MOROCCO IMPLEMENTS AGADIR AGREEMENT-- WITH A CATCH

UNCLAS SECTION 01 OF 02 RABAT 000619

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT PASS USTR FOR DOUG BELL
FAS FOR AILEEN MANNIX

E.O. 12958: N/A
TAGS: ECIN ECON EFIN ETRD MA
SUBJECT: MOROCCO IMPLEMENTS AGADIR AGREEMENT-- WITH A CATCH

REF: A. RABAT 528


B. RABAT 362


1. (SBU) Summary: Three years after its signature and nearly
a year after it technically entered into force, Morocco on
March 27 finally published the customs circular necessary to
implement the Agadir Agreement. That accord, signed by
Morocco, Tunisia, Jordan, and Egypt in 2004, established a
free trade area among the four countries as a step towards
fulfillment of the 1995 Barcelona Declaration's vision of a
Euro-Mediterranean free trade area by 2010. The circular was
long delayed, however, by Morocco's fear that it would be
forced to extend duty free entry to a range of sensitive
agricultural imports from the United States under our own
bilateral FTA, if such products were admitted duty free from
the Agadir signatories. To resolve the impasse, Morocco
ultimately decided to exclude these 128 sensitive
agricultural products from the Agadir agreement,
notwithstanding the fact the agreement itself calls for
complete elimination of duties on all industrial,
agricultural, and agro-industrial products. Moroccan
officials indicate that they formally notified counterpart
governments of this decision in advance, and have not
received any objections. The decision brings closure to an
issue that has been the poster child of critics of Morocco's
regional trade policy, at a time when there is increasing
discussion here of the importance (and promise) of regional
economic integration. End Summary.


2. (SBU) The Agadir agreement, a flagship project for
regional free trade initiated by Morocco in 2001 and signed
in February 2004, has languished since it formally entered
into force in July 2006. While technically in effect, the
failure of Moroccan customs to issue implementing customs
circulars meant that practically it had no effect on the
ground. In private conversations, government contacts
concede that unlike Morocco's trade agreements with Turkey,
the United States, and the European Union, which were
negotiated in great detail and saw regular and intensive
consultation with concerned Moroccan industries, the Agadir
agreement and other similar regional or pan-Arab agreements
were "political statements," which were entered into with
much less preparation.


3. (SBU) As a result, as officials at the National Export
Council have explained to us, as it moved to implement the
Agadir agreement Morocco quickly perceived an embarassing
complication: any decision to grant preferential access to a
list of sensitive agricultural products including beef,
chicken, wheat, and other goods from Jordan, Tunisia or Egypt
would require Morocco to grant an equivalent preference to
the United States. Morocco had negotiated an exception to
this requirement in an exchange of letters dated June 15,
2004 between USTR Robert Zoellick and Minister-Delegate
Fassi-Fihri, but the letters indicated that "Morocco does not
anticipate importing any agricultural good from an Arab
League country if that country is not a net exporter of that
good." None of the other Agadir signatories, however, are
net exporters of the goods in questions.


4. (SBU) After a delay of nearly a year as various
authorities considered how to resolve the problem, Morocco
ultimately decided to formally exclude these goods from
application of the Agadir Agreement. The preambule to the
March 27 circular implementing the Agadir Accord (5047/223)
thus makes its application subject to relevant provisions in
the circular that implemented the U.S.-Morocco FTA (No.
4977/222). Those latter provisions provide that the 128
products listed in annex 10 of the Moroccan Customs
implementing regulations "cannot be imported in a
preferential category derived from bilateral, regional, or
multilateral free trade agreements" with certain countries,
unless those countries are net exporters of the products
concerned. The circular further specified in a separate list
in the same annex the list of countries that are not net
exporters; all three other Agadir signatories figure on this
list.


5. (SBU) While some in the Moroccan press who have been
critical of the Agadir Agreement have had a field day with
the decision, Morococan officials defend it, emphasizing that

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there have been no objections from the other parties to the
agreement. In comments to a leading economic weekly,
Minister of External Commerce Mechahouri stressed that all
three countries were "consulted and made aware" of the issue.
He argued that Morocco was the only country to find itself
in such a situation as only it has a free trade agreement
with the United States (NB obviously overlooking the
U.S.-Jordanian FTA),and in a play on words concluded that
"to open ("s'ouvrir") does not mean to suffer ("suffrir") or
to surrender ("s'offrir"). Questioned about the Agadir
decision, officials at the Foreign Ministry have been quick
to stress that the Customs decision puts Morocco in full
compliance with its obligations toward the United States, and
that this was the primary consideration guiding the Agadir
circular.


6. (SBU) The Customs decision comes at a time when regional
economic integration is very much the topic of conversation
in Moroccan government circles. In addition to the newfound
activism of the Arab Maghreb Union (UMA) on the topic
(reftel) and the creation in Marrakech in February of a
regional business confederation uniting business associations
across the Maghreb, recent months have also seen conferences
hosted by the UN Economic Council for Africa (UNECA) and the
Moroccan High Planning Commission (HCP),all positing that
increased intra-regional trade could unlock a virtuous cycle
of exports leading to faster economic growth and reduced
unemployment. Experts note that with intra-regional trade in
the Maghreb only constituting 3 percent of total trade flows,
the region lags far behind its peers in Latin America and
Asia. They note too the potential advantages that could
accrue from greater cooperation as the region moves towards
free trade with Europe under the Euro-Mediterranean dialogue
launched at Barcelona in 1995. Maghreb countries, they
argue, would do better to negotiate as a block with the EU,
instead of dealing individually with it. The theme of
regional integration has also been pushed by the IMF, most
recently in the Deputy Managing Director's visit to Morocco
on April 4.


7. (SBU) Comment: In the context of these long-range visions,
issuance of regulations allowing effective implementation of
the Agadir Agreement is a modest step. It nonetheless
removes an embarassing cloud that has hung over the agreement
since its signature. Though some predict complaints from
other signatories about Moroccan back-tracking, others point
to similar failures in other countries (Tunisia's failure to
allow importation of the "Logan"-- an inexpensive
Moroccan-produced vehicle-- is a particularly sore subject)
and predict that they will let the issue slide, particularly
given the fact that historically there has been almost no
trade in the goods in question. End Comment.
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RILEY