LEBANON: ECONOMY MINISTER REVIEWS WTO MEETINGS

C O N F I D E N T I A L SECTION 01 OF 02 BEIRUT 000777

SIPDIS

SIPDIS

NSC FOR ABRAMS/SINGH/MARCHESE/HARDING; STATE PASS TO USTR

E.O. 12958: DECL: 05/30/2017
TAGS: ECON ETRD PGOV PREL LE
SUBJECT: LEBANON: ECONOMY MINISTER REVIEWS WTO MEETINGS


Classified By: Ambassador Jeffrey D. Feltman for reasons 1.4 (b) and (d
).

SUMMARY
--------------


1. (C) Minister of Economy and Trade (MOET) Sami Haddad
expressed frustration that, in his view, U.S. trade
negotiators asked more of Lebanon than they have asked of
other recent WTO members. He argued that any message of
strong American political support to the besieged GOL is not
trickling down to working level negotiators. Haddad said he
has met most USG requests, including the drafting of required
laws, but is pushing back against requests to additional
lowering of goods tariffs. Lebanese officials request that
we show political support to Lebanon by wrapping up bilateral
negotiations while we still have a pro-trade cabinet to work
with; we can continue to discuss any outstanding issues in
alternate fora, Haddad suggested. Finally, Haddad explained
some of the urgency of his request by highlighting that some
resigned cabinet ministers appeared interested in returning
as 'caretaker' ministers in a new cabinet. End Summary.

FRUSTRATED WITH STRICT DEMANDS,
LACK OF POLITICAL SUPPORT AT WTO
--------------


2. (C) Explaining his emotional late night call to the
Ambassador on the first night of the early-May world Trade
Organization (WTO) working party meeting in Geneva to the
Ambassador and Poloff, Minister of Economy and Trade (MOET)
Sami Haddad expressed frustration that, in his view, the U.S.
is asking more of Lebanon than it has asked of other recent
WTO members, such as Vietnam. Our negotiations are already
advanced, Haddad's WTO advisor Lama Ouejean told us, and
Lebanon has done the technical work to prepare. The
government faces no political resistance to passing all the
draft laws to make it WTO compliant, if only the Speaker
would open Parliament. The GOL did its internal homework for
this round, engaging in various bilateral dialogues with the
U.S., EU, Japan, and others.


3. (C) Any message of strong American political support to
Lebanon is not trickling down to the working level, Haddad
argued, particularly on agricultural issues. The GOL made
what Haddad claimed to be a very generous informal offer in
the summer of 2005 -- prepared by MOET official Fadi Maki,
who was later fired -- but U.S. negotiators used this as a
floor and have asked for significant additional concessions.
In contrast to the allegedly tough time the U.S. is giving
Lebanon, Ouejean noted, Vietnam and other recent WTO members
have less liberalized economies than Lebanon. Finally, U.S.
agricultural demands are unreasonable, as Lebanon provides
less of a subsidy to its farmers than the U.S. does, Haddad
declared.

MUCH OF THE WORK IS DONE
--------------


4. (C) Much of the work the U.S. wanted from Lebanon is done,
in the form of draft laws ready to be voted on when
Parliament re-opens. Lebanon expects to conclude bilateral
negotiations with Taiwan, Australia, and Japan by the end of
June. Lebanon has met all requirements from the Secretary
General of the WTO. More than 20 countries have acceded to
the WTO in the last 12 years, and most have less liberal
economies than Lebanon has, Haddad argued, so there is little
reason for the United States to require further concessions
from Lebanon. However, unless the U.S. and EU now wrap up
bilateral discussions, Lebanon will be plagued with new
bilateral agreement requests from relatively insignificant
trading partners such as Brazil and Cuba.


