Cablegate: Tifa Council - Austr Donnelly's Ministerial

DE RUEHTU #0287/01 0791040
P 191040Z MAR 08





E.O. 12958: N/A

B. 07 TUNIS 1521


1. (SBU) On the margins of the March 10-11 US-Tunisia Trade
and Investment Framework Agreement (TIFA) Council meeting,
Assistant US Trade Representative for Europe and the Middle
East (AUSTR) Shaun Donnelly met with Prime Minister Mohamed
Ghannouchi, Minister of Development and International
Cooperation Mohamed Nouri Jouini, and Minister of Commerce
Ridha Touiti. AUSTR Donnelly advocated for several US
companies with pending project/export proposals before the
GOT. He also raised the proposed Open Skies agreement, as
well as, pharmaceutical issues, such as patent linkage, data
exclusivity, and correlated pharmaceutical product appeals.
The TIFA delegation also discussed the Generalized System of
Preference Program (GSP) with the business community and the
Center for the Promotion of Exports (CEPEX).

2. (SBU) In all of his meetings, AUSTR Donnelly explained
President Bush's interest in the region and ultimate goal of
establishing a Middle East Free Trade Area (MEFTA) by 2013.
While emphasizing that this TIFA Council meeting was not an
FTA negotiation, AUSTR Donnelly expressed his hope that both
sides would use the meeting to explore and develop concrete
near-term steps to increase bilateral trade and investment
and to remove existing barriers. AUSTR Donnelly argued that
by liberalizing the services sector, particularly in the
areas of ICT, Tunisia would attract much more foreign and
domestic investment.

3. (SBU) Themes from Tunisian officials included: the
historical ties between the United States and Tunisia; that
Tunisia will continue its reform strategy, but that the
reforms need to be implemented gradually so that Tunisians
and Tunisia's economy can build the capacity to absorb the
changes; that the USAID scholarship program be re-instated;
the economic and social progress that Tunisia has achieved;
the GOT's desire to diversify its economic partners beyond
the EU; requests for more cooperative technical assistance
programs to build capacity and to promote Tunisian exports to
the US; and the desire for partnerships for Tunisian
companies with US businesses in GOT targeted high value-added
sectors. End Summary.

Prime Minister Ghannouchi

4. (SBU) Ghannouchi began with a short soliloquy on the
long-standing US-Tunisian friendship and how grateful Tunisia
is for our pre- and post-independence support. AUSTR
Donnelly explained the general framework of the TIFA Council
proceedings and complimented the Minister on the economic
progress that he has observed since he last was in Tunisia 16
years ago. Ghannouchi expressed his pride and satisfaction
with Tunisia's reform program. He said that the GOT would
continue with its fundamental reforms to integrate Tunisia
into the global economy and to upgrade the living standards
of all Tunisians. Tunisia wants to reinforce its economic
and commercial ties with the United States but in a way that
benefits both countries. Ghannouchi identified three major
pillars for US-Tunisian economic cooperation:

A) Re-instatement of the USAID funded student post-graduate
program that was suspended in 1992. Ghannouchi opined that
this program is a great investment that will reap benefits
for both countries by producing "American products" who may
later play a major role in disseminating the US business
culture in Tunisia;

B) Provide greater predictability under the GSP program by
guaranteeing that Tunisian products would benefit from

TUNIS 00000287 002 OF 004

duty-free treatment for a five to ten year period.
Ghannouchi indicated that longer eligibility would raise the
visibility of the US market and would stimulate Tunisian
exporters to consider targeting this market.

C) Encourage US companies to invest in Tunisia, mainly those
with added value. Ghannouchi specifically said that the GOT
was looking for investment projects that would generate jobs,
innovation, and new technology transfer, such as in the ICT
and telecommunications fields.

5. (SBU) Ambassador Godec offered to discuss with Washington
the prospect of instituting an education program similar to
the former USAID program. On GSP, Donnelly explained that
Tunisia already benefits from preferential treatment of
several thousand products under the GSP program, but
exporters were not taking full advantage of it. Ambassador
Godec offered to work with the GOT to promote and raise the
visibility of the GSP program throughout Tunisia.

MDIC Minister Jouini

6. (SBU) Jouini stated that the main objectives for this
TIFA Council were for both sides to share information and
acquire a clearer understanding of the legal framework and
provisions under which each party operates, to find areas of
convergence, and to explore areas where we can advance the
trade and investment relationship. He used the EU-Tunisia
Association Agreement negotiations as a good example of a
negotiation process that works for Tunisia. He said that
Tunisia has signed an action plan for the "Neighborhood
Policy" with the aim of harmonizing Tunisian legislation with
that of the EU and the ultimate goal of full integration into
the global economy, with the long term goal of Tunisian goods
receiving the same treatment as EU goods (under the rules of

7. (SBU) AUSTR Donnelly emphasized that the US approach to
Free Trade Agreements (FTA) is fundamentally different from
that of the EU. US FTAs are comprehensive agreements and
normally require substantial legislative and regulatory
reform before an FTA can be reached. He suggested that the
GOT review the text of the Morocco-US FTA while they continue
their trade negotiations with the EU and as they consider
changes to Tunisia's legislative and regulatory regime.
Jouini responded that the GOT would prefer that trade and
investment discussions between the United States and Tunisia
should proceed gradually. AUSTR Donnelly told Jouini that he
views our TIFA discussions as a way in which the United
States and Tunisia can meet, talk, and establish building
blocks to advance our bilateral economic relationship.

