Identifier
Created
Classification
Origin
09ALGIERS900
2009-10-05 15:21:00
CONFIDENTIAL
Embassy Algiers
Cable title:
ALGERIA: USTR DIRECTOR BURKHEAD TACKLES
VZCZCXRO1957 PP RUEHAG RUEHBZ RUEHMR RUEHPA RUEHPB RUEHSL RUEHTRO DE RUEHAS #0900/01 2781521 ZNY CCCCC ZZH P 051521Z OCT 09 FM AMEMBASSY ALGIERS TO RUEHC/SECSTATE WASHDC PRIORITY 7962 INFO RUEHXQ/ALL EUROPEAN UNION POST COLLECTIVE RUCNMGH/MAGHREB COLLECTIVE RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE RUEHBS/USEU BRUSSELS RUEATRS/DEPT OF TREASURY WASHDC RHEBAAA/DEPT OF ENERGY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC
C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 000900
SIPDIS
STATE FOR NEA/MAG
STATE PASS FOR USTR - BURKHEAD
COMMERCE FOR NATE MASON
E.O. 12958: DECL: 10/05/2019
TAGS: EINV EFIN ETRD ECON PGOV PREL AG
SUBJECT: ALGERIA: USTR DIRECTOR BURKHEAD TACKLES
TRADE-INVESTMENT CHANGES
REF: A) ALGIERS 890 B) ALGIERS 889 C) ALGIERS 888 D)
ALGIERS 887
Classified By: Ambassador David D. Pearce, reasons 1.4 (b),(d)
Summary
-------
C O N F I D E N T I A L SECTION 01 OF 03 ALGIERS 000900
SIPDIS
STATE FOR NEA/MAG
STATE PASS FOR USTR - BURKHEAD
COMMERCE FOR NATE MASON
E.O. 12958: DECL: 10/05/2019
TAGS: EINV EFIN ETRD ECON PGOV PREL AG
SUBJECT: ALGERIA: USTR DIRECTOR BURKHEAD TACKLES
TRADE-INVESTMENT CHANGES
REF: A) ALGIERS 890 B) ALGIERS 889 C) ALGIERS 888 D)
ALGIERS 887
Classified By: Ambassador David D. Pearce, reasons 1.4 (b),(d)
Summary
--------------
1. (C) USTR Director Paul Burkhead told Algerian ministers
and senior officials during a September 27-28 visit that the
U.S. wants to improve trade and investment ties with Algeria
and help Algeria diversify its economy beyond the hydrocarbon
sector. GOA officials said Algeria still wants to accede to
the WTO and reinvigorate U.S. trade with and investment in
Algeria. These officials welcomed his proposal to hold a
bilateral stock-taking meeting on WTO accession and bilateral
trade and investment, the latter in the context of our Trade
and Investment Framework Agreement (TIFA). Businessmen,
meanwhile, raised with Burkhead their concerns over recently
enacted legislation that impedes trade and investment and
emphasized that implementation without prior consultation
injected unpredictability into the business climate.
Burkhead raised these issues with GOA ministers, who
responded that the measures were needed to halt a sudden
deterioration in Algeria's balance of payments, exert more
control over large-scale profit repatriations, and stimulate
domestic industries. Diplomats from EU countries, Japan,
Egypt and Canada also complained to Burkhead about the
negative effects recent Algerian laws have had for trade and
investment. In the case of the EU, these changes breach the
terms of Algeria's association agreement. Burkhead's press
roundtable was mostly repeated factually in the local press,
although some newspapers complained that his remarks
constituted unwarranted criticism of and interference in
Algerian policies. Reftels report individual meetings. End
summary.
Private Sector Airs Its Worries
--------------
2. (SBU) In a September 27-29 visit, USTR Director for
European and Middle Eastern Trade Affairs Paul Burkhead met
with numerous U.S. and Algerian business leaders, including
representatives from General Electric, Microsoft, Citibank,
and Hamida Pharma, as well as government officials. Private
sector leaders raised concerns over measures enacted in the
July 2009 Complementary Finance Law and rules enacted in 2008
that have impeded trade and foreign investment in Algeria.
