Cablegate: Uaeg Gives Ustr Zoellick High-Level Commitment To

Diana T Fritz 02/05/2007 04:54:20 PM From DB/Inbox: Search Results






DE RUEHAD #3834/01 3001313
P 261313Z OCT 04





E.O. 12958: DECL

1. (SBU) Summary: UAEG leaders assured USTR Ambassador
Zoellick that the UAE remained interested in negotiating an
FTA with the U.S. They also assured him that the UAEG was
taking steps to end implementation of the secondary and
tertiary aspects of the Arab League boycott and would
ensure that the revised labor laws would be ILO compliant.
They said that they understood the USG's requirement for
national treatment for U.S. investors, but indicated that
they would be looking for a short transition period for
existing agency relationships. Finally, they officially
informed Ambassador Zoellick that MinState for Finance Dr.
Mohammed Khalfan Khirbash would be the point person on any
FTA negotiations. End Summary.

2. (U) On October 13, Ambassador Zoellick met in Abu Dhabi
with Deputy Prime Minister/Minister of State for Foreign
Affairs Sheikh Hamdan bin Zayed Al-Nahyan (HBZ); Minister
of Economy and Commerce, Sheikh Fahim Al-Qasimi; Abu Dhabi
Deputy Crown Prince, Sheikh Mohammed bin Zayed Al-Nahyan
(MBZ); Chairman of the Abu Dhabi Department of Economy,
Sheikh Hamed bin Zayed; and in Dubai with Minister of
Finance, Sheikh Hamdan bin Rashed Al-Maktoum (HBR);
Minister of State for Finance, Dr. Mohammed Khalfan bin
Khirbash; and U.S. and Emirati private sector
representatives. Ambassador Zoellick also visited the port
of Jebel Ali and conducted press interviews.

3. (SBU) During his meetings, Ambassador Zoellick
emphasized that the U.S. sought high quality, "state of the
art" FTAs. He stated that the U.S. preference was to
negotiate FTAs with reform leaders, both as a way of
recognizing their reforms and as a way to provide an
example that would encourage other countries to raise their
standards. Ambassador Zoellick's UAEG interlocutors agreed
with this approach and stressed that the UAE was committed
to economic reform and to a FTA with the U.S. Sheikh
Mohammed bin Zayed, for example, said that the UAE viewed
itself as a positive example for the region and believed
that a U.S.-UAE FTA would have regional benefits. He wryly
noted that "we (the UAE) get jealous when we see another
country signing an FTA with you." MinEconomy Al-Qasimi
added that at the October 12 GCC Economic Ministers
meeting, all but Saudi Arabia favored moving forward with
bilateral trade negotiations with the U.S. rather than
negotiating a multilateral GCC agreement. He noted that
he, personally, favored ways of improving regional
integration, but that if any country could not meet the
high standards required in a FTA, other countries (i.e.,
the UAE) should move forward on their own (and encourage
the others to catch up).

4. (SBU) Ambassador Zoellick told his interlocutors that he
was very impressed with the progress made in the TIFA
Council discussions with the UAE. He outlined in general
terms the requirements of our FTAs, including complete
coverage on goods and services, customs, environment, etc.
Ambassador Zoellick specifically highlighted areas where we
have concerns including the Arab League Boycott, and
investment issues (Companies and Agencies laws, and
restrictions in banking and insurance), and labor. He
noted the generally good IPR environment in the UAE, but
asked to work more closely together on dealing with
counterfeit products.

5. (U) Ambassador Zoellick also provided the UAE a possible
timeline if both parties decided to move to FTA
negotiations. He explained that he would need to formally
notify Congress of the Administration's intent to negotiate
with the UAE. After this notification, there would be a
mandatory 90-day waiting period before negotiations could
start. Depending on the complexity of the negotiations,
they could take about a year. There would then be another
90-day period before the USG could sign the agreement and
send it to Congress for an "up-or-down" vote. He said
that, if the decision was made to move forward, he thought
negotiations could start in early 2005 and be presented to
Congress in 2006. He stressed that the UAE needed to make
its case, both with the USG and with the business
community, for an FTA.

6. (SBU) The UAEG leadership stressed eagerness to move
forward with FTA negotiations as quickly as possible and
keen interest in resolving issues. Sheikh Hamdan bin
Zayed, who was clearly well briefed, without prompting
raised the key areas of concern for the U.S. and stressed
that the UAE was coordinating the efforts of all relevant
federal and local entities to ensure that the UAE took the
necessary steps for an FTA. He added that, due to his
success leading the UAE TIFA team, MinState for Finance Dr.
Mohammed Khalfan bin Khirbash would be the UAE's point
person for the FTA negotiations, and that MinEcon Sheikh
Fahim Al-Qasimi would also play a key role. In Dubai,
Sheikh Hamdan bin Rashid Al-Maktoum indicated that there
had been an internal debate over some of the more sensitive
issues under discussion, particularly labor issues and the
agency law, but that all parties were fully committed to
moving forward to an FTA with the U.S.

