PALESTINIAN AUTHORITY REQUEST FOR WTO OBSERVER

C O N F I D E N T I A L JERUSALEM 000357

SIPDIS

NEA FOR IPA AND SEMEP; NSC FOR KUMAR; USTR FOR FRANCESKI,
KLEIN, AND VENKATARAMAN; GENEVA FOR USTR/SHARK

E.O. 12958: DECL: 02/25/2020
TAGS: PREL ETRD USTR WTRO ECON KWBG IS
SUBJECT: PALESTINIAN AUTHORITY REQUEST FOR WTO OBSERVER
STATUS: USTR MEETINGS WITH PALESTINIAN OFFICIALS AND
PRIVATE SECTOR

REF: A. STATE 14912

B. 09 JERUSALEM 1993

C. 09 GENEVA 961

Classified By: CG Daniel Rubinstein, reasons 1.4 (b) and (d)

Summary
--------------


1. (SBU) Representatives of the Office of the United States
Trade Representative (USTR) met with Palestinian Authority
(PA) and Palestinian private sector representatives to
discuss the PA's pending request for World Trade Organization
(WTO) observer status. PA Prime Minister Fayyad and Minister
of National Economy Abu-Libdeh described PA plans to use
observer status as a framework for needed reforms,
development of legislation, and institution building. They
emphasized that the PA would not use observer status as a
platform to politicize the WTO General Council. USTR
representatives also met with the PA Ministry of National
Economy's WTO Team to continue the joint review of the
existing trade regime begun in January (ref A),and with the
Palestinian Private Sector Coordination Council to stress the
importance of private sector involvement in the WTO process.
PA officials expressed appreciation for USG support of their
observership application in the General Council and its
subsidiary bodies, and asked for USG assistance and advice
for obtaining this objective. USTR, USAID, Embassy Tel Aviv,
and Post discussed potential areas for assistance, and the
needed follow-up in Geneva and Washington. End summary.


2. (U) Cecilia Klein, Senior Director for WTO Accessions and
Import Licensing Issues, and Arun Venkataraman, Associate
General Counsel, from the Office of the U.S. Trade
Representative visited Jerusalem and Ramallah February 22-24.


Fayyad: WTO as a Tool for Statebuilding, Reform
-------------- ---


3. (C) Prime Minister Salam Fayyad told USTR representatives
that the PA had made the decision to use the WTO agreements
as a framework for economic reform and institution building.
He stressed that observership would lend critical support to
his statebuilding efforts, and help ensure implementation of
reforms that conformed to international standards. Fayyad
acknowledged that there was a political dimension to the PA's
application, explaining that the political benefit of
observer status would be a natural consequence of membership
in the WTO community. However, the political benefit was not
itself the reason for the PA's efforts, Fayyad said.


4. (C) Fayyad stressed that the PA would approach the WTO in
a "serious way," and that it did not "serve our interests to
say we are ready for accession when we are not." He
underscored the PA's need for both technical and diplomatic
assistance in supporting these efforts, adding "we could wait
on observer status, but I honestly think that we can benefit
from association with the WTO."


5. (C) Fayyad acknowledged that Israeli acquiescence to the
PA application would be necessary, given the consensus-based
nature of the WTO. He called the road to WTO observership
"tricky," adding that the GOI might try to link the PA's
request to other political issues. But, he said, "I'm
interested in getting to where we are going, not winning a
debate." The PA was prepared to discuss this issue frankly
with the GOI, he said.


6. (C) Turning to trade issues, Fayyad said that Palestinians
should take advantage of being next-door to an economic
powerhouse like Israel. "You will find," he told USTR, "that
on the basic WTO principles such as open market access, an
enabling investment environment, and low tariffs, you are
pushing on an open door -- these are all things I want." He
acknowledged that protectionist practices existed,
attributing them largely to aspects of the PA's customs
envelope with Israel (Israeli agricultural quotas, certain
high tariffs, and high taxes on luxury goods). The PA is


nonetheless trying to liberalize, he said.


7. (C) Fayyad said that his ideal would be a
non-discriminatory system with low tariffs across the board,
one that would be granted to trading partners "regardless of
reciprocity." In reference to the Paris Protocol, Fayyad
stated that he was "not keen on changing what exists." While
the Protocol is a much better a system than most people give
it credit for, he said, it is not being implemented as it
should be, and parts of it could be improved. Overall,
Fayyad claimed that the Protocol had served the PA well and
he could "live with it."

Abu-Libdeh: This is not a political issue
--------------


8. (C) Minister of National Economy Hasan Abu-Libdeh pointed
to the inclusion of WTO observership in PM Fayyad's two-year
plan for statehood, noting that the PA intended to use
observer status as an impetus for timely implementation of
reforms based on WTO provisions and increased market access.
He emphasized that the application is not an "academic
exercise," but rather is necessary to bolster the PA's
ability to use international standards as the basis for
institution building. We are "toddlers, maybe even infants"
in trade policy, he said, and "we need your help and the help
of other members."


9. (C) Abu-Libdeh said that the PA is building the
infrastructure of a state, including a trade regime and a
functioning economy that does not depend on donor assistance.
"Everyone agrees that some day there will be a Palestinian
state," he said. "The difference between Israelis and
Palestinians is the definition of 'some day.'" He asked USTR
to inform the GOI of the PA's intention to request a
working-level meeting with the GOI to discuss their bid for
WTO observer status. Note: Ministry officials subsequently
confirmed to EconChief February 25 that they were moving
forward to request working-level meetings with the GOI on WTO
"and other issues." End note.

