USTR SCHWAB PROMOTES BILATERAL TRADE AND INVESTMENT IN

UNCLAS SECTION 01 OF 02 ABU DHABI 001265 SENSITIVE SIPDIS STATE FOR NEA/ARP AND EEB STATE PLEASE PASS USTR (MOWREY, BUNTIN) E.O. 12958: N/A TAGS: ETRD ECON EFIN PGOV AE SUBJECT: USTR SCHWAB PROMOTES BILATERAL TRADE AND INVESTMENT IN UAE ABU DHABI 00001265 001.2 OF 002 ¶1. (SBU) Summary: United States Trade Representative Susan Schwab visited the UAE October 21-23 for a series of discussions with government officials and representatives of Dubai's private sector. She reiterated the United States' strong commitment to an open and dynamic trade relationship with the UAE, particularly reinforcing with the private sector that the U.S. remains "open for business," despite the current financial crisis. She acknowledged difficulties (some of which were raised by various UAE private sector reps) preventing the conclusion of a bilateral Free Trade Agreement (FTA), including Emirati reluctance to take on commitments to liberalize aspects of the UAE's investment regime (particularly with respect to the energy sector). However, Amb. Schwab urged using the existing "TIFA-Plus" channel to formalize agreements or other bilateral arrangements in those areas which had progressed under the FTA talks. UAEG officials agreed to revisit the possibilities for bilateral action under TIFA-Plus. They also described remaining political hurdles to an EU-GCC FTA, despite efforts by the French EU Presidency to conclude the negotiations. End Summary. U.S. Firms Upbeat -------------- ¶2. (SBU) USTR Schwab began her visit to the UAE in Dubai with a series of discussions with U.S. companies with a significant regional presence, including General Motors, General Electric, and a roundtable with executives from a variety of U.S. firms. The messages she heard were consistent: Dubai remains a dynamic and profitable environment for U.S. companies, but there exist significant challenges. Those cited repeatedly included the U.S.'s Section 911 taxation laws (which have the effect of making Americans non-competitive for overseas jobs),difficultly complying with the GCC's unique standards requirements and the region's disadvantageous Commercial Agency laws, which often impose strict penalties on foreign firms for ending their relationships with local agents, even when contracts have reached their expiration dates. ¶3. (SBU) The American representatives were eager to hear about the prospects for conclusion of a U.S./UAE FTA. They described widespread commercial successes in the UAE, in many cases confiding that their local/regional divisions were more profitable at the moment than their U.S.-based operations. Nonetheless, it was clear that U.S. business is eager to see formalized an improved bilateral trade relationship as a means of protection against the deteriorating global financial outlook. USTR Schwab cautioned that, while much progress had been made in the FTA talks, the "last ten percent is always the most difficult" in FTA negotiations and it was not clear the UAEG was prepared to make the concessions necessary to finalize the agreement. She assured them, however, that the U.S. was prepared to memorialize progress already made in the negotiations through a series of individual agreements and arrangements, where possible, that could be concluded within the existing Trade and Investment Framework Agreement (TIFA) "TIFA-Plus" consultative mechanism. Dubai Private Sector More Circumspect -------------- ¶4. (SBU) USTR Schwab also met with board members from the Dubai Chamber of Commerce and Industry (DCCI),Dubai's most important private sector organization representing 108,000 members across all sectors. The DCCI leaders were less enthusiastic than their American counterparts about the benefits of a formal free trade relationship with the U.S. It became evident in the discussion that, in the eyes of DCCI, the private sector had not been sufficiently consulted throughout the FTA negotiations and could not be expected to implement what the UAEG had negotiated on its behalf. Board members described their own narrow objectives vis-a-vis trade with the U.S. as expanding the UAE's market share and its investments in the U.S. (Note: Despite USTR Schwab's repeated assurances that the U.S. is open for business with the UAE, there remain obvious scars from the 2006 Dubai Ports World debacle and lingering concern that politics could, again, jeopardize legitimate investment decisions to the detriment of the overall bilateral relationship. End Note) ¶5. (SBU) DCCI aired a number of frustrations associated with doing business with the United States. Notably, they complained about lengthy visa processing requirements (the Consul General explained the USG is constantly seeking ways to expedite and improve services for legitimate visitors); difficulties Arab travelers face at U.S. ports of entry; the propensity of U.S. business to immediately take disputes to court; and the mixing of political and economic issues (one member gave the example of U.S. attempts to limit legitimate trade in non-controlled items with Iran as damaging to DCCI members' attempts to do business with U.S. firms). Minister of Trade Committed ABU DHABI 00001265 002.2 OF 002 to Improving Trade Relationship -------------- ¶6. (SBU) During their October 23 meeting, USTR Schwab and UAE Minister of Foreign Trade Sheikha Lubna Al Qasimi discussed ways to restore momentum to the stalled Trade and Investment Framework Agreement (TIFA) "TIFA Plus" process. Sheikha Lubna said that the UAE prides itself on being the largest export market for U.S. goods in the region and that this trade relationship must continue. USTR Schwab encouraged the UAE to consider a series of bilateral agreements or other arrangements that would promote trade and investment ties. Sheikha Lubna expressed interest in the Anti-Counterfeiting Trade Agreement (ACTA) and said she would push the Ministry of Economy to join the ACTA negotiations as an active participant. She also said that the UAE remains interested in concluding a Bilateral Investment Treaty (BIT) and a double taxation treaty with the United States and requested a model e-commerce agreement text for the UAEG to review. Sheikha Lubna promised to follow up with others in the UAEG to encourage more active Emirati engagement in these areas. ¶7. (SBU) Turning to the suspended US-UAE FTA negotiations, Sheikha Lubna said that the new Ministry of Foreign Trade (established in February 2008) still has difficulties convincing other UAE agencies, which retain the lead on some key trade and investment issues, to commit to formal FTA obligations with the United States. Sheikha Lubna told USTR Schwab that "new thinking" and renewed U.S. trade promotion authority will be needed before the UAEG is ready to restart FTA negotiations. In addition, she opined that it would be essential to convince stakeholders (such as banks and private sector entities) of the benefits of the FTA. Sheikha Lubna and USTR Schwab agreed that both sides should engage the US and UAE private sectors to promote support for future efforts to liberalize bilateral trade and investment. EU-GCC FTA -------------- ¶8. (SBU) During USTR Schwab's meetings, UAE officials said the proposed EU-GCC free trade agreement would likely need a political push for conclusion. Sheikha Lubna told USTR Schwab that the agreement had progressed rapidly of late thanks to a strong push from France, in its role as EU President, and particularly from French President Sarkozy. Sheikha Lubna said Sarkozy had also written to GCC Secretary General Abdulrahman al-Attiyah, then sent Minister of State for Foreign Trade Affairs Anne-Marie Idrac to follow up with individual GCC member states. Sheikha Lubna said the strong ties between France and the current GCC president, Qatar, were also helpful. ¶9. (SBU) Minister of State for Foreign Affairs Anwar Gargash, in a separate meeting on October 23, was skeptical such a political decision would be forthcoming. He described the EU negotiations as the "longest trade negotiations in history" and accused the EU of inserting at the eleventh hour a "political clause" on human rights. Echoing the DCCI's earlier complaints about inserting non-trade issues into negotiations, Gargash said the GCC position wouldn't allow the UAE to accept such an insertion. Given that human rights have become an almost required component of EU trade negotiations, Gargash was doubtful the agreement would be concluded. ¶10. (U) This cable has been cleared by USTR Schwab's party. OLSON