MADAGASCAR: FURTHER EMBASSY INPUT FOR AGOA REVIEW

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E.O. 12958: DECL: 10/14/2019
TAGS: ECON ETRD EAGR EAID PHUM MA
SUBJECT: MADAGASCAR: FURTHER EMBASSY INPUT FOR AGOA REVIEW

REF: ANTANANARIVO 714

Classified By: AMBASSADOR NIELS MARQUARDT FOR REASONS 1.4 B AND D.


1. (C) Summary: As the 2010 interagency AGOA review now
moves forward toward making decisions, post offers this
additional input and background to inform agencies' ongoing
deliberations. Post recommends that Madagascar's AGOA
eligibility be maintained for 2010 if the Malagasy leaders
can demonstrate additional progress on returning to
constitutional rule by year-end 2009. AGOA is currently our
most effective tool for pressuring the political actors to
install a power-sharing transition government, and would
continue to provide useful leverage throughout 2010 to ensure
that that the plan agreed to in the Maputo Accords, which
outlined the institutions of the transition and set a Nov
2010 election deadline, fully comes to fruition. A
determination of ineligibility would likely elicit negative
reactions at high-levels from France and the African Union,
as such a determination may be viewed as undermining the
Maputo process we have pledged to support, as well as
exacerbating an already volatile situation on the ground.
Additionally, American investors, tens of thousands of AGOA
workers, other AGOA beneficiary nations (regional suppliers),
and the USG image in Madagascar all stand to suffer if AGOA
is lost. Madagascar's rival political factions have recently
made progress towards implementing a consensual, inclusive
transition government that could organize free and fair
elections under the terms of the Maputo transition charter.
"Summit" discussions organized by the AU for Nov. 3-5 in
Addis Ababa could yield further progress; thus, Post
recommends that the decision on Madagascar's eligibility be
delayed as long as possible to allow maximum time for the
unity transition government to be installed and for
additional progress to be demonstrated. End summary.

AGOA: Critical Positive Leverage
--------------

2. (C) Madagascar's main political actors, including the de
facto president, have frequently and increasingly alluded to
the threat of losing AGOA eligibility as an important factor
in their decisions to pursue negotiations and seek a rapid
resolution to the political crisis. While the process is
fraught with delay and dilatory tactics, much of the urgency
currently felt can be attributed, in a positive sense, to the
pending AGOA determination. Now well-versed in the
disastrous economic and social consequences of losing AGOA,
these politicians now understand how important it is to
maintain Madagascar's trade benefits. Having already cut all
aid funding going directly to the government, suspended all
but non-humanitarian assistance, terminated definitively our
MCA program, and ceased issuing most visas to government
officials, we retain extremely little leverage over the
Malagasy government: AGOA is our only remaining "big stick."
To continue to influence their actions in a positive
direction, Post recommends that AGOA eligibility be
maintained for 2010 if the Malagasy leaders can demonstrate
additional progress on returning to constitutional rule by
year-end 2009. Specifically, the four vying factions should
implement the power-sharing transition government envisioned
by the August 9 Maputo Accords, which would pave the way for
organizing elections by November, 2010. Further progress
towards elections could be demonstrated by the establishment
of the independent electoral commission mandated by the
Maputo Charter. A feasible timeframe for organizing
elections will be determined onthe basis of recommendations
by technical evaluation teams from the UN and EU. Post
assesses that credible elections could not be held prior to
April 2010 at the very earliest, given the necessary
preparations, including reforming the electoral code (and
possibly also the constitution),and the Nov - Mar
rain/cyclone season (during which elections would be
impossible). Evaluation teams from the UN and EU may/may
arrive as early as mid-November, and their mission would take
approximately one month; thus, a feasible election date may
not be determined before mid-December at the earliest, and
possibly not until after the New Year holidays.

Progress to Date
--------------

3. (C) Concrete steps towards returning to constitutional

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order and respecting the rule of law have been taken during
negotiations of the four principal political rivals in
Mozambique and by their delegations in Madagascar. The
August 9 "Maputo" agreement of Madagascar's four vying
political rivals to the terms of a transition charter for the
formation of a consensual, inclusive transition government to
organize elections within 15 months was a critical
breakthrough. The further agreement by de facto transition
leader Andry Rajoelina to dismiss his prime minister and
replace him with a consensus candidate, upon which all four
movements agreed October 6, was another important, necessary,
and politically difficult step towards resolution of the
political crisis. The international community, including the
USG, has heralded these breakthroughs and pledged its support
for eventual elections after formation of a consensus
government. The four movement chiefs (Rajoelina, ousted
President Ravalomanana and former Presidents Ratsiraka and
Zafy) have agreed to meet in Addis Ababa November 3 through 5
to seek final agreement on the leadership of the transition.
If they can achieve this difficult task, they will be poised
to move forward with the establishment of the consensual
transition government. If these tasks can be accomplished,
the US should send a signal of support by renewing AGOA
eligibility for another year.

