Cablegate: Maintaining the Momentum for a 2008 Tifa Council

VZCZCXYZ0002
PP RUEHWEB

DE RUEHTU #1521/01 3311139
ZNR UUUUU ZZH
P 271139Z NOV 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 4146
INFO RUCNMGH/MAGHREB COLLECTIVE PRIORITY

UNCLAS TUNIS 001521

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EEB (DIBBLE), NEA/MAG (HOPKINS AND HARRIS)
STATE PASS USTR (DONNELLY AND BURKHEAD) AND USAID (MCCLOUD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES),
AND CLDP (TEJTEL AND MCMANUS)
USDOC PASS USPTO (ADAMS, BROWN AND MARSHALL)
CASABLANCA FOR FCS (ORTIZ)
CAIRO FOR FINANCIAL ATTACHE (SEVERENS)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ETRD EINV ECON BEXP TS
SUBJECT: MAINTAINING THE MOMENTUM FOR A 2008 TIFA COUNCIL

REF: A. TUNIS 1506

B. STATE 153695
C. TUNIS 1368
D. TUNIS 1249
E. TUNIS 1136
F. TUNIS 959
G. TUNIS 105

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Summary
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1. (U) After a recent series of government and private
business delegations that have traveled between Tunis and
Washington, it is time for a Trade and Investment Framework
Agreement (TIFA) Council in early 2008. In order to be most
effective, we believe such a meeting should be held in
Tunisia, and that the four informal working groups agreed to
by USTR and the GOT should begin informal discussions to set
an agenda. From the American side, the most useful topics to
address include services such as franchising and aviation,
restrictions on foreign firms employing expatriates, and
pharmaceutical company concerns with intellectual property
rights (IPR). Rather than focusing on the end goal of an
FTA, we suggest that the existing four working groups be used
as platform to discuss the most pressing USG and GOT
concerns. Emphasizing dialogue is also critical to avoiding
Tunisian perceptions that an FTA is "one-size-fits-all" and
that the United States does not consider Tunisia's specific
concerns. End Summary.

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Moving Forward
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2. (U) Both the USG and GOT are in agreement: it is time for
a TIFA Council. September's interagency economic delegation
visit (Ref D) led by State EEB PDAS Liz Dibble kicked off the
discussions and highlighted USG interest in the bilateral
economic relationship. Minister of Development and
International Cooperation (MDIC) Mohamed Nouri Jouini's
October visit to DC (Ref B) as well as the Tunisian-American
Chamber of Commerce (TACC) Door Knock visit both signal
renewed Tunisian -- government and private sector -- interest
in strengthening the bilateral economic relationship. The
November US Chamber of Commerce - Africa Society delegation
visit to Tunisia (Ref A) has also helped to generate
increased private sector interest among US businesses.

3. (SBU) We believe that a GOT-hosted Council would bring the
greatest possibility for a productive meeting. It would
encourage more robust Tunisian participation in the process,
which will be critical in ensuring follow-up and follow-on.
However, we understand that Minister Jouini has aQustanding
invitation to visit the United States in January, which might
make a Washington-based TIFA Council preferable. Now that
Minister Jouini has agreed to hold a TIFA Council meeting in
early 2008, it is time to set a date. As USTR has already
named heads for the four working groups, we suggest that USTR
and MDIC working groups begin informal discussions to set an
agenda. The Embassy is actively working with MDIC to prepare
them for substantive exchanges. As the four working groups
begin to set an agenda for the Council, we suggest the
following topics, which not only represent priority issues,
but also areas in which we have the best chance for real
progress.

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Services
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4. (SBU) Franchising: GOT restrictions on franchising
continue to act as a barrier to further US trade and
investment. Minister Jouini told the Ambassador that Tunisia
is prepared to permit franchising (Ref G) and the recent
attendance of a Ministry of Commerce official and a Tunis
Chamber of Commerce representative to a US-sponsored
franchising conference in Cairo indicates GOT readiness to
move forward on this issue. We believe that the time is
right for substantive discussion on franchising.

