TIFA UPDATE: MINISTER JOUINI EXPRESSES HOPE TO U/S

C O N F I D E N T I A L TUNIS 000208

SIPDIS

SIPDIS

STATE FOR EB, NEA/PI (S.FRANCESKI) AND NEA/MAG (W.LAWRENCE)
TREASURY FOR U/S TIMOTHY ADAMS
PASS TO COMMERCE ITA/MAC/ONE (T.CHEGUER) AND CLDP (M.TEJTEL)
PASS TO USTR (D.BELL)
PASS TO USPTO (M.ADLIN)
CASABLANCA FOR FCS (R.ORTIZ)

E.O. 12958: DECL: 02/02/2016
TAGS: ECON EFIN EFTA ETRD TS
SUBJECT: TIFA UPDATE: MINISTER JOUINI EXPRESSES HOPE TO U/S
ADAMS FOR PROGRESS IN 2006

REF: A. 05 TUNIS 2775 (JUDICIAL EXCHANGE PROGRAM)


B. 05 TUNIS 2433 (OIL IMPACT)

C. 05 TUNIS 1495 (TIFA WRAP-UP)

Classified By: Ambassador William J. Hudson; Reasons 1.4 (b),(d)


1. (SBU) Summary. Treasury Under Secretary Timothy Adams'
January 30 meeting with Development Minister Jouini discussed
ways to move forward our Trade and Investment Framework
Agreement (TIFA) process in 2006. Ambassador noted the
Ministry's feedback on USTR discussion papers, which
spotlighted areas of divergence as a good start for more
constructive TIFA discussions in 2006. Jouini also requested
increased technical assistance to help Tunisia confront
significant economic reform challenges ahead. Post supports
increased engagement and technical assistance to encourage
the GOT's economic reform plans. End Summary


2. (SBU) In a January 30 meeting with Treasury Under
Secretary Timothy Adams, Minister of Development and

SIPDIS
International Cooperation Jouini reiterated the GOT's primary
preoccupation with boosting employment and consolidating
economic reforms made in the past decade. As part of the
GOT's medium-term strategy, Jouini stated that he "looks
forward" to a Free Trade Agreement (FTA) with the U.S.,
following similar agreements with the European Union and
Turkey, though he noted looming and "very critical"
challenges to boost GDP growth from Tunisia's current 5
percent to 6 percent over the next five years, and further to
6.5 percent for the 2011-16 period.


3. (SBU) Jouini explained Tunisia's coming transformation
will be paradoxical -- boosting employment while increasing
productivity and competitiveness, with the latter steps
likely implying jobs losses -- and will not be easy. Jouini
stated that world energy prices spikes in 2005 have also cost
the GOT nearly USD 1 Billion in governmental subsidies to
soften consumer price impacts, despite four rises in
state-controlled retail prices in the past year (See Ref B
for more on oil price impacts). Jouini noted these factors
are imposing severe strains on the GOT's budgetary
flexibility.


4. (SBU) Jouini asked U/S Adams for more specific technical
assistance aimed at opening Tunisia's markets; he also asked
for ways to transfer management expertise and capacity
building to support efficient implementation of economic

reforms. Ambassador Hudson noted the GOT's recent written
feedback on USTR's working group discussion papers and said
the GOT's serious progress to engage on TIFA issues, which
have previously been gradual in their progress, could help
discussions in 2006. Jouini expressed hope that TIFA
discussions would move quickly in 2006 to help increase
Tunisia's private sector development and promote the general
investment climate in the Middle East North Africa (MENA)
region.

Comment
--------------

5. (C) Minister Jouini's latest comments on the U.S.-Tunisia
TIFA dialogue are the strongest and most forward-leaning
we've heard since the second TIFA Council in July 2005 (REF
C) and his newfound appreciation for the necessity of
economic reform should be encouraged with targeted, enhanced
TIFA-engagement in the near term. Jouini's posture is
without doubt influenced by a growing sense that
globalization and demographic movements are exposing Tunisia
to significant challenges with little alternative other than
to liberalize its economy to attract more foreign investment.
Recent media reports have also noted declines in private
sector business confidence and the significant financial
barriers for start-up entrepreneurs that may be contributing
to a growing sense of urgency.


6. (C) Jouini's call for closer TIFA-engagement in the
near-term presents us with an opportunity to build on
programs such as our recent workshop with the Tunisian
judiciary on bankruptcy reform (REF A) that incorporates

themes on the rule of law, transparency, and separation of
powers. This workshop involved judge-researchers from
Tunisia's Ministry of Justice and legislative think-tank,
which reviews all pending Tunisian legislation and is a key
body for effecting legal reform in Tunisia. Through this
judicial exchange, we achieve a measure of success in an
otherwise extremely recalcitrant political context. Post
therefore recommends that NEA/PI and USTR consider releasing
additional funding (previously designated under MEPI's
Commercial Law Development Program's "Compliance with Trade
Agreements") to galvanize the TIFA process and unleash
economic reform programs with political impact. With
U.S.-Tunisia bilateral trade still at modest levels and
Tunisia's imminent economic challenges, a "tough love"
approach insisting on continued economic reform, coupled with
USG assistance in the process, offers a wise course that will
ultimately benefit both countries in trade and investment, as
well as serving our broader agenda in the political realm.


7. (U) U/S Adams has not cleared this cable.
HUDSON