Commerce Minister Touiti

8. (SBU) Minister Touiti said that he is proud of the
quality of Tunisian products and of Tunisia's efforts to
improve its investment and regulatory environment, including
Intellectual Property Rights (IPR) enforcement. He said that
Tunisia is working hard to fully comply with European and
hence international standards. He said that Tunisia hopes to
see increased trade between the United States and Tunisia
through well-targeted product marketing. Touiti would like
to see greater support and cooperation between the United
States and Tunisia in the areas of technical assistance,
exchange of information about trade opportunities, and the
exchange of experts for short and long term assignments
(i.e., something akin to the Japanese International
Cooperation Agency (JICA)).

9. (SBU) AUSTR Donnelly used this meeting to seek GOT
cooperation in reaching a successful conclusion to the WTO
Doha Round negotiations. He indicated that while senior

TUNIS 00000287 003 OF 004

officials in Geneva are working hard toward achieving a
breakthrough on a "modalities" package, they need to narrow
gaps and issues over the short term so that ministers can
make decisions. The United States is looking for a
"modalities" package that sets the formula and frameworks for
agriculture, non-agricultural market access, and services
that will move these negotiations into the final phase. He
added that the choreography has changed for the Doha Round
with countries negotiating as groups. He argued that
emerging markets such as India, Brazil, China, Argentina,
need to make a contribution and should not continue to claim
the same special exceptions that are claimed by
less-developed countries. He encouraged Tunisia to work
actively to promote constructive solutions and to pursue its
own interests in the Doha Development Agenda, and not blindly
follow the Advanced Developing Countries group or other
groups whose agenda is not really in line with Tunisia's


10. (SBU) AUSTR Donnelly and Ambassador Godec raised several
outstanding advocacy issues with all GOT officials:

Open Skies - Both Minister Jouini and Prime Minister
Ghannouchi said that the GOT was looking into the possibility
of a bilateral Open Skies agreement with the United States
and raised the possibility that an agreement could be
concluded next year.

Franchises - During the meeting with Minister Jouini, AUSTR
Donnelly asked where Tunisia stood with regards to opening up
the Tunisian market to franchises, noting that liberalization
of the services sector would attract greater US investment to
Tunisia. Jouini responded that franchises are not totally
banned, but that authorizations for franchises have to be put
into a larger framework agreement and have to take social
factors into consideration. He said that some of Tunisia's
recent agreements with the Middle Eastern investors permit
franchises. He also said that the tourism sector is open,
and that franchises for hotels and touristic restaurants
would be welcome. The retail sector is not yet open to
franchises, because Tunisia is currently embarked on a plan
to upgrade this sector. He added that Tunisia is cooperating
with the EU to integrate the retail sector into the global
economy. Jouini stated that Tunisia is studying franchise
legislation and intends to send a proposal to the Parliament
in a few months. (Note: see septel for working group
discussion. End Note.)

Boeing - The GOT officials responded that Boeing's bid for
the Tunis Air fleet replenishment will be given due
consideration and gave their assurances that the process will
be open and transparent.

Cisco - Officials said the GOT is aware of and considering
Cisco's E-Government public private partnership (PPP)
proposal. The GOT is happy with Cisco's current investment
in Tunisia and favorably disposed toward Cisco. (Note:
Econ/Commercial Officer has relayed this information to Cisco
representatives in Tunisia and encouraged them to approach
the MDIC and the Ministry of Communications to follow-up on
their proposal. End Note.)

SemGroup - GOT officials said that they are aware of the
SemEuro (SemGroup subsidiary) storage terminal proposal.
Prime Minister Ghannouchi's response to this issue was that
the Skhira region (proposed site for SemEuro storage
terminal) was "very interesting for the GOT, and that there
were already several projects planned in that area." He went
on to say that the GOT was studying SemEuro's proposal. He
said, however, that a decision is unlikely in 2008. Jouini
said that he believed that the hold-up on this project was a

TUNIS 00000287 004 OF 004

fiscal issue - that SemEuro did not want to pay taxes.
(Note: Before this project stalled, SemEuro had reached an
agreement with the GOT to sign a special convention which
would require them to pay taxes in accordance with the
US-Tunisia Bilateral Investment Treaty. Jouini seemed to be
unaware of this agreement. During the TIFA investment
working group session, the GOT lead for this group asked
whether SemEuro would consider locating their storage
terminal project elsewhere in Tunisia. Econ/CommercialOff
responded that Post would contact SemEuro and pose this
question to them, but that Post did not believe that SemEuro
was tied to the Skhira location. End Note.)

Coca-Cola - The GOT gave what has become a standard reply to
expressed concerns about the carbonated beverage tax: The
excise tax on carbonated beverages is not discriminatory, as
it applies to all such products and not just to Coca-Cola.
Officials also pointed out that the consumer pays this tax.
They argued that the tax in no way prevents Coca-Cola from
upgrading their bottling and distribution facilities.

Crown Can - In response to concerns about the GOT's limit on
the number of expatriate employees, officials made clear that
Tunisia has an abundance of highly educated, capable citizens
that are looking for employment. They went on to explain
that the GOT has always worked with individual companies such
as Crown Can to meet their specific expatriate requirements.


11. (SBU) Throughout all of AUSTR Donnelly's meetings with
GOT interlocutors, there was a general excitement about the
TIFA Council meeting and genuine interest in advancing trade
and investment between Tunisia and the United States. It has
also become clear to us and to our interlocutors that the
fact that Tunisia is a GSP beneficiary country, eligible for
duty free treatment on many of its products, is not widely
known. Post will conduct additional outreach to local
business entities to raise the visibility of the GSP program,
including possibly arranging a workshop with a GSP expert.
These meetings also confirmed the reports that recent
investment agreements reached with several Gulf countries
permit retail franchises in new projects in Tunisia. End

12. (U) AUSTR Donnelly has cleared this cable.

Please visit Embassy Tunis' Classified Website at: fm

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