5. (SBU) Open Skies: During an August 20 meeting with CODEL
Costello, Minister of Transportation Abderrahim Zouari stated

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Investment
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6. (SBU) Expat Employees: The restiction limiting the number
of expatriates that my be employed by a foreign company
continues to e a major concern for US investors. Although
currently the limit is four expatriate employees, some
companies have been able to negotiate exceptions to the rule.
The case-by-case nature of these exceptions to the
expatriate restriction is unpredictable; a clear and
consistent policy allowing greater foreign managerial
participation would represent a vast improvement for American
investors.

7. (SBU) Real Estate: Although foreign companies no longer
require prior GOT authorization for purchasing property in
tourist or industrial zones, the GOT continues to require
authorization for selling the very same property. Exxonmobil
has been waiting for such authorization for over four years,
demonstrating that this formality can be a significant
barrier to investment. The GOT has recently granted
exceptions to this restriction, but American investors would
benefit from an across-the-board exception to this
legislation.

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IPR
---

8. (U) Although the GOT has taken positive steps to address
IPR protection, more work remains to be done to prevent the
retail sale of pirated optical disks and protect US
pharmaceutical products.

-- Correlation: In January 2007, the GOT suspended the
"correlation system" which excluded drugs manufactured abroad
in favor of locally produced generics; however, drugs placed
on the list of correlated drugs prior to the suspension
continue to be excluded from the marketplace. Removing US
pharmaceutical products from this exclusionary list is our
top IPR priority.

-- Data Exclusivity: In addition, pharmaceutical companies
have ongoing concerns that the GOT is not TRIPS-compliant on
data exclusivity. The GOT asserts it is TRIPS-compliant, and
Minister Jouini has indicated that if, in fact, the GOT is
not compliant it will take steps to address the problem. The
TIFA Council presents an opportunity to clarify whether TRIPS
compliance is at issue.

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Market Access
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9. (SBU) Tariff Reductions: Tariff reductions will be
critical for many American companies to remain competitive
after the Association Agreement with the European Union goes
into effect January 1, 2008. Since 1996 the Association
Agreement has gradually reduced tariffs on many EU imports
and will completely eliminate tariffs on these goods
beginning January 1. High tariffs, in some cases as high as
125 percent, constitute a significant disadvantage for many
American firms already doing business in Tunisia and price
many American exports out of the market.

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Potential Pitfalls and Tactics
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10. (SBU) We provide the following examples of potential

pitfalls and suggested tactics to avoid GOT sensitivities and
get discussions started on the right foot.

-- TIFA as Dialogue not FTA Negotiation: Although the GOT has
stated its desire for an eventual Free Trade Agreement with
the United States, it is clear that the the time is not right
on either side to enter into FTA negotiations. Rather than
focusing on the end goal of an FTA, we suggest that the
existing four working groups be used as platform to discuss
the most pressing USG and GOT concerns. Even though many of
the topics for discussion would be part of any eventual FTA
agreement, taking the focus off of the FTA will help.

-- Focusing on Tunisia and Avoiding Comparisons: The GOT is
quick to remind USG interlocutors that Tunisia is unique and
that a "one-size-fits-all" approach will not work. While the
very nature of US FTAs has created this perception,
understanding this sensitivity and avoiding comparisons can
help to allay this concern. Comparisons between Tunisia and
countries such as Morocco and Jordan are often misinterpreted
as signifying that the USG does not recognize the distinct
and specific differences of Tunisia.

-- Stressing Consultation Instead of Obligation: Following
the 2005 Council, the presentation of USG papers outlining
the requirements of an FTA became a source of
misunderstanding on both sides and proved to be an
ineffective tool to spur further discussion. The GOT did not
appreciate use of "obligation" as it appeared one-sided and
it also reinforced the "one-size-fits-all" misperception.
While USG intentions were straightforward and the
misunderstanding inadvertent, the working papers illustrate
GOT sensitivity and suggest we should adopt a new approach.

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The Bottom Line
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11. (SBU) Liberalization of the Tunisian economy is in
Tunisia's best interest and will help attract the trade and
investment necessary for the economy's continued growth.
Although the United States can encourage increased US trade
and investment, it is ultimately US companies who will make
their own decisions about the the attractiveness of the
Tunisian market. By taking concrete steps to improve the
business climate for US investors, the GOT will send an
important signal that Tunisia is open for business.
Convening a TIFA Council in early 2008 will encourage the GOT
to take the necessary next steps.
GODEC

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