AUSTR WILSON SETS STAGE FOR FTA JOINT COMMITTEE

UNCLAS RABAT 000271 SENSITIVE SIPDIS STATE FOR EEB/TPP AND NEA/MAG STATE PLEASE PASS USTR FOR AUSTR CHRIS WILSON AND PAUL BURKHEAD E.O. 12958: N/A TAGS: ETRD ECON ECIN EAGR MO SUBJECT: AUSTR WILSON SETS STAGE FOR FTA JOINT COMMITTEE REF: A. RABAT 1190 ¶B. RABAT 0190 ¶1. (SBU) Summary: In preparation for the May 2009 Joint Committee Meeting (JCM) Assistant United States Trade Representative for Europe and the Middle East Christopher Wilson met with Government of Morocco (GOM) officials and business representatives on March 19 and 20 to discuss outstanding issues related to the U.S.-Morocco Free Trade Agreement (FTA). Wilson highlighted the bilateral trade growth, including the entry of new Moroccan products, since the entry into force of the FTA, and emphasized the need to address technical issues before the JCM through an exchange among experts. Wilson's visit coincided with the release of a business sector-commissioned evaluation of the free trade agreements that Morocco has signed in recent years. GOM officials and the private sector observed that Moroccan exports had failed to meet expectations but attributed this to a failure of Moroccan businesses to "enter the ring," as well as the lack of a comprehensive export strategy. In press interviews, Wilson noted the positive achievements of the agreement to date, and described its potential as a "tool" businesses can utilize to expand their trade with the U.S. End Summary. -------------- IT'S ALL ABOUT THE TOMATOES -------------- ¶2. (SBU) Foreign Trade Minister Abdellatif Maazouz, Wilson's official counterpart, reviewed outstanding issues with Wilson and the Charge d'Affaires before Wilson's more in-depth discussion with technical experts from Maazouz's team. Maazouz praised the existing healthy working relationship between USG and GOM officials dealing with FTA discussions. He assessed that the GOM, like the King, "believes in" the FTA and defends it, but said that Morocco, like Doubting Thomas, needs to see concrete results in improved trade opportunities and figures. Acknowledging Wilson's statistics pointing to healthy growth in bilateral trade, Maazouz argued that public perception of the trade relationship is focused on key sectors with "high visibility," particularly agriculture. Although trade volume in electronics or aerospace products may be ten times that of agriculture, Maazouz said, when the public hears that tomatoes from Morocco have been banned from the U.S., the result is a negative assessment of the entire relationship. We need to ensure that the "clouds do not block the sunshine" of the "good work" we are doing on trade, he concluded. Wilson noted Morocco's frustration with the perceived slow pace of approval for products such as tomatoes, but stressed that Morocco's FTA had in fact given the case file a higher profile relative to other pending applications. Concerning technical responses such as the recent restrictions on Mediterranean tomatoes for disease and pest concerns, Wilson and Maazouz agreed that increased transparency and exchange of information on actions and reasons would assist in assuring both sides of the other's commitment to the agreement. -------------- -- NEED PROGRESS ON WHEAT QUOTAS AND TRANSSHIPMENT -------------- -- ¶3. (SBU) Wilson expressed hope that discussions on transshipment and wheat quotas could lead to agreement before the May JCM. The disagreement on transshipment is important to us, he noted, and we are constrained in our ability to alter our interpretation because the same language is incorporated in FTAs with multiple countries. Morocco is the only partner who differs in the interpretation, Wilson pointed out. He invited the GOM to send a delegation of customs experts to Washington to discuss a path forward on a common interpretation that would avoid a restrictive interpretation of the rules of origin. This visit would also allow discussion of a Customs Mutual Assistance Agreement as envisioned in the FTA, he added. ¶4. (SBU) On the issue of administration of tariff rate quotas (TRQs) for wheat, Wilson said the U.S. is ready to enter into an open, transparent discussion, but it must be done with urgency. Maazouz agreed that personnel changes in the Moroccan team addressing the issue may have delayed engagement, but assured Wilson that the overall team is ready to engage. He agreed that both governments want the May JCM to be a "signature meeting," where these issues have been resolved. ¶5. (SBU) Maazouz asserted that Morocco has been awaiting a written transshipment proposal from the U.S. for some time. The GOM is committed to removing anything that inhibits trade, Maazouz averred, but the U.S. interpretation of transshipment poses "risks" to Morocco, as it could allow falsification of origin, given the agreement does not require a certificate of origin. "We don't have this problem with other countries," he continued, because certificates of origin guarantee the true provenance of goods being transshipped. Regarding imports to Morocco, Maazouz continued, the GOM also worries that American exporters to Europe could use Morocco as a dumping ground for products that do not sell in Europe, including possibly spoiled goods. The GOM believes that a time limit on transshipped goods, as well as a certificate of origin, could address their concerns while keeping the transshipment provision of the FTA, he concluded. In the technical meeting following the session with Maazouz, GOM officials agreed to send a delegation to the U.S. for a technical exchange between customs officials after Wilson undertook to transmit a paper setting forth avenues for overcoming transshipment concerns. The paper, Wilson specified, will not