWARAN NSC FOR AHARRIMAN, KAMEND CJTF-76 FOR POLAD, CENTCOM FOR CG CFC-A COMMERCE FOR FLAVIN, CBUCHAN, AADLER, SHAMROCK USTDA FOR DSTEIN, SGREENIP SENSITIVE SIPDIS E.O.12958: N/A TAGS: ECON ETRD EFIN PREL OPIC EAID PGOV AF SUBJECT: VISIT OF SECRETARY OF COMMERCE CARLOS GUTIERREZ TO AFGHANISTAN FEBRUARY 28 MARCH 1 ¶1. (SBU) Summary: Secretary of Commerce Carlos Gutierrez visited Afghanistan February 28 to March 1. Secretary Gutierrez met with GOA President Karzai, Minister of Commerce Arsala, participated in a roundtable with Afghan International Chamber of Commerce executives and members of parliament, business leaders and GOA officials and hosted a reception for U.S. companies operating in Afghanistan. President Karzai was unenthusiastic about a potential U.S. Regional Opportunity Zone initiative that could grant U.S. tariff concessions on goods jointly produced by Afghan and Pakistan interests unless it were coupled with efforts to get Pakistan to prevent attacks from Pakistani territory. The Commerce Minister undertook to educate the President on the commercial benefits this initiative could offer Afghanistan. Post seeks DoC guidance on follow-up activities discussed during the visit including reverse U.S. and Afghan trade missions and promised DoC assistance in identifying U.S. companies interested in working with Afghan counterparts to promote dried fruit and nuts, marble and carpet exports. We ask that DoC move forward on funding and training a Commercial FSN. End Summary. ¶2. (U) Secretary of Commerce Carlos Gutierrez visited Afghanistan February 28 to March 1. Following a courtesy call with Ambassador Neumann and a Country Team briefing, he began a program of meetings with GOA executive and parliamentary officials, and Afghan and U.S. businesses. -------------- Minister of Commerce Amin Arsala -------------- ¶3. (U) Arsala welcomed Gutierrez and noted the timeliness of his visit in the wake of a successful January 31 London Conference that endorsed a visionary Afghanistan Compact and Afghan National Development Strategy, which commit the GoA to promote the role and potential of the private sector in advancing sustainable economic development. ¶4. (U) Arsala listed a number of recent GoA private sector initiatives, including the December 2005 enactment of a private sector investment law and Commerce Ministry efforts to ramp up an export promotion directorate. He highlighted dried fruit, hand-knotted carpets, marble and minerals (particularly copper) as four key export sector clusters that the GoA has targeted for support. He also emphasized expansion of regional trade opportunities as a GoA priority, and noted that total bilateral trade with Pakistan had grown from USD 60-70 million during the Taliban era to current levels of USD 1.1 billion. ¶5. (U) In response to Undersecretary Lavins question on how the U.S. Commerce Department could support GoA efforts to expand its export markets, Arsala asked for technical assistance with fresh fruit cold storage technology and dried fruit quality control and packaging technology, as well as assistance in making credit available to rural producers. ¶6. (U) Secretary Gutierrez agreed to explore ways in which the U.S. Commerce Department could help link U.S. private sector companies with Afghan counterparts in priority export sectors identified by the GoA. In response to Arsalas request that U.S. Foreign Commercial Service establish a presence on the ground in Afghanistan, Gutierrez noted that Commerce is represented by a State KABUL 00001022 002 OF 004 Dept Commercial Officer that could call on regional Foreign Commercial Service assets, including in the UAE. -------------- President Karzai -------------- ¶7. (U) President Karzai inquired about the status of the Building Business Bridges Initiative and expressed an interest in using this program, as well as the announced USTDA USD 500,000 technical assistance grant program to attract new U.S. investors to Afghanistan. Karzai is particularly interested in expanding Afghan exports to U.S. and regional markets, particularly Afghan fresh and dried fruits, as well as carpets. Karzai was dismayed that, according to trade figures quoted by the Secretary, Afghan carpets represent only three percent by value of Afghan exports to the United States. ¶8. (U) Sue Hamrock, of the Commerce Departments Afghanistan Investment and Reconstruction Task Force, indicated that Commerce is exploring possibilities for cooperation with State in organizing reverse trade mission for U.S. buyers of carpets. The Secretary suggested that the same could be done with buyers for fresh and dried fruit. ¶9. (SBU) Secretary Gutierrez raised the urgent need for the GOA to address an incomplete