Initial FTA Success Stories - The First 90 Days

UNCLAS RABAT 000506

SIPDIS

SIPDIS

USTR FOR DOUG BELL
STATE ALSO FOR NEA/MAG AND NEA/OFI
STATE ALSO FOR EB/TPP
USDOC FOR ITA/MAC/ANESA - DAVID ROTH
USDA FOR ITP - BOB MACKE

E.O. 12958: N/A
TAGS: ETRD EAGR BEXP KIPR KTIA MO
SUBJECT: Initial FTA Success Stories - The First 90 Days


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SUMMARY
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1. Summary: As expected, increased foreign direct
investment has led FTA successes in the early days. Yet
anecdotal evidence shows U.S. and Moroccan exporters are
making use of the FTA's market access provisions to explore
new market opportunities. U.S. FTA-related technical
assistance has borne fruit: MEPI and USAID programs are
helping Moroccan businesses recognize and seize the FTA's
benefits. End Summary.


2. The success of the FTA in attracting foreign direct
investment and in "marketing Morocco" had become apparent
even before ratification and implementation of the accord.
Now, 90 days into implementation, we are beginning to see
signs of expanded bilateral trade. U.S. FTA-related
technical assistance, especially MEPI-funded FTA assistance
has produced concrete gains for Moroccan exporters,
particularly for SMEs.

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Foreign Direct Investment
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3. As expected, the first, and most impressive successes
linked to the FTA are increased foreign direct investment in
Morocco. The FTA's investment provisions plus generous
market access (particularly for textiles and garments) make
Morocco an attractive platform for export to the United
States and to the European Union. Even before the
conclusion of negotiations in 2004, citing the FTA's textile
market access, Group Legler, an Italian concern, announced a
$66 million investment. It consummated the deal in March

2006. Fruit of the Loom decided to move its Northern
Ireland operations to Morocco, expanding its operations in
the kingdom with a $150 million investment. Settavex, the
Moroccan subsidiary of a Spanish garment producer has
committed an additional $7.2 million to expand its
vertically integrated denim garment production facility in
Settat, southeast of Casablanca. Hong Kong-based SML and
Arrow Shirts have also indicated they will invest in Morocco
soon.


4. There have been significant new foreign investments
outside the textiles and garment sector as well.
International Paper purchased a local packaging firm for
$120 million in 2005. Electronic component maker Minco will
invest one to four million dollars over the next few years
for their facility that makes sensors and flexible circuits
for export. Dell opened a telephonic service center in

2003. Its 1000 employees (over half women) service the
francophone European market. In addition, citing FTA IPR
protections and a positive business climate bolstered by the
FTA, IT companies such as UAE's Tech Access and Antelop
Computer have established a Moroccan presence. In 2004, a
group of Moroccan expatriates returned to Casablanca to open
an Apple Computer showroom (called Univers Digital),noting
the FTA drew them back to Morocco.

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U.S. Exports
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5. In the first weeks following entry into force of the
FTA, post's commercial and agricultural sections have noted
an increase in potential U.S. export deals. While many
remain anecdotal and lack specific amounts to date, we are
encouraged by the success of U.S. apple exporters during
their February 2006 visit to Casablanca. FCS has fielded
inquiries from Moroccan producers seeking U.S. inputs, such
as an artisanal iron products firm searching for U.S. iron
suppliers. The FTA enabled U.S. sorghum exporters to send
25 thousand metric tons, worth four million dollars, to
Morocco, the first shipment in six years.

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U.S. Technical Assistance and Moroccan Exports
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6. Moroccan textile and garment exporters have begun
negotiating deals with U.S. design houses, distributors and
retailers. The largest deal to date by a Moroccan firm is
SOMITEX's $61 thousand January 2006 contract to provide baby
and children's clothing to the U.S. market. Petit Poussin
has two firm orders ($25 thousand and $15 thousand) for
children's wear. Modatric will export 3000 units of
knitwear worth $25 thousand. Benitex has signed a $ 15
thousand deal for thermal underwear. All these firms have
befitted from the four-year MEPI-funded and USAID-
Administered IESC Morocco Fast Track Trade program that
assists Moroccan firms trying to take advantage of the
benefits of the FTA.


7. IESC Morocco Fast Track Trade Program has also helped
companies outside the textile and garment sector. IESC's
earliest major success story was in March 2004. Nouvelle
Manufacture de Cuir signed an $88.5 thousand contract to
provide luxury leather display cases to well-known U.S.
jewelry stores. IESC's greatest success that exploited new
market access was frozen fruit and vegetable exporter Noble
Delice's $2.6 million contract (negotiated at the Fancy
Foods Show) for 100-120 containers of its products. Other
IESC clients include small artisanal exporters: Manar
Marbre that exported eight thousand dollars worth of marble
sinks; Arte Palma that negotiated a contract for $15
thousand in palm leaf baskets; and Louizida, a producer of
high quality argan oil-based cosmetics that secured a $14
thousand export contract.


8. Other MEPI implementers have contributed to the
increased interest and ability of Moroccan exports to enter
the U.S. market. The Commerce Department's Commercial Law
Development Program (CLDP) has provided MEPI-funded
standards training in five separate sectors, helping
Moroccan businesses understand U.S. rules and regulations.
A $500 thousand MEPI-funded Aid to Artisans program has also
begun preparing Moroccan artisans to penetrate the U.S.
market. These exports, particularly in the SME sector, will
help fuel vital job creation and promote entrepreneurialism
in Morocco. USAID has recently launched its five year New
Business Opportunities Program, a strategy that will support
and compliment these other technical assistance efforts to
help Moroccans realize the promise of the FTA.

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Comment:
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9. Comment: Over the next several months and years, we
expect to see increased levels of interest by both Moroccan
and U.S. exporters. Foreign direct investment will remain
an important fuel for economic growth and employment
creation. The FTA forms a key piece of the investment
puzzle by providing investor assurances, market access for
goods and services, liberalization in the financial sector
and telecommunications, requiring new transparency and
enforcement of property rights, including intellectual
property rights. These combine to improve the business
climate and set Morocco apart from its neighbors. By
adhering to its FTA obligations Morocco will go a long way
to furthering its status as a member of the global trading
community. Our FTA outreach and the new possibilities the
agreement provides will help the Moroccan private sector
diversify away from its traditional bias toward and
dependence on the European market for investment, exports
and inputs. Mission Morocco's FTA-related outreach will
continue apace, leveraging practical private sector
experiences and expertise with diplomatic tools to drive
home the message that the FTA is already a success.


RILEY