LIBYA PREPARED TO FINALIZE - BUT NOT SIGN - A TIFA

UNCLAS SECTION 01 OF 02 TRIPOLI 000336

SIPDIS

SENSITIVE
SIPDIS

DEPT PLEASE PASS TO USTR

E.O. 12958: N/A
TAGS: PGOV PREL ECON ELAB LY
SUBJECT: LIBYA PREPARED TO FINALIZE - BUT NOT SIGN - A TIFA

REF: MILLER-BURKHEAD EMAIL 4/20/2008


1. (SBU) Summary: The Minister of Economy-equivalent said the
GOL has resolved two key internal debates related to a Trade and
Investment Framework Agreement (TIFA) and is prepared to
finalize the accord with the U.S., provided a final face-to-face
meeting of technical experts - an important political exercise,
from its perspective - occurs. While the GOL is prepared to
finalize the text of the agreement, it will not be in a position
to sign the agreement so long as Section 1083 (the so-called
Lautenberg Amendment) of the U.S. 2008 National Defense
Authorization Act applies to Libya. Separately, the GOL is
continuing internal deliberations on how to implement a radical
privatization and economic reform agenda recently proposed by
Muammar al-Qadhafi amid concerns the measures could exacerbate
inflation and unemployment. End summary.

GOL READY TO FINALIZE TIFA, BUT WANTS FINAL FACE-TO-FACE MEETING
OF EXPERTS


2. (SBU) The CDA met with Secretary of the General People's
Committee for Economy and Trade (Minister of Economy-equivalent)
Dr. Ali Abdullah Essawi on April 17 to discuss next steps on
finalizing a U.S.-Libya Trade Investment Framework Agreement
(TIFA). Reiterating points made in an earlier meeting with
Emboffs by Dia Hammuda, Director of the Ministry's Foreign
Cooperation Office, Essawi stressed that while much progress has
been made via email correspondence, from the GOL's perspective a
face-to-face meeting between technical experts to review and
finalize the language was necessary. An agreement of this kind
represented an important political commitment; an in-person
meeting to discuss the document was a significant and
appropriate part of the process. (Note: Essawi's position
reflects the Libyan perspective that the political intent behind
an agreement is as important as the language of the document
itself. End note.)


3. (SBU) Two issues were identified in Emboffs' earlier meeting
to discuss the TIFA: 1) whether the GOL wanted the agreeement to
come into effect upon signing or upon notification of
ratification by the respective parties, and; 2) language for
labor provisions in the agreement that had to be provided by the
GOL's Labor Ministry-equivalent. Essawi told CDA the GOL had
decided it would prefer that the agreement come into effect
after notification of ratification. The Ministry of Economy had
also received the language for the labor provisions, which would
be forwarded to USTR this week via email. Essawi suggested that
the technical experts try to meet sometime in May or June to
finalize the document. Foreign Cooperation Office Director
Hammuda will lead the GOL's delegation. (Note: The technical
experts' meeting may help avoid GOL proposals for changes to the
text of the agreement on the eve of signing, as occurred in
January 2008 with a US-Libyan Science and Technology Agreement.
End note.)

LIBYA WON'T SIGN AGREEMENT UNDER SHADOW OF LAUTENBERG AMENDMENT


4. (SBU) Essawi made it clear that while the GOL is prepared to
finalize language for a TIFA, it would not be in a position to
sign the agreement so long as Section 1083 (the so-called
Lautenberg Amendment) of the U.S. 2008 National Defense
Authorization Act applied to Libya. (Note: The Lautenberg
Amendment potentially facilitates attachment of Libyan
government assets to satisfy damages awarded by U.S. courts in
terrorism-related cases. The GOL has taken significant measures
to insulate its assets from potential seizure, to include
divestiture of investments in U.S. financial markets by its
sovereign wealth fund. End note.) Citing an Arabic expression,
Essawi said signing a TIFA in the shadow of the Lautenberg
Amendment would be just "ink on paper", mocking the intent of
expanded economic and commercial ties.

GOVERNMENT WORKING TO IMPLEMENT QADHAFI'S VISION ...


5. (SBU) Responding to the CDA's question about implementation
of economic reforms and radical privatization advocated by
leader Muammar al-Qadhafi in a key speech on March 2, Essawi
said the goals are to dramatically reduce the government's role
in regulating economic activity while more efficiently
distributing Libya's oil wealth to its people. The government
believes radical reforms, to include ending subsidies for
foodstuffs and commodities, as well as regulation of utilities,
will encourage more rapid economic reform and privatization.
Essawi is a member of two (the economic activities committee and
the wealth distribution committee) of the five cabinet-level
committees charged with implementing Qadhafi's vision. He
indicated that the implementing committees' consultations were
to be concluded by September, with final recommendations
expected by year's end.


TRIPOLI 00000336 002 OF 002


... BUT IS CONCERNED ABOUT INFLATION, UNEMPLOYMENT


6. (SBU) Essawi conceded that achieving a balance between ending
government subsidies and maintaining a politically palatable
daily standard of living was "very difficult". Expressing
concern that the measures could prompt inflation and greater
unemployment, he carefully noted that Qadhafi's proposal that
each family receive direct allotments of 5,000 Libyan dinar
(about $4,200) per month was "an idea" for oil wealth
distribution, and suggested that other forms of compensation
such as shares in government funds might be an alternative.
(Note: Qadhafi proposed eliminating virtually all state
subsidies and radical privatization, to include the education
and health care systems, in exchange for providing direct
stipends to citizens, from which they would ostensibly pay for
and collectively manage everything themselves. End note.)
Essawi put the overall unemployment rate in Libya at 17 percent
and the unemployment rate among "youth" aged 18-34 at 25
percent. (Note: A 2004 World Bank estimate put the overall
unemployment rate at 30 percent. End note.) Growing the
economy and creating jobs were key priorities, he said, noting
that one-third of Libya's population is under the age of 18.
(Note: The CIA's World FactBook estimates that 33.2 percent of
Libya's citizens are under the age of 14. End note.)


7. (SBU) Comment: A sophisticated, forthcoming interlocutor,
Essawi drew a clear line between potential signing of a TIFA and
waiving application of the Lautenberg Amendment. His concerns
about possible inflationary and unemployment pressures related
to implementation of Qadhafi's privatization and economic reform
scheme echo what we've heard from other contacts. End comment.
STEVENS