These included: 1) a 51-percent Algerian majority share
requirement for all foreign investment; 2) a 30-percent
Algerian share requirement for all import companies; 3)
limitations on the repatriation of profits; 4) requiring that
a letter of credit be the sole allowable form of payment for
imports; 5) a ban on the import of many pharmaceuticals; and
6) sudden changes in various import procedures. Burkhead
also heard complaints of lax enforcement of Algeria's
intellectual property protection legislation. Burkhead told
business leaders the U.S. recognized that Algeria should
diversify its economy beyond the energy sector, and that a
key way to do this is to create conditions favorable to
foreign investment and trade.
USTR Message to GOA: WTO Accession Best Path to Reform
-------------- --------------
3. (C) As reported in reftels, Burkhead met with Minister of
Commerce El Hachemi Djaaboub, Minister of Finance Karim
Djoudi, Minister of Industry and Industrial Promotion
Abdelhamid Temmar, and Secretary General in the Ministry of
Health Abdelsalam Chakou. He told all official interlocutors
that the U.S. wants to improve trade and investment with
Algeria. Consultations under our Trade and Investment
Framework Agreement (TIFA) had ceased after 2004, however,
and should be revived. Burkhead spotlighted WTO accession as
the best instrument to help implement reforms needed for
Algeria to diversify its economy away from oil and gas, take
a more direct part in the global economy, and have a seat at
the table that negotiates global trade policy. He emphasized
that the U.S. stands ready to partner with this country to
help it accede to the WTO.
ALGIERS 00000900 002 OF 003
GOA: We Want WTO, But How?
--------------
4. (C) Senior GOA officials responded that Algeria wished to
accede to the WTO and some expressed bafflement at why
negotiations had stalled. Burkhead said the U.S. was ready
to partner with Algeria in its accession bid, but Algeria
would have to make hard choices in the rules governing trade
and investment. All GOA officials reacted favorably to his
proposal to hold a bilateral meeting to take stock of
Algeria's WTO accession bid soon, a meeting that could also
discuss re-engaging on trade and investment issues under the
framework of TIFA.
GOA Defends Restrictive Trade and Investment Measures
-------------- --------------
5. (C) Burkhead raised with GOA officials the obstacles to
trade and investment that had arisen over the past year,
including those contained in the July 2009 Complementary
Finance Law. These measured deterred U.S. and foreign
investment, would impede Algeria's WTO accession, and created
an unpredictable business climate that played havoc with
businesses already in Algeria or thinking of investing there.
GOA officials defended the measures as necessary to staunch
a sudden spike in imports, especially services, over the last
year. Coupled with a drop in oil export receipts, Algeria's
balance of payments had deteriorated. Controls on profit
repatriation were designed to stop tax evasion and exert
greater control over large currency transfers outside the
country. The letter of credit requirement was designed to
clamp down on over-invoicing. A second goal of the measures
was to stimulate domestic production, which had fallen on
hard times following earlier periods of economic
liberalization. Several GOA officials stated that Algeria
remained committed to a policy of import substitution.
Intellectual Property
--------------
6. (C) Burkhead brought up U.S. companies' complaints of lack
of intellectual property protection and said there was a need
to educate the people to create a culture of respect for
intellectual property. The Minister of Industry noted that
Algeria had an intellectual property protection law and could
use training assistance from the U.S. in how to enforce it.
Pharmaceutical Ban
--------------
7. (C) Burkhead argued to Health Ministry Secretary General
Chakou that the import ban on a list of pharmaceuticals was
contrary to international trade rules and would create
shortages and harm the Algerian consumer. Chakou said the
ban covered only drugs already produced in Algeria and was
designed to protect and stimulate domestic production of
drugs. His ministry monitored the market and issued import
permits when a shortage was imminent.