5. (C) While Lebanon's other bilateral partners have focused
on services, U.S. negotiators have focused on asking Lebanon
to lower already low agricultural and industrial goods
tariffs. Haddad's senior advisor on WTO issues, Lama
Ouejean, told us that Lebanon has already matched at least 60
percent of the U.S. demands on agriculture and at least 70
percent of the demands on other goods. Lebanon cannot
further eliminate tarrifs without affecting politically
sensitive interest groups and undermining already fragile
government finances. The level Lebanon is binding at is
already too low for a developing county. In addition,
Lebanon feels caught, like many other countries, between

BEIRUT 00000777 002 OF 002


conflicting U.S. and EU demands on audiovisual material
distribution, which require that the U.S. and EU to work out
a solution between themselves. On services, U.S. requests
are in line with those of other bilateral partners, but on
goods the U.S. has been especially demanding.

TIME TO WRAP UP BILATERAL NEGOTIATIONS
LEST WE LOSE THE CABINET
--------------


6. (C) Haddad, feeling some pressure to conclude negotiations
before a possible change of government, asked that we
consider wrapping up bilateral negotiations now by either
formally signing a bilateral accession agreement based on the
draft laws, or by signing an MOU that lays out the pledges
Lebanon must deliver on to reach a bilateral accession
agreement. The U.S. can avoid giving Parliament Speaker
Nabih Berri and Syria a veto on Lebanon's WTO membership by
not waiting for the draft laws to be passed, and instead
accepting cabinet approval of all required draft laws as a
basis to conclude negotiations. If we signed an agreement
based on draft laws and the cabinet resigned, all laws
referred to parliament would remain in parliament, Haddad
assured us. Alternatively, the United States could sign an
MOU saying it agreed to close negotiations now with the
expectation that Lebanon would adopt specific actions.


7. (C) Haddad went on to argue that supporting Lebanon's WTO
accession now would have a large political payoff,
strengthening the international community's perception of
Lebanon in the same way that signing an agreement with the
IMF has. Lebanon's first-ever IMF agreement and continued
pro-reform efforts are evidence that Lebanon wants to join
the rest of the world as a "good citizen." In addition,
Lebanese officials would like to reinforce perceptions that
Lebanon conforms to international rules. Previously at the
forefront of the Arab world, Lebanese officials are now
ashamed to be seen as lagging. Lebanon was a founding member
of WTO predecessor, the GATT, but withdrew in 1951 and only
started its effort to rejoin in 2002.


8. (C) Discussion on issues of ongoing concern could continue
in alternate fora, Haddad explained. For example, IPR issues
remain an area of bilateral attention, but are at this point
an enforcement rather than a legislative issue. They can be
better addressed through the Special 301 process than through
the WTO forum, which requires only that laws are on the
books, rather than implemented. Lebanese officials should
shift their limited resources to focusing on passage of laws
and law enforcement, Haddad argued.

BRING THE MINISTERS BACK
--------------


9. (C) Some of Haddad's eagerness to conclude bilateral WTO
accession negotiations apparently stems from his realization
that the cabinet will constitutionally dissolve with the next
presidential election this fall and could be dissolved before
that as part of a political package. Haddad implied that the
opposition, and in particular the six resigned ministers,
were looking for a way out of the political impasse, and were
considering coming back as caretaker ministers. Haddad noted
that some of the ministers, such as Health Minister Khalifeh,
never stopped working from home, while others, such as the
resigned Minister of Foreign Affairs, recently resumed
signing papers. Haddad believes that reform measures and WTO
accession concessions will become harder, not easier, to
achieve if those ministers resume work.


10. (C) Comment: We are sure that none of Haddad's
arguments are new to the Washington trade policy officials
who have worked with Lebanon -- or any numbemr of other
countries, for that matter -- on WTO accession. The urgency
in Haddad's tone stems from his fear that, if the Siniora
government is changed either by force or with agreement of
March 14 leaders, the cabinet environment will be less
friendly to reform in general and WTO in particular. Thus,
he is eager to wrap up WTO accession as soon as possible.
FELTMAN