TUNISIA: MINISTERS DISCUSS TRADE AND DEVELOPMENT

C O N F I D E N T I A L TUNIS 000114 SIPDIS E.O. 12958: DECL: 02/16/2020 TAGS: ECON ETRD PREL TS SUBJECT: TUNISIA: MINISTERS DISCUSS TRADE AND DEVELOPMENT WITH DAS SANDERSON Classified by Ambassador Gordon Gray for reasons 1.4 (b) and (d). ¶1. (C) Summary: During (separate) January 26 meetings with Commerce Minister Ridha Ben Mosbah and Development and International Cooperation Minister Mohamed Jouini, DAS Sanderson flagged the mid-February visit of a U.S. trade delegation and welcomed Tunisian interest in resuming TIFA discussions, but cautioned that a Free Trade Agreement (FTA) was unlikely in the foreseeable future. The Tunisians expressed interest in completing an Open Skies agreement by ¶2013. DAS Sanderson urged the GOT to respond sooner rather than later to the U.S. draft passed in September, as such talks can take significant time. The Tunisian ministers recounted efforts to modernize and diversify the economy and identified employment generation as their greatest challenge. The ministers expressed support in principle for regional economic integration, though they were wary of the political obstacles. End summary. ¶2. (SBU) Underscoring the U.S. interest in boosting trade with Tunisia, DAS Sanderson flagged for the Ministers the February 15 visit of at least six U.S. companies, including several Fortune 500 firms, in conjunction with a U.S. Department of Commerce-led Executive Trade Mission to Libya and Algeria. Ben Mosbah and Jouini each welcomed the visit. DAS Sanderson noted that there were currently 70 U.S. firms with a permanent presence in Tunisia, and hoped that this number would increase. Ben Mosbah and Jouini each seemed to accept this point, noting that Tunisia wanted to increase trade with the U.S. to "introduce equilibrium" among its foreign trading partners. Currently, Tunisia's trade with the EU massively outweighs its commerce with the U.S., they noted. ¶3. (C) Both Ben Mosbah and Jouini expressed interest in reviving bilateral Trade and Investment Framework Agreement (TIFA) talks, which lost momentum in early 2008. (Comment: The momentum loss was attributable to GOT ambivalence, from the Embassy's perspective. End comment.) Each Minister also candidly expressed hope that reviving the TIFA process could lay the groundwork for the opening of negotiations for an FTA. DAS Sanderson underlined that the atmosphere in Washington was not currently favorable toward FTAs with any country, but stressed that in any case much could be gained for both sides from advancing the TIFA process. ¶4. (C) DAS Sanderson also confirmed the U.S. looked forward to a Tunisian response on a draft Open Skies Agreement the Embassy passed the GOT in September. Ben Mosbah and Jouini affirmed that Tunisia hoped to complete an agreement by 2013, when Tunisair would take delivery of aircraft allowing for new routes to New York and Montreal. DAS Sanderson welcomed this interest, but cautioned that Open Skies negotiations can be time-intensive and urged the Tunisians not to wait too long to start work on them. ¶5. (SBU) Ben Mosbah told DAS Sanderson that Tunisia was making "enormous investments in the future," gradually leaning closer toward an "Anglo-Saxon business model," including a growing emphasis on equipping Tunisian youth with English skills as the country seeks further integration into the global economy. Jouini also emphasized Tunisia's efforts, which have already yielded many tangible successes, in pursuing structural transformation of its economy. During the 1990s, advocates of privatization within the GOT overcame significant domestic opposition to rationalize and scale down the government's command role in the economy. Thanks to their success in so doing, per capita revenues had more than doubled, and consumer purchasing power parity shot up markedly. "We created wealth," Jouini underlined. ¶6. (SBU) Jouini told DAS Sanderson that one of the GOT's main economic priorities for 2010 was to reform the country's incentive system for investment. The GOT has already established "one stop shops" for investors in each governorate. A company can be legally created in only 24 hours, one of the fastest turnarounds in the world, Jouini boasted. Tunisia has been favorably ranked in indices consulted by foreign investors, but hopes to improve further, Jouini asserted. The GOT will continue to emphasize in particular its offshore sector, taking advantage of Tunisia's educated, skilled, and competitively priced workforce and its physical proximity to European markets, Jouini stressed. Ben Mosbah conceded that an enduring challenge for Tunisia has been addressing the "dualities" in the economy. While Tunisia's "off shore sector" (processing and manufacturing for export) is thriving and attracting more investment all the time, the country's interior markets remain too walled off from global trade. ¶7. (C) Tunisia's greatest economic challenge by far is unemployment, each minister noted. "We must find every opportunity" to address this problem, Jouini emphasized. There is great pressure on the labor market - Tunisia is currently producing 60,000 university graduates every year, with a total need for 80,000 new jobs each year, he added. DAS Sanderson told each minister that promoting regional economic integration would go a long way toward growing the economies of Tunisia and the other states of North Africa and flagged Under Secretary Hormats's personal interest in pursuing this goal. Jouni and Ben Mosbah each agreed that regional economic integration was highly desirable, and mentioned that unemployment among university graduates was one of several challenges the Maghreb states shared. They saw political issues, particularly Algeria-Morocco tensions, as a massive obstacle, however. ¶8. (U) DAS Sanderson has cleared this message. GRAY