Arab League Boycott

7. (SBU) In his meeting with Sheikh Hamdan bin Zayed and
Sheikh Fahim Al-Qasimi and his meeting with Sheikh Hamdan
bin Rashed, Ambassador Zoellick stated that he understood
that the UAE had renounced the secondary and tertiary
aspects of the Arab League boycott against Israel.
However, noting that prohibited boycott language continues
to appear in contracts, he underscored that these boycott
requests would have to cease for an FTA to move forward.
Sheikh Hamdan bin Zayed stressed that the UAEG would adhere
to its commitments and would not/not implement the
secondary and tertiary aspects of the boycott, and that the
UAE was committed to resolving the issue, was already
notifying companies that they needed to modify their
contracts, and that the UAEG would be following-up to
ensure this happens. Sheikh Al-Qasimi, whose Commerce
Ministry implements the boycott, noted that many UAE
companies used old forms, but promised that "this issue
will not come up again. Instructions have been prepared."
During Ambassador Zoellick's meeting with U.S. businesses,
one company complained that it still faced boycott
language. The company representative noted that, although
the company was able to remove the offending language from
tender documents, it was a long process and sometimes the
company lost business because of the time required to fix
the forms. (Note: post will continue to follow up with the
UAEG and U.S. businesses to be sure that this problem is
resolved quickly.)

Agencies and Companies Laws

8. (SBU) Ambassador Zoellick highlighted USG concerns about
UAE legislation such as the Agencies and Companies laws
that limit U.S. ownership of businesses in the UAE outside
the free zones and discourage foreign investment. His
comments found a ready audience with U.S. businesses, which
highlighted this as a concern and specifically noted the
costs involved in "getting out" of a franchising
relationship. Both Sheikh Hamdan bin Zayed and Hamdan bin
Rashed noted that this was a sensitive area for the UAE,
but recognized that ultimately any solution would have to
provide U.S. investors with national treatment. Sheikh
Hamdan bin Zayed stressed that all new investors under an
FTA would receive national treatment, but noted that some
of the established local agents would be opposed to change
and noted that the UAE would be seeking a short transition
period (until 2006) for existing agency agreements. One
UAE businessman also implied that this was a sensitive area
for the UAE, when he urged the U.S. not to take "a cookie
cutter approach" to the FTA.


9. (SBU) In all of his meetings with UAE leaders,
Ambassador Zoellick stressed that the USG requires its FTA
partners to enforce their own labor laws, but also expects
that these laws will be consistent with international
standards, as defined by the ILO. He explained that the
USG understood the UAE's demographic and security concerns
and urged UAE leaders to work with the USG and the ILO on
developing labor laws and labor union laws that met UAE
security concerns and ILO standards. There was no intent
to use labor and environmental concerns as barriers to
trade; negotiations over these issues would thus take the
form of a "problem-solving exercise." Sheikh Hamdan bin
Zayed and Sheikh Mohamed bin Zayed both said that the UAEG
understood the requirement and would meet the ILO's
concerns, and Sheikh Hamdan bin Zayed stressed "there will
be unions." MinState Khirbash also stated that the UAE's
labor laws would be ILO compliant. Hamdan bin Rashid in
noted that any new approach on labor would need to take
into account the fact that many of the laborers in the UAE
were here only temporarily, for a year or two, and would
soon be returning to their home countries. During a brief
sidebar discussion, MFA U/S Abdullah Rashid Al-Noaimi
explained to AUSTR Cathy Novelli and Ambassador his
concerns about passing the text of the draft law to the
USG, before the cabinet had a chance to review it. He
committed to sharing all relevant information verbally with
the USG, and that they would take U.S. concerns into
account. (Note: Post will work with the UAEG, the
Department and USTR to put the relevant experts together.)

Jebel Ali Port and Free Zone

10. (U) Ambassador Zoellick also met with Sultan bin
Sulayem, the Chair of the Dubai Ports, Customs, and Free
Zone Corporation at the Jebel Ali port. Bin Sulayem noted
that the Dubai's two ports (Jebel Ali and Port Rashid) were
moving 6.2 million TEU and 14,000 ships a year between
them(Port Rashid 1.2 Million TEU). In addition, Dubai
ports moved 400,000 new and used cars . The port of Jebel
Ali employed 8,400 people and the attached free zone had
3,800 companies based in it, almost 200 of them American.

11. (U) Bin Sulayem explained that Dubai was seeing China
become a much stronger trading partner, adding that it had
taken over from Japan as the number one partner. (Note:
this presumably excludes oil, which ships out of Abu Dhabi,
end note.) Other major partners included Japan, the UK and
the U.S. (number 5). Bin Sulayem said Dubai ports viewed
regional competition as a good thing, especially since
transportation capacity was not growing as quickly as
global trade flows. He cited Dubai's plans to increase
port capacity to 20 million TEU by 2020.


12. (SBU) This was a very successful visit on in all
respects. Ambassador Zoellick clearly explained the
requirements for an FTA and laid out concerns that the UAE
will need to address. For their part, UAE leaders welcomed
his message and undertook to resolve problems in a
positive, cooperative spirit. They also reiterated -- at a
political level -- the UAEG's interest in negotiating an
FTA with the USG and their willingness to address the
concerns raised by Ambassador Zoellick. End Comment.

This cable has been cleared by Ambassador Zoellick's party.


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