International Community Backlash Likely
--------------

4. (C) If the USG were to suspend Madagascar from AGOA, it
would be viewed by much of the international community, and
particularly by the African Union, as undermining the fragile
Maputo transition process we have pledged to support. Key AU
officials, including Ping and Lamamra, have made this point
repeatedly and pointedly. Post would expect negative
high-level reactions from France, SADC, and the AU. The AU
and SADC have undertaken major efforts to resolve this
political crisis, as have the French, who have extremely
important interests here. (It may not be not well understood
just how much more important Madagascar is to France than it
is to the US. The enormous French Embassy here is one of the
10 largest in the world. More French nationals -- estimated
at 25,000 -- reside here than in any other AU member state.
Some 700 French businesses are established here. President
Sarkozy is personally engaged, as are multiple ministers and
high-level officials of the GOF.) The French, in concert with
the AU and SADC, are certain to be vexed if US unilateral
actions were to fan the flames they are trying painstakingly
to extinguish. In a country of striking poverty and almost
no industrial development outside textiles, the garment
sector offers more formal jobs (estimated at around 100,000)
than any other sector, besides the government. Most of these
jobs, around half of which depend on AGOA, are located in or
near the capital city, which would face increasing crime
rates and worsening social instability in the event of AGOA's
loss. The French have already demonstrated a strong aversion
to the idea of even the targeted sanctions currently being
wielded as a stick by the AU; they can be expected to
intervene at a high level in Washington if they perceive AGOA
as heading towards suspension. AU Chairman Jean Ping
chastised the US at the Oct 6 international contact group
meeting for the "negotiating problems" posed by the Dec 31
AGOA decision deadline, implying that Rajoelina's argument to
move forward with rapid elections (despite the lack of
consensus, implementation of a neutral entity to organize
them, or proper preparation) was based partly on Rajoelina's
concern for maintaining AGOA eligibility. Ping implicitly
urged the USG to more closely align an eventual AGOA
determination with the timeframe of the Maputo Charter, a
document which the entire international community supports as
the only way forward out of the political crisis.

American Investor Concerns
--------------

5. (SBU) Madagascar has long been a poster child for AGOA.
In fact, 2008 USITC data showed that Madagascar ranked second
in AGOA apparel shipments by value only after Lesotho, with
exports worth USD 279 million. Several large US buyers such
as the GAP, Gloria Vanderbilt, and Jordache purchase garments
in Madagascar for import into the US. In addition to the
many US companies that source garments from Madagascar,
several American companies, including Jordache, Cottonline,
and Winds, have invested tens of millions of dollars in

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Madagascar as a result of the trade benefits offered under
AGOA. Jordache alone has invested USD 60 million in its
Malagasy facilities. They stand to lose much or most of
their investments if AGOA is no longer in effect. Although
the makers of denim products may be able to survive a
temporary suspension of AGOA, those that produce synthetic
garments that are subject to higher duties are already
scoping out other countries to which to relocate. According
to most of the investors, American, Mauritian, Chinese, etc.,
once they pull out, they will not return; AGOA "suspension"
would therefore amount to its permanent termination here.
There may also be significant, negative regional effects in
African nations that supply fabric, zippers, and other
accessories to Malagasy garment production. The impact of
AGOA suspension here therefore could have a chilling effect
far beyond the shores of Madagascar and throughout the
AGOA-eligible region.

US Image Concerns
--------------

6. (C) If Madagascar was deemed no longer eligible for AGOA
benefits, the four rival political factions, who have been
involved in negotiating the formation of a consensual
transition government, would likely point fingers at each
other, wiggling out of the blame for the consequences of
their selfish actions -- and at the US. The US would be the
most tempting, obvious, and unified target for the resentment
of unemployed workers and family members,Q well as Malagasy
citizens in general, who would see the economic and security
situation of their country worsen due to a decision made by
and attributed to the US President. The US likely would be
seen as "abandoning" Madagascar. Post obviously would seek
to deflect the blame back on the Malagasy politicians who
overthrew a democratically-elected government and triggered
this crisis, but such an explanation would likely fall on
deaf ears in this intensely insular nation. The highly
positive images that most Malagasy now hold of the US and of
the American president would be tarnished significantly, and
for the long haul.

Comment: Deferring the Decision is Key
--------------

7. (C) For all of the aforementioned reasons, Post urges
strongly that the decision on Madagascar's AGOA eligibility
be deferred until the latest date possible. We doubt that
all the elements for a positive decision on eligibility will
be fully in place in time for the Nov 13 interagency meeting,
especially given its proximity to the Nov 3-5 Addis Summit
and the need for time afterwards to assess and implement
whatever is agreed there. When the interagency
recommendation is formulated, if Madagascar's leader's have
made additional progress on returning to constitutional rule,
Post recommends that AGOA be maintained for one year in order
to provide a "carrot" for the progress that has been made --
and a "stick" for encouraging the full implementation of the
Maputo Accords during 2010. If AGOA were suspended, we would
lose the main remaining point of US leverage over the
country's rogue leaders -- and over a fragile reconciliation
process. The rival political factions have recently made
progress towards implementing a consensual, inclusive
transition government that could organize free and fair
elections under the terms of the Maputo transition charter.
The international community has endorsed this charter as the
only way forward out of the Malagasy political crisis. The
USG should support this process by renewing AGOA eligibility
if progress continues toward the installation of a transition
government in the coming weeks. End comment.
MARQUARDT