Europeans/Egyptians Worry About Trade-Investment Restrictions
-------------- --------------
8. (C) Meeting with senior diplomats from countries with
major investments in Algeria, Burkhead heard that the EC,
French, UK, Japan, and Egyptian representatives were most
critical of these measures and the inconsistent
implementation of other regulations. The EC representative
underscored Algeria's breach of key provisions of its
association agreement with the EU. Interestingly, a Canadian
diplomat indicated that Ottawa was resigned to the
legislative changes, given the GOA's ideological
inclinations. Senior UK and EU officials will visit Algeria
shortly to discuss these rules, including how they have
violated provisions of the EU association agreement.
Next Steps
--------------
9. (C) Embassy recommends that USTR and Department follow up
with formal offers of bilateral talks on WTO accession and
ALGIERS 00000900 003 OF 003
bilateral trade and investment issues, under the framework of
the TIFA Council. We will continue to consult with other
concerned embassies here and report on their governments'
discussions with the GOA.
10. (U) USTR Burkhead has cleared this message.
PEARCE
SIPDIS
STATE FOR NEA/MAG
STATE PASS FOR USTR - BURKHEAD
COMMERCE FOR NATE MASON
E.O. 12958: DECL: 10/05/2019
TAGS: EINV EFIN ETRD ECON PGOV PREL AG
SUBJECT: ALGERIA: USTR DIRECTOR BURKHEAD TACKLES
TRADE-INVESTMENT CHANGES
REF: A) ALGIERS 890 B) ALGIERS 889 C) ALGIERS 888 D)
ALGIERS 887
Classified By: Ambassador David D. Pearce, reasons 1.4 (b),(d)
Summary
--------------
1. (C) USTR Director Paul Burkhead told Algerian ministers
and senior officials during a September 27-28 visit that the
U.S. wants to improve trade and investment ties with Algeria
and help Algeria diversify its economy beyond the hydrocarbon
sector. GOA officials said Algeria still wants to accede to
the WTO and reinvigorate U.S. trade with and investment in
Algeria. These officials welcomed his proposal to hold a
bilateral stock-taking meeting on WTO accession and bilateral
trade and investment, the latter in the context of our Trade
and Investment Framework Agreement (TIFA). Businessmen,
meanwhile, raised with Burkhead their concerns over recently
enacted legislation that impedes trade and investment and
emphasized that implementation without prior consultation
injected unpredictability into the business climate.
Burkhead raised these issues with GOA ministers, who
responded that the measures were needed to halt a sudden
deterioration in Algeria's balance of payments, exert more
control over large-scale profit repatriations, and stimulate
domestic industries. Diplomats from EU countries, Japan,
Egypt and Canada also complained to Burkhead about the
negative effects recent Algerian laws have had for trade and
investment. In the case of the EU, these changes breach the
terms of Algeria's association agreement. Burkhead's press
roundtable was mostly repeated factually in the local press,
although some newspapers complained that his remarks
constituted unwarranted criticism of and interference in
Algerian policies. Reftels report individual meetings. End
summary.
Private Sector Airs Its Worries
--------------
2. (SBU) In a September 27-29 visit, USTR Director for
European and Middle Eastern Trade Affairs Paul Burkhead met
with numerous U.S. and Algerian business leaders, including
representatives from General Electric, Microsoft, Citibank,
and Hamida Pharma, as well as government officials. Private
sector leaders raised concerns over measures enacted in the
July 2009 Complementary Finance Law and rules enacted in 2008
that have impeded trade and foreign investment in Algeria.
These included: 1) a 51-percent Algerian majority share
requirement for all foreign investment; 2) a 30-percent
Algerian share requirement for all import companies; 3)
limitations on the repatriation of profits; 4) requiring that
a letter of credit be the sole allowable form of payment for
imports; 5) a ban on the import of many pharmaceuticals; and
6) sudden changes in various import procedures. Burkhead
also heard complaints of lax enforcement of Algeria's
intellectual property protection legislation. Burkhead told
business leaders the U.S. recognized that Algeria should
diversify its economy beyond the energy sector, and that a
key way to do this is to create conditions favorable to
foreign investment and trade.
