Cablegate: Ustr Kirk Visit Highlights Trade Opportunities

VZCZCXRO4063
RR RUEHROV
DE RUEHDS #1977/01 2291013
ZNR UUUUU ZZH
R 171013Z AUG 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 5873
INFO RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 03 ADDIS ABABA 001977

SIPDIS
SENSITIVE

DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA - DWINSTEAD
DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND BARBARA
GRYNIEWWICZ
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN

E.O. 12958: N/A
TAGS: BEXP ETRD ECON EFIN EINV PREL OVIP ET
SUBJECT: USTR KIRK VISIT HIGHLIGHTS TRADE OPPORTUNITIES

ADDIS ABAB 00001977 001.2 OF 003

SENSITIVE BUT UNCLASSIFIED; BUSINESS PROPREITARY INFORMATION; NOT
FOR INTERNET DISTRIBUTION

SUMMARY
-------

1. (SBU) U.S. Trade Representative (USTR) Ambassador Ron Kirk and
his delegation visited Ethiopia from August 6-9 to highlight trade
opportunities with the United States. During his meeting with Prime
Minister Meles Zenawi, Ambassador Kirk praised Ethiopia's success
under the U.S. African Growth and Opportunity Act (AGOA), but stated
that there is significant potential for additional growth.
Ambassador Kirk urged Meles to continue moving forward with
Ethiopia's World Trade Organization (WTO) accession process and
liberalize the telecommunications and financial services sectors in
order to reduce the cost of doing business in Ethiopia and increase
global competitiveness. Meles admitted that Ethiopia was working to
improve the weak telecommunications infrastructure and acknowledged
there would be some room for liberalization within five years.
Regarding the financial sector, Meles said some openings have
occurred already, but that further liberalization "will be an
issue." Meles echoed Ambassador Kirk's desire to move to the next
stage of WTO accession negotiations and said he hoped to start
bilateral talks soon. Ambassador Kirk visited USAID-supported
factories--Almeda Textile and Peacock Shoe--both of which are AGOA
beneficiaries. He also delivered the keynote address to over 80
attendees at a business luncheon and led a press roundtable with 20
local and international journalists. His visit received extensive
positive local media coverage, including print and television. END
SUMMARY.

PM MELES ON TRADE, TELECOM, AND FINANCIAL SERVICES
--------------------------------------------- -----

2. (SBU) USTR Ambassador Ron Kirk and his delegation met with Prime
Minister Meles Zenawi to discuss trade and investment issues.
Ambassador Kirk opened the meeting stating that Ethiopia has
experienced success under AGOA, but that there is room for
additional growth. He also urged Meles to liberalize the
telecommunications and financial services sectors while detailing
the challenges businesses face with poor phone and internet
connectivity. Meles responded by stating that Ethiopia values the
AGOA program and hopes this program will continue. Meles admitted
Ethiopia's telecommunications infrastructure is weak and said that
five years down the line there will be "some room for
telecommunications liberalization." Ethiopia is currently working
on improving the infrastructure and offering value-added
telecommunications services from the private sector. Regarding the
financial services sector, Meles stated there has been some
liberalization, but indicated that further liberalization "will be
an issue" as Ethiopia moves forward with WTO accession negotiations.
Meles cited World Bank Chief Economist Justin Lin's comments
included in a recent Economist magazine article as support for his
argument that "early liberalization is not necessarily the way to
go" with financial services.

3. (SBU) In terms of Ethiopia's WTO accession, Ambassador Kirk
expressed the need to move the process forward to the bilateral
negotiations phase. Meles stated that Ethiopia is now moving to
that stage and he hoped to start the talks soon. He added that
there is no future for Ethiopia without being a part of global
integration, but cautioned that others would need to be
understanding regarding the pace of this integration.

4. (SBU) Other topics of discussion included Ethiopia's foreign
exchange crisis and recent problems in the coffee industry. Meles
explained the origins of Ethiopia's foreign exchange crisis starting
with high world oil and fertilizer prices in 2008, which drove up
inflation rates. Meles said Ethiopia has been devaluing the
Ethiopian Birr over time in coordination with the International
Monetary Fund (IMF) and should be receiving an influx of foreign
currency from the IMF within two months. Meles disassociated the
decline in coffee exports from the foreign exchange crisis, saying
the coffee sector issues were a "different problem." (Note: In
early 2009, the Ethiopian Government seized coffee stocks from major
exporters and revoked their export licenses claiming they were
"hoarding" coffee since the global price of coffee was historically

ADDIS ABAB 00001977 002.2 OF 003

low. End note.) Meles blamed the coffee sector problems on
companies having to operate with more transparency and trading
through the newly-established Ethiopian Commodity Exchange (ECX).
He affirmed that Ethiopia has now "sorted out the problem" and that
coffee exports are back on track.