propose a different U.S. interpretation but would try to present practical options for moving forward. -------------- AGRICULTURE, FISHERIES, AND SERVICES -------------- ¶6. (SBU) Ministry of Agriculture representative Samia Moulay Benaissa expanded on Maazouz's agriculture concerns, highlighting the lack of a final rule permitting entry of tomatoes from the Souss-Massa region into the U.S., the timing of USDA's Animal and Plant Health Inspection Service's (APHIS,s) risk assessment for the export of blueberries and raspberries, accelerating the tariff reduction for one olive line item and artichokes, changing the basis for the TRQs to a marketing year, and the differing agricultural trade figures (Ref A details pending agricultural issues). Benaissa also requested technical assistance for the promotion of Moroccan agricultural products in the U.S. Wilson acknowledged all the work left to be done on agricultural issues, recommended that U.S. and Moroccan agricultural experts hold a Digital Video Conference (DVC) to address these issues before the FTA JCM in May, and requested the GOM to identify the new lead negotiator on agriculture issues since the retirement of the previous negotiator. GOM officials undertook to provide us with a point of contact for future communications. (Note: Ministry of Agriculture contacts informed AgCouns that there are imminent changes in the leadership positions of several agencies within the Ministry. End note.) ¶7. (SBU) GOM officials told Wilson that they have reviewed the language in the separate letters that will be exchanged to revise Morocco's schedule of non-conforming measures in services and the fisheries line item, and hope to have the letters ready for signature during the JCM. The letters are in good shape to be finalized in May, Wilson noted, but the accelerated tariff reduction request for canned sardines will require consultations with Congress, which may take time. -------------- CONTINUED TECHNICAL ASSISTANCE -------------- ¶8. (SBU) Ministry of Foreign Trade Secretary General El Aid Mahsoussi commended the high level of FTA-related technical assistance support the USG has provided to Morocco and expressed Morocco's hope for its continuation. He added that the GOM is in the process of formalizing a coordinated support request by sector. Wilson regarded the technical assistance to Morocco as a "very impressive" exhibit of collaboration to reinforce the FTA. "We remain interested in continuing to be responsive," said Wilson, "but our resources are limited and we need as much precision as you can provide in terms of priorities." Moroccan Customs officials requested engagement with U.S. Customs regarding new and different products, to which Wilson proposed a meeting between experts. ¶9. (SBU) Wilson closed the technical meeting by reiterating the fact that both sides need to work together to make sure the FTA provides the expected benefits, and noted that expert meetings should be the top priority for both governments to address issues before the JCM. He thanked Morocco for its active participation in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations. Wilson also added that President Obama and the new leadership at USTR have expressed interest in exploring the relations between trade agreements, environmental policies and labor rights. The U.S. will present initial ideas on how these policies are developing within the U.S. system at the JCM, he added. Mahsoussi underscored the importance the GOM attaches to the environment and labor rights and welcomed U.S. proposals at the JCM. -------------- -------------- INDUSTRY AND FINANCE MINISTRIES REVIEW CHALLENGES -------------- -------------- ¶10. (SBU) Ministry of Industry Ahmed Reda Chami told Wilson and the Charge that the FTA was "good," but Moroccan exporters had not yet "cracked the code" to take advantage of its opportunities. The FTA was not meeting expectations, but the responsibility for that "is more on our side." Barriers to Moroccan export success included lack of knowledge of and connections within the U.S. market, the scale of the U.S. businesses (such that many Moroccan exporters could not fulfill U.S. orders),and a weak dollar making Moroccan exports uncompetitive. Chami,s cabinet is conducting a study to identify sectors in which Morocco has potential to be internationally competitive, and also hopes to entice multinational firms with experience selling in the U.S. to locate production in Morocco to take advantage of the FTA. U.S. firms will also be welcome, Chami clarified, arguing that U.S. firms could locate production here to open new European and North African markets, so as not to be taking jobs from the U.S. Chami said that he intends to lead an industrial delegation to the U.S. in the near future, but has delayed the visit to avoid arriving at a time when U.S. counterparts are preoccupied with other economic concerns. ¶11. (SBU) Wilson and the Charge reviewed Morocco,s economic growth and export goals with Minister of Economy and Finance Salaheddine Mezouar and Director of the Treasury Zohair Chorfi. Mezouar, who served as an industry representative on Morocco,s FTA negotiation team, assessed that the FTA had given positive results, although the dollar weakness had made Europe a more attractive market to Moroccan exporters. However, he stated, Morocco has "gained an important partner" with whom exporters will have time to build relationships. Mezouar outlined Morocco,s macroeconomic context, and noted that price changes and the global economic slowdown appear to have reduced overseas remittances, tourism receipts, and phosphate export sales in January and February by 15 to 20 percent from last year. However, the GOM has implemented sector-specific