Review of the PA's Trade Regime
--------------


10. (SBU) USTR representatives also met with the Ministry of
National Economy's (MoNE) WTO team for a full day to review
the PA's existing trade regime, clarify issues discussed in
the January PA-USTR telcon, and identify current trade policy
authorities and gaps in authority. The team included Hatem
Yousef, the PM's Advisor on Custom Reform and Taxes; Bashar
Abaza, PA Customs and Excise; Fuad Shubaki, PA Customs; Tareq
Abu-Liban, Ministry of Agriculture; Hazem Shunnar and
Mohammed Sayyed, Palestinian Standards Institute; Saeb Bamia,
Private Sector Coordination Council; Maha Sabya, Corporate
Registration; Ramadan Bdieh, WTO Center; Saad al-Khatib,
advisor to the Minister of National Economy; and Nahid
al-Qudsi, IPR enforcement, MoNE.


11. (C) The MoNE team laid out its current efforts to use
WTO provisions as the framework for institution-building and
a thorough revision of trade and commercial legislation, and
briefed on the "WTO Roadmap for Palestine," a copy of which
is available on the unclassified website
www.intelink.gov/communities/state/palecon. USTR
representatives and the MoNE team reviewed in detail the
questions that USTR had prepared (ref A) on importation,
exportation, customs, trade agreements, tariffs, taxation,
policy mechanisms, transparency, lawmaking, trading rights,
price controls, technical barriers to trade and sanitary and
phytosanitary, agriculture, export duties, services, and
intellectual property. A more detailed report on this review
will be provided by USTR septel.


12. (C) During the review, USTR representatives noted that
the PA appears to have the authority under the Paris Protocol
over a significant number of areas covered by WTO provisions,
such as internal distribution of goods, trade in services,
import licensing, export regulation, intellectual property
rights, and agriculture support, even if this authority is


not currently fully exercised. At the same time, they noted,
there are also other areas, principally in customs processing
of imports, tariffs, and other border formalities, where the
PA does not have full autonomous control. There are also
significant gaps in IPR protection enforcement and commercial
legislation. Authority in the area of standards and sanitary
measures is in the hands of the PA, but is exercised mainly
to enforce Israeli requirements on imports, as provided for
in the Paris Protocol.


13. (C) Klein stressed that WTO observership does not mandate
that an applicant for observer status be WTO-compliant, but
that it must have intent to initiate accession at some point.
USTR offered to ask U.S. experts to review draft PA
commercial legislation and provide comments. She also noted
that USTR would work with other USG agencies to ensure that
U.S. technical assistance supports PA reform efforts based on
WTO and to refine current programs, as necessary.

The Role of the Private Sector
--------------


14. (C) In a separate meeting with the heads of PA private
sector associations, Klein stressed the importance of
involving the private sector early in trade policy
decision-making and PA participation in WTO, since the
resulting reforms and tariff reductions would impact them
first and foremost. At their request, she outlined USG legal
requirements for trade policy coordination with the private
sector, Congress, and among agencies participating in the
Trade Policy Staff Committee (TPSC). She pointed out the
importance of communication with the PA concerning private
sector interests, in order to ensure effective use of trade
policy.


15. (C) Private sector representatives asked for USG
consideration of how technical assistance could be utilized
to build capacity among their organizations to use the WTO to
benefit their members. The MoNE reported that it had
established several coordination mechanisms when WTO observer
status was first approached in 2001, including a "National
Task Force for Economic Development," composed of public and
private sector representatives and a WTO resource center that
acts as a technical advisory team. While coordination
activities have stalled since then, Saeb Bamian, chair of the
Private Sector Coordination Council (composed of
representatives from chambers and industry associations)
noted that the Council could provide mechanisms for ongoing
private sector involvement as the PA developed its trade
regime.

Next Steps for the USG and PA
--------------


16. (C) Based on the results of the three days of
discussions, the USTR team stressed the importance of
re-focusing the PA's approach to WTO observership. They
suggested emphasizing that while the PA is not yet a state
nor a separate customs territory (with full autonomy over its
trade regime and the issues covered by WTO provisions),it is
recognized as a state in the making, it has significant trade
regime functionality, and it clearly intends to join the WTO
at some point. The PA was encouraged to consult with other
delegations in Geneva (not just missions in Ramallah and
Jerusalem) to build consensus for the application, dealing
frankly with current limitations in their trade regime and
emphasizing their efforts to use observer status to help
build the economy and expand the trade regime. She suggested
that the PA prepare a presentation for the consultations that
focused on economic reform and statebuilding and defused
concerns about political posturing. Klein also urged the PA
to focus on observer status, rather than on accession.


17. (C) Klein emphasized that, as a WTO member, Israel's
acquiescence to the request would be necessary for the PA to
become a WTO observer. Klein noted the GOI's concerns about
the PA's efforts to prohibit sale of goods produced in
Israeli settlements and the possible use of PA WTO observer
status as a political platform that would disrupt legitimate


WTO work. She urged the PA to follow up on its proposal to
meet with the GOI at a working level. She said that USTR
intended to help as much as possible, and would review the
information and the materials provided by the PA in these
discussions, work with other USG agencies to refine suggested
technical assistance, and seek TPSC confirmation of the USG
position and a plan to support it in Geneva.


18. (U) This cable has been cleared by USTR's Cecilia Klein.

RUBINSTEIN