legal framework that leaves investors with a high degree of uncertainty. Karzai downplayed this concern, saying that I thought we had passed a good investment law, but conceded that a comprehensive commercial legislative framework is a necessary component of an enabling environment for private sector-led growth. ¶10. (U) Karzai asked the Secretary how Afghan membership in the WTO would be helpful to Afghanistan. The Secretary explained that the WTO is a global trading club and that the accession process requires countries to adopt investor stor friendly policies that in turn allowed the US to extend more favorable trade benefits such as equal treatment under the Harmonized Tariff Schedule. ¶11. (SBU) When the Secretary raised the issue of possible U.S. tariff preferences in the context of Regional Opportunity Zones (ROZs) for goods jointly produced in Afghanistan and Pakistan, Karzai indicated that he would put the squeeze on any initiative that benefited Pakistan as long as it continued to export bombs and terrorists to Afghanistan. U/S Lavin pointed out that ROZs could play a role in promoting stability in the region. Ambassador Neumann has followed up in pointing out to President Karzai the benefits of an ROZ. He will continue to do so. -------------- Roundtable Discussion -------------- ¶12. (U) Secretary Gutierrez participated in a roundtable discussion hosted by the Afghan International Chambers of Commerce (AICC,) which included AICC board members, Minister of Agriculture Obidullah Ramin, Chairman of the the KABUL 00001022 003 OF 004 Parliamentary National Economy Committee Daud Sultanzoy and members of the Afghan business community. ¶13. (U) AICC Chairman Hamid Farooqi introduced his organization and asked for the Secretarys assistance in promoting Afghan exports to the U.S. and in facilitating matchmaking between U.S. and Afghan companies. Mahmood Karzai, brother of President Karzai and AICC board member, gave a brief presentation on obstacles to private sector development in Afghanistan, which included the usual concerns about electricity and roads, access to land and capital. He also cited a lack of clear economic vision by the GOA. ¶14. (U) Sultanzoy stated that Parliament is keenly aware of the immediate need for legislation that would provide legal safeguards for investment, but noted that Parliament would need assistance in capacity building. ¶15. (U) Secretary Gutierrez emphasized the U.S. long term commitment to Afghanistan, promised to explore potential matchmaking and export promotion activities and exhorted d the Afghan business community to set an example by paying their taxes. -------------- Business Reception -------------- ¶16. (U) Secretary Gutierrez hosted a reception at the newly-opened five-star Kabul Serena Hotel for U.S. businesses operating in Afghanistan. Twenty-five companies were represented, including Globecomm Systems, John Walter Thompson Advertising, FedEx, Afghan Wireless Communications Company and Shaw International. Afghan business leaders, GOA officials, including Minister of Finance Anwar-ul-Haq Ahadi, Minister of Communications Amirzai Sangeen and Minister of Commerce Arsala and members of Parliament also attended. -------------- COMMENT -------------- ¶17. (SBU) President Karzais unhelpful comment on the ROZ proposal reflects a real preoccupation. Commerce Minister Arsala later privately committed to EconCouns to educate the President on the very real commercial benefits that this possible U.S. tariff concession initiative (formally y announced by President Bush in Islamabad on March 4) could offer Afghanistan. We believe that in the end we will convince Karzai to support the ROZ. ¶18. (SBU) Post awaits guidance from the Department of Commerce on follow-up activities discussed during the visit, specifically, reverse U.S. and Afghan trade missions and assistance in identifying U.S. companies interested in working with Afghan counterparts to improve and promote dried fruit and nuts, marble and carpet exports. LtGen. Eikenberry has expressed interest in supporting the Secretarys proposed export assistance initiatives at the SIPDIS PRT level and Post is currently exploring available mechanisms to do so. KABUL 00001022 004 OF 004 19.(U) Finally, our Embassy Economic Section is pleased to represent the Department of Commerce in Afghanistan, with a dedicated Foreign Service Economic officer working closely with DoC/ITA and with DoCs Washington Commercial Advocacy Center to actively promote expanded U.S. trade with and d investment in Afghanistan. We recommend the Commerce Department consider training and funding a dedicated Embassy Kabul Commercial FSN to support posts trade and investment advocacy efforts. NEUMANN