PA PRESSES ON WTO OBSERVER STATUS, BUT OPENS THE

C O N F I D E N T I A L JERUSALEM 001764

SIPDIS

STATE PASS USTR, FOR NEA/IPA AND EEB, NSC FOR SHAPIRO/KUMAR

E.O. 12958: DECL: 10/02/2019
TAGS: ECON ETRD PREL KWBG WTRO KPAL IS
SUBJECT: PA PRESSES ON WTO OBSERVER STATUS, BUT OPENS THE
DOOR FOR SHORT-TERM COMPROMISE

REF: A. JERUSALEM 1607

B. GENEVA 814 AND PREVIOUS

C. TEL AVIV 2166

D. STATE 99831

Classified By: Consul General Daniel Rubinstein, Reasons 1.4 (b) and (d
)


1. (C) Summary: PA officials claim to have broad support for
their bid for WTO observer status from other WTO delegations,
while acknowledging USG concerns. PM Fayyad told the Consul
General October 1 that he will not put the U.S. in a position
where it must vote no on a PA request. He and his advisors,
however, believe the PA has a legitimate case for full
observer status, and that such status is key to PA
institution building. PA officials provided a written
response to USG concerns, as conveyed in Ramallah and Geneva.
Post will continue to work to secure the PA's agreement to
seek only ad hoc observer status at the Ministerial (as they
had in 2005),while the USG continues to review the PA
request for full observer status. End summary.

PA Positive After Geneva,
But Understands the USG Not On Board
--------------

2.(C) According to Saad al-Khatib, Advisor to the Minister of
National Economy, the PA received assurances of support in
Geneva from the EU, Canada, Australia, India, Pakistan,
China, the African group, the ASEAN group, and the Latin
American group. Al-Khatib acknowledged that the PA has heard
clearly, in both Geneva and Ramallah, that the USG is not in
a position to support full observer status at this time.
Al-Khatib provided written responses to the legal concerns
expressed to the PA by the USG regarding the PA's
qualification for observer status. (These documents have
been emailed to NEA/IPA.) Al-Khatib expressed some surprise
that the USG was "renewing these old arguments" and provided
a copy of a 2005 letter to ConGen Jerusalem responding to
similar concerns. He claimed that USG officials, following
the PA's participation in the 2005 Ministerial, accepted that
the PA was eligible under WTO rules and would support a bid
for formal observer status. However, he said, Hamas' 2006
election victory shor
tly thereafter derailed the follow-through. "Why have you
gone backwards?" he asked.

PA Argues Paris Protocol Confirms Autonomy
--------------


3. (SBU) The PA's argument is that the very existence of the
Paris Protocol, and the fact that Palestinians chose to enter
into the agreement with Israel, confirms the PA's autonomy
over external trade policy and the existence of a "separate
customs territory." Al-Khatib noted that Israelis and
Palestinians agreed to set standards for and cooperate on
aspects of the regulation of trade with third parties. He
argued that many vital WTO-relevant functions are
unrestricted by the Paris Protocol and are left to the full
autonomy of the two parties to regulate, such as third
country tariffs, sanitary and phyto-sanitary measures,
licensing of imports and exports, trade in services, and
regulation of trade-related intellectual property rights.


4. (SBU) Al-Khatib said that the concept of a separate
customs territory was conceived to ensure that the trading
system covers territories that are not states. He cited
cases such as Ceylon and Rhodesia as historical examples of
colonial administrations on the way to independence, where it
was in the interest of the world trading system to ensure
that trade was regulated. The PA is no different, he said,
and it is clearly in the interest of the U.S. and Israel to
facilitate the integration of the Palestinian territories
into this system. He stressed the importance of the "promise
of accession" as a catalyst for meaningful reform and further
liberalization in the Palestinian economy.

PM Fayyad: Focus on Long-Term Prospects
--------------


5. (C) The Consul General reiterated the U.S. position to PM
Fayyad on October 1. Fayyad responded that close engagement
with the WTO is a key part of his institution building
efforts and the two-year plan for statehood, but that he

would not allow a situation to develop where the U.S. would
be forced to vote against a PA request. He underscored that
the PA could not accept less than what it got in 2005 (ad hoc
observer status at the Ministerial),and that it was
important to remain focused on the long-term prospects for
observer status and eventual accession. Fayyad said that
Minister of National Economy Bassim Khoury would lead the
PA's engagement with the WTO and asked the Consul General to
work with Khoury to find a way forward.

Comment
--------------


6. (C) Given Fayyad's assurances, we will now press Khoury to
scale back the PA's request in Geneva to observer status at
the Ministerial (which the PA had in 2005). It is important
for the PA (and for our own long-term interest in a
prosperous, rule-based, and globally connected Palestinian
economy) that the PA's engagement with the WTO not get caught
up in the current climate of mistrust between the PA and GOI
in other multilateral settings. We recommend continued
review of our legal position on the Palestinians'
qualification for the WTO, in light of the PA's written
response to our concerns. End Comment.
RUBINSTEIN