5. (U) Ambassador Kirk closed the meeting by urging Ethiopia to
diversify its commercial interests by not only focusing on export
sectors, but producing for the domestic market as well. He went on
to state that the African continent has the potential to be seen by
the global business community like the Chinese and Indian markets
and that East Africa will not be dynamic without Ethiopia's leading
role. Meles said he was "very pleased" with the Ethiopian diaspora
and other Americans who are investing and providing assistance in
Ethiopia right now, but welcomed additional assistance to build
Ethiopia's capacity to manufacture goods at competitive prices.
Ambassador Kirk told Meles that the United States would be happy to
play a role in this type of assistance.

AGOA IN ACTION: TEXTILE AND SHOE FACTORY VISITS
--------------------------------------------- --

6. (SBU) Ambassador Kirk visited two AGOA beneficiaries during his
visit: Almeda Textile Factory outside of Axum in northern Ethiopia
and Peacock Shoe Factory in Addis Ababa. USAID provides support to
the Almeda Factory under their AGOA+ program as they export garments
to the U.S. market. Almeda is one of the few vertically-integrated
textile to garment factories in Ethiopia, employing over 3,000
employees. The factory exported over USD 150,000 in sports attire
and uniform aprons to the United States in the past year, but
current orders from new U.S. buyers should significantly increase
these figures. USAID assists the Peacock Shoe Factory under their
Fintrac partner program and the factory just shipped its first
sample lot of men's dress shoes worth USD 110,000 to the U.S.
market. Peacock Shoe Factory maintains nearly 400 employees.

EXTENSIVE PUBLIC OUTREACH
-------------------------

7. (U) The U.S. Chamber of Commerce and the newly-formed American
Chamber of Commerce (AmCham) Ethiopia hosted a business luncheon in
honor of Ambassador Kirk. He delivered the keynote address to over
80 attendees from both the public and private sectors. Ambassador
Kirk echoed themes from President Obama's recent speech in Ghana
stating that change must come from within Africa. He encouraged
Ethiopia to take full advantage of the U.S. trade preference
programs noting that Africa currently only exports about 60 products
of the over 6,500 products eligible for duty-free access into the
United States under AGOA. Ambassador Kirk informed the crowd that
the U.S. can assist with trade capacity issues and that it welcomed
Ethiopia's continued progress towards WTO accession. He closed his
remarks stating that Ethiopia's economic reforms--especially in
terms of the telecommunications and financial sectors--were key to
increased trade and economic prosperity.

8. (U) Ambassador Kirk also led a press roundtable of 20
international and local press members and gave brief television
interviews with state-owned ETV at the Prime Minister's Office and
at the Peacock Shoe Factory. His visit received extensive positive
coverage in local English and Amharic language newspapers as a
result of these press events. Most local coverage focused on his
message of Ethiopia's status as key U.S. trading partner in Africa;
Ethiopia's success, challenges, and potential under AGOA; and the
U.S. interest in moving the WTO accession process forward. The
Ambassador's clear public message of the need to liberalize the
telecommunications and financial service sectors in order to
increase U.S. investment in Ethiopia received particular attention
and provides helpful top-cover for other stakeholders to press on
these issues.

DELEGATION DETAILS
------------------

9. (SBU) Ambassador Kirk's delegation of ten people arrived in Addis
Ababa for its August 6-9 visit straight from the annual AGOA Forum
in Nairobi, Kenya. The delegation included the Deputy USTR
Ambassador Demetrios Marantis, Assistant USTR for Africa Florizelle

ADDIS ABAB 00001977 003.2 OF 003

Liser, Assistant USTR for Public and Media Affairs Carol Guthrie,
USTR Director for African Affairs Patrick Coleman, U.S. House Ways
and Means Committee Majority and Minority Trade Counsels Alexander
Perkins and Angela Ellard, and U.S. Chamber of Commerce Africa
Business Initiative Executive Director and Associate Director Scott
Eisner and Danielle Walker. The delegation also received briefings
from the USAID-funded WTO Accession and AGOA+ teams and held a
dinner discussion with key private sector representatives during
their visit.

10. (U) USTR cleared this cable.

MEECE

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