UNCLAS SECTION 01 OF 02 MANAMA 000305

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR

E.O. 12958: N/A
TAGS: ETRD PREL OVIP SECRETARY OF COMMERCE GUTIERREZ REGION OFFICIALS ECTRD BILAT
SUBJECT: SECRETARY DISCUSSES FTA WITH MINISTER OF INDUSTRY
AND COMMERCE FAKHRO


1. (SBU) Summary. Minister of Industry and Commerce Hassan
Fakhro told visiting Commerce Secretary Gutierrez February 27
that the Cabinet would forward most IPR implementing
legislation for the FTA to the National Assembly in the
coming days, and that the copyright legislation should follow
soon after. He was optimistic that the implementing
legislation would be passed in the coming weeks. The next
step, he stated, will be to launch an aggressive promotional
campaign to American companies, which will include trade
missions and highlight the advantages and incentives that
Bahrain offers. He hoped Bahrain's textile industry will
adapt and benefit from the FTA. Bahrain, with the help of
Arthur D. Little, is developing an industrial strategy for
the next 20 years. Fakhro discussed GCC economic
integration, including the goal of currency unification by

2010. He said that if the GCC had tried to negotiate an FTA
with the US as a group, progress would have been much slower,
citing the continuing negotiations (12 years so far) that
have been taking place on a GCC-EU FTA. He said that King
Hamad was the true "father of the FTA" in Bahrain. End
summary.


2. (SBU) During his February 26-28 visit to Bahrain to
headline a U.S.-co-sponsored conference on "Free Trade in the
Middle East," Secretary of Commerce Carlos Gutierrez met with
Minister of Industry and Commerce Dr. Hassan Fakhro to
discuss the U.S.-Bahrain Free Trade Agreement and other
trade-related issues. Minister Fakhro opened the meeting by
thanking the Secretary for his remarks at the conference
supporting Bahrain's reform efforts and highlighting the
benefits of an FTA. He also thanked the Commerce Department
for its help to Bahrain in helping develop its commercial law
(financed under a MEPI grant).


3. (SBU) Secretary Gutierrez in turn thanked the Minister for
Bahrain's support in organizing the Free Trade Conference.
Noting our hope that U.S. and Bahrain companies will be able
to benefit from the FTA soon, the Secretary asked about the
status of the IPR implementing legislation, which must be

passed before the FTA can take effect. Fakhro responded that
"it is almost in the bag." He said that the Cabinet's legal
committee approved the legislation this week, and passed it
back to the Cabinet. He said that the Cabinet will forward
the legislation (all except the copyright legislation, which
is still being finalized) to the National Assembly in the
coming days, and that he expects it to be passed in a few
weeks. He said that Bahrain would still like to implement
the FTA by April 1, but put the chances of getting it passed
in time for that at 50/50.


4. (SBU) Asked about the copyright legislation, Fakhro said
that he expected it to be sent to the Cabinet "very shortly."
He noted that it was the Ministry of Information, not
Industry and Commerce, that had responsibility for the
copyright legislation.


5. (SBU) Fakhro said that, after the FTA comes into effect,
the next challenge will be to promote the FTA and to more
effectively highlight the advantages and incentives that
Bahrain offers to American companies. Bahrain needs to
develop a campaign that especially targets the U.S. A key
will be to get the private sector involved. One element of
the campaign will be trade missions to the U.S. He noted
that Bahrain has sent a couple of trade missions in the past,
but needs to do this more aggressively now. Secretary
Gutierrez welcomed this, and said that the Department of
Commerce would be glad to help to make Bahraini trade
missions successful.


6. (SBU) Fakhro said that one sector he, as Minister of
Industry and Commerce, hopes to promote is textiles. Noting
that Jordanian Minister of Trade and Industry Sharif Zubi, in
his speech that morning at the Free Trade Conference, had
highlighted how Jordan's textile industry had benefited from
its FTA, Fakhro stated that he wanted to explore ways to
restructure Bahrain's textile industry to move upscale and in
line with tastes in the U.S. He said that Bahrain's textile
industry currently employs 12,000 people (25 percent of whom
are Bahraini) and exports $300 million in textile goods,
mostly to the U.S. Bahrain recognizes that its textile
industry will not be able to compete with China or India, but
hopes that, with the FTA, it can be competitive if it
upgrades its production.


7. (SBU) More broadly, Fakhro stated, Bahrain is developing
an industrial strategy for the next 20 years, employing the
services of Arthur D. Little as consultant. Asked what
industries Bahrain would focus on, Fakhro replied that the
emphasis would be on developing small and medium-sized
industries. He said that the government is trying to expand
the role of the private sector, even in areas that have
traditionally been run by state-controlled companies, such as
oil and petrochemicals. If it works to have the private
sector run these industries in the U.S., he said, why not for
us?


8. (SBU) The Secretary asked Fakhro about progress towards
economic integration within the GCC. Fakhro replied that the
GCC countries have come a long way in this endeavor, but
still have a lot to achieve. The currencies are expected to
be unified in 2010. This move will not have a major
immediate impact, as all currencies are currently pegged to
the dollar and so are in effect merged. But it will lead to
a unified monetary policy and perhaps in time a unified
fiscal policy. The GCC customs union will also hopefully be
finished before too long, which will lead to a completely
free transfer of goods, services and people.


9. (SBU) The Secretary asked if there had been consideration
of negotiating an GCC-wide FTA with the U.S., instead of one
country at a time. Fakhro said that negotiating as a region
would have slowed the process considerably, citing the 12
years that the GCC has been negotiating a FTA with the EU as
an example. Some countries (read: Saudi Arabia) only just now
joined the WTO and were not ready for an FTA. Once Bahrain
knew that there was a possibility of negotiating an FTA with
the U.S., it did not want to wait years for it to be
completed.


10. (SBU) Noting that the Secretary would shortly meet King
Hamad, Fakhro said that the King has been the "instigator and
guardian" of Bahrain's decision to negotiate an FTA with the
U.S. Every time a problem or issue came up, he pushed to
resolve it. He is a great friend of the U.S., Fakhro stated,
and in Bahrain the "father of the FTA."
MONROE