USTR Message to GOA: WTO Accession Best Path to Reform
-------------- --------------
3. (C) As reported in reftels, Burkhead met with Minister of
Commerce El Hachemi Djaaboub, Minister of Finance Karim
Djoudi, Minister of Industry and Industrial Promotion
Abdelhamid Temmar, and Secretary General in the Ministry of
Health Abdelsalam Chakou. He told all official interlocutors
that the U.S. wants to improve trade and investment with
Algeria. Consultations under our Trade and Investment
Framework Agreement (TIFA) had ceased after 2004, however,
and should be revived. Burkhead spotlighted WTO accession as
the best instrument to help implement reforms needed for
Algeria to diversify its economy away from oil and gas, take
a more direct part in the global economy, and have a seat at
the table that negotiates global trade policy. He emphasized
that the U.S. stands ready to partner with this country to
help it accede to the WTO.
ALGIERS 00000900 002 OF 003
GOA: We Want WTO, But How?
--------------
4. (C) Senior GOA officials responded that Algeria wished to
accede to the WTO and some expressed bafflement at why
negotiations had stalled. Burkhead said the U.S. was ready
to partner with Algeria in its accession bid, but Algeria
would have to make hard choices in the rules governing trade
and investment. All GOA officials reacted favorably to his
proposal to hold a bilateral meeting to take stock of
Algeria's WTO accession bid soon, a meeting that could also
discuss re-engaging on trade and investment issues under the
framework of TIFA.
GOA Defends Restrictive Trade and Investment Measures
-------------- --------------
5. (C) Burkhead raised with GOA officials the obstacles to
trade and investment that had arisen over the past year,
including those contained in the July 2009 Complementary
Finance Law. These measured deterred U.S. and foreign
investment, would impede Algeria's WTO accession, and created
an unpredictable business climate that played havoc with
businesses already in Algeria or thinking of investing there.
GOA officials defended the measures as necessary to staunch
a sudden spike in imports, especially services, over the last
year. Coupled with a drop in oil export receipts, Algeria's
balance of payments had deteriorated. Controls on profit
repatriation were designed to stop tax evasion and exert
greater control over large currency transfers outside the
country. The letter of credit requirement was designed to
clamp down on over-invoicing. A second goal of the measures
was to stimulate domestic production, which had fallen on
hard times following earlier periods of economic
liberalization. Several GOA officials stated that Algeria
remained committed to a policy of import substitution.
Intellectual Property
--------------
6. (C) Burkhead brought up U.S. companies' complaints of lack
of intellectual property protection and said there was a need
to educate the people to create a culture of respect for
intellectual property. The Minister of Industry noted that
Algeria had an intellectual property protection law and could
use training assistance from the U.S. in how to enforce it.
Pharmaceutical Ban
--------------
7. (C) Burkhead argued to Health Ministry Secretary General
Chakou that the import ban on a list of pharmaceuticals was
contrary to international trade rules and would create
shortages and harm the Algerian consumer. Chakou said the
ban covered only drugs already produced in Algeria and was
designed to protect and stimulate domestic production of
drugs. His ministry monitored the market and issued import
permits when a shortage was imminent.
Europeans/Egyptians Worry About Trade-Investment Restrictions
-------------- --------------
8. (C) Meeting with senior diplomats from countries with
major investments in Algeria, Burkhead heard that the EC,
French, UK, Japan, and Egyptian representatives were most
critical of these measures and the inconsistent
implementation of other regulations. The EC representative
underscored Algeria's breach of key provisions of its
association agreement with the EU. Interestingly, a Canadian
diplomat indicated that Ottawa was resigned to the
legislative changes, given the GOA's ideological
inclinations. Senior UK and EU officials will visit Algeria
shortly to discuss these rules, including how they have
violated provisions of the EU association agreement.
Next Steps
--------------
9. (C) Embassy recommends that USTR and Department follow up
with formal offers of bilateral talks on WTO accession and
ALGIERS 00000900 003 OF 003
bilateral trade and investment issues, under the framework of
the TIFA Council. We will continue to consult with other
concerned embassies here and report on their governments'
discussions with the GOA.
10. (U) USTR Burkhead has cleared this message.
PEARCE