US-MOROCCO FTA STUDY REVEALS "TO WIN THE LOTTO,

UNCLAS RABAT 000276

SENSITIVE
SIPDIS

DEPT FOR NEA/MAG, EEB/TPP
DEPT PLEASE PASS USTR CHRIS WILSON AND PAUL BURKHEAD

E.O. 12958: N/A
TAGS: ETRD ECON ECIN EAGR MO
SUBJECT: US-MOROCCO FTA STUDY REVEALS "TO WIN THE LOTTO,
ONE MUST BUY A TICKET"

REF: A. RABAT 00271

B. RABAT 0190


1. (SBU) Summary: A study of Morocco,s Free Trade Agreements
(FTAs) commissioned by private enterprise and released in
late March, concluded that Moroccan firms are not seizing
opportunities that exist in the U.S. market. The report
formed the backdrop for Assistant United States Trade
Representative Christopher Wilson's March 19-20 visit to
Morocco to lay the groundwork for the second annual Joint
Committee Meeting in May, and generated a lively public
debate of the impact of the U.S.-Morocco FTA. While arguing
that most benefits of the FTA have gone to U.S. exporters,
the report largely attributed this lopsided outcome to the
failure of Moroccan businesses to take advantages of the
available opportunities, as well as the failure of the
Moroccan Government to ensure that the agreements were
accompanied by a coherent export strategy. End Summary.

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FTA REPORT UNVEILED
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2. (SBU) The USTR visit coincided with the release of the
General Confederation of Enterprises (CGEM)-commissioned
report on "Free Trade Agreements: Opportunities Offered to
Morocco." The study authors, from the French consulting firm
Roland Berger, presented the results on March 24 to a meeting
that grouped CGEM, the National Council of Foreign Trade,
including Ministry of Foreign Trade Secretary General El Aid
Mahsoussi, and Embassy officers (A/DCM and Econoff). The
report concluded that the FTA has strongly benefited U.S.
exports, which have tripled since the FTA went into force in
2006, while Moroccan exports to the U.S. have grown at an
annual rate of 22 percent through 2007. The authors
concluded that the lopsided outcomes are due to Moroccan
exporters failing to seize opportunities in the U.S. market
for largely internal reasons.

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RESULTS AND CONTROVERSY
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3. (SBU) The top reasons, according to the report, as to why
Moroccan exporters are not taking advantage of the FTA
include lack of knowledge of the market and its norms;
limited capacity by Moroccan exporting companies to meet the
demands of U.S. importers; lack of an effective export
promotion strategy; and weak internal logistics. The study
did identify a number of Moroccan products that are export
competitive for the U.S. market, however, including clothing,
essential oils and perfumes, shoes, animal and vegetable
lubricants and oils, and canned foods. While participants
welcomed the positive message, they urged that it be refined
to be of practical utility. The report's general export
promotion advice for broad sectors, they argued, is not
useful to help market individual products in an unknown
market. They also urged greater attention to the fact that
the value added in Moroccan exports constitutes only 30
percent of the headline figures, given that much of the total
is made up of re-export of goods that were temporarily
admitted to Morocco for processing. This reality, some
present argued, reflects Morocco's greatest "handicap:" the
sub-contracting model it has adopted to meet the demands of
European partners is not in high demand with potential U.S.
importers.

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FURTUNATE COINCIDENCE
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4. (SBU) The results of the CGEM study generated massive
press coverage during the week of Wilson's visit and focused
attention on the need for Moroccan businesses to more
aggressively exploit the opportunities offered by the
agreement. French language daily Le Soir recently summarized
this message noting that "To win the lotto, one must buy a
ticket." Wilson used the press interest generated by the
study to highlight the positive achievements of the FTA to
date, including an increase in bilateral trade from USD 1
billion in 2006 to around USD 2.5 billion in 2008. He also
acknowledged throughout the visit the work the GOM and
business community is doing, by commissioning such studies
and formulating recommendations and support for industry, to
take full advantage of the opportunities the FTA has to

offer.


5. (SBU) Comment: The conclusions and recommendations offered
by the study were not groundbreaking. The GOM has been well
aware of Moroccan exporters' concerns with the U.S. market
and has already started taking action to hone its export
promotion strategy (Ref B). Despite a sometimes defensive
response to the report during the March 24th presentation,
all agreed with its underlying conclusions, while suggesting
that a more detailed sectoral examination would be even more
useful. Widespread recognition that Moroccan businesses must
step up their efforts to take advantage of the FTA marks a
welcome step forward in public discussion of the agreement
and its benefits. End Comment.


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Jackson