support measures to help firms in difficulty, particularly in export sectors. Although the GOM does not have the financial resources of developed countries, Mezouar asserted, "we,re managing well" in maintaining public confidence and keeping the credit markets healthy. The GOM agrees, he stated, that countries must not retreat to protectionism in the current crisis, but must "preserve the model of trade" that has been built. He expressed concern that each country is responding to its own problems, but that global trade and economic growth requires a coordinated response. ¶12. (SBU) Mezouar predicted that the opening of the Tangier-Med port and its prospects for direct shipping links to the U.S. east coast would assist in "orienting" Moroccan exporters to the U.S. Particularly in an economic crisis, he mused, "there are opportunities" for a country like Morocco. Morocco, as a relatively small exporter to a market the size of the U.S., cannot be a mass market supplier, he observed, and must find its success in such niches. The GOM plans to offer technical assistance to help exporters understand the U.S. market. Overall, Mezouar stated he is not dissatisfied with the FTA. Trade growth has not been as high as desired, but it is growing. Chorfi agreed that U.S. foreign direct investment has also grown as a result of the FTA, although that too at a slower rate than hoped. At the end of the day, Mezouar observed, the state is not the exporter, and it is up to the private sector to take advantage of the opportunities created under the FTA. -------------- EXPORT PROMOTION IS THE KEY -------------- ¶13. (SBU) Director General Saad Benabdallah of the revamped Maroc Export (formerly Center for the Promotion of Moroccan Exports) and his newly recruited team gave Wilson an overview of the structure, priorities and focus of Maroc Export (Ref B). They emphasized their interest in reaching out to the U.S. market and establishing trade tours, business-to-business initiatives, and other marketing strategies targeting U.S. companies and investors. Maroc Export's U.S. strategy will prioritize promoting agricultural products, textiles, clothing and leather, and niche products such as emerging technologies, they outlined. "The U.S. is our top priority market," Benabdallah asserted, "we are looking for USTR and Embassy assistance in creating partnerships to reach out to that market." -------------- BUSINESS COMMUNITY COMMENDS FTA -------------- ¶14. (SBU) Business leaders from CGEM (Morocco's largest federation of enterprises) and the American Chamber of Commerce (AMCHAM) met Wilson in Casablanca March 20. CGEM U.S.-Morocco FTA Committee President Abdelmalek Kettani noted that CGEM is committed to making sure Moroccan businesses take full advantage of the agreement. To that end, CGEM is looking to establish a permanent Moroccan council in Washington to promote business links and to serve as an entry point for American investors interested in Morocco. "If we want the FTA to work," Wilson responded, "these are the types of business links we need to establish." Kettani also reviewed the conclusions of the study CGEM commissioned on the country's various FTAs (subject of septel). ¶15. (SBU) A representative from Sun Trading Company, a U.S. agricultural importer/exporter, expressed his concerns on the long period of time required to attain APHIS certification to export blueberries and raspberries to the U.S. He added that his company is very interested in importing Moroccan blueberries, but hesitates to invest until the APHIS certification is complete. Wilson acknowledged the lengthy certification process and agreed to take the request for accelerated certification back to USDA in Washington. Overall, however, business representatives at this meeting and a separate lunch with Wilson commended the FTA for "bolstering" business and opening new opportunities, a theme Wilson emphasized in several impromptu national radio and television appearances during his visit, and a sit-down interview with L'Economiste, Morocco's premier business-oriented French language daily newspaper. ¶16. (SBU) Post has continued to broadcast the positive message on the achievement of the FTA Wilson generated. On March 27, the Charge, alongside Minister Chami, briefed at a roundtable discussion hosted by AMCHAM entitled "American Investment in Morocco." He highlighted that since FTA implementation two-way trade has expanded (not just as a result of phosphates and wheat); Moroccan agricultural exports to the U.S. have risen steadily; U.S. investments have increased; and the U.S. continues to provide targeted technical assistance. "The FTA offers Morocco a great opportunity," Minister Chami concluded, "we are trying to figure out exactly what needs to be done to take advantage of it." -------------- NOT MUCH TIME TILL THE JCM -------------- ¶17. (SBU) Comment: As Minister Maazouz outlined for Wilson, the Moroccan perception of trade relations with the U.S. continues to be skewed based on news reports that portray FTA benefits as being one sided. Wilson's visit provided a timely opportunity to highlight the bilateral benefit of FTA-derived growth to GOM officials, business leaders and the public at large. To reinforce this positive focus and ensure a constructive outcome at the second JCM of the FTA in May, the Mission urges priority engagement by Washington agencies to address outstanding technical issues in advance of the JCM, including undertaking without delay the technical exchanges among experts proposed by Wilson. End Comment. ***************************************** Visit Embassy Rabat's Classified Website; http://www.intelink.sgov.gov/wiki/Portal:Moro cco ***************************************** Jackson