VZCZCXYZ0014
PP RUEHWEB

DE RUEHTU #0645/01 0800914
ZNY CCCCC ZZH
P 210914Z MAR 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 0151
INFO RUEHAS/AMEMBASSY ALGIERS PRIORITY 7175
RUEHEG/AMEMBASSY CAIRO PRIORITY 1234
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0768
RUEHFR/AMEMBASSY PARIS PRIORITY 1549
RUEHRB/AMEMBASSY RABAT PRIORITY 8107
RUEHCL/AMCONSUL CASABLANCA PRIORITY 3949
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

C O N F I D E N T I A L TUNIS 000645 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB AND NEA/MAG (WLAWRENCE) 
PASS TO COMMERCE ITA/MAC/ONE (ROTH) AND CLDP (TEJTEL) 
PASS TO USTR (D.BELL) 
PASS TO USPTO (M.ADLIN) 
CASABLANCA FOR FCS (R.ORTIZ) 
 
E.O. 12958: DECL: 03/17/2016 
TAGS: ECON ETRD EFTA PREL TS
SUBJECT: TUNISIA: MINISTER TELLS A/S WELCH TUNISIA SERIOUS 
ABOUT TRADE TALKS 
 
 
Classified By: Ambassador William J. Hudson; Reasons 1.4 (b), (d) 
 
¶1. (C) Summary.  Minister of Development and International 
Cooperation Jouini told A/S Welch March 15 that job creation 
and boosting foreign investment were key challenges to 
Tunisia in the next ten years.  Part of the strategy included 
diversifying trade exchanges, now primarily with the EU, to 
other partners, including the U.S.  He said Tunisia was 
serious about the TIFA process and an eventual FTA, and when 
USTR was ready he could "mobilize the relevant ministries and 
the private sector."  A/S Welch cautioned that internal 
developments in Tunisia were important regarding the 
salability of a proposed FTA in the USG.  End Summary. 
 
¶2. (SBU) In a March 15 meeting with A/S Welch, Minister of 
Development and International Cooperation Jouini described 
the future challenges to Tunisia's continued economic growth, 
focusing on job creation and increasing foreign investment. 
Jouini said that Tunisia faces a demographic bulge in the 
next 10 years which will increase the number of Tunisian 
university students to 500,000 by 2016, and boost demand for 
jobs by 10 percent.  Although the bulge will be temporary 
(Tunisia's birth rate remains very low at 1 to 1.5 percent) 
these degree holders will need and expect employment.  Jouini 
said that the GOT estimates it will need to increase its the 
GDP growth rate from an average 5 percent to at least 6 to 
6.5 percent to ensure the level of job creation needed. 
 
¶3. (C) Jouini said the GOT was pursuing various methods to 
boost economic growth.  Increasing foreign investment was 
key. Although he acknowledged that the size of the Tunisian 
market was fairly limited, Jouini said Tunisia was becoming 
well integrated into the global economy and could usefully 
serve as a base for multinational enterprises.  Responding to 
A/S Welch's question, he listed the key areas for investment 
as tourism and transport sectors (port development), health 
services, financial services, and telecommunications.  He 
also said Tunisia's privatization of state owned industries 
(proceeding slowly but in the right direction) offered good 
opportunities for the private sector. He said one of the 
goals of his ministry was to increase the share of services 
as part of GDP to 60 percent by 2016, which would offer 
relatively well-educated Tunisians more attractive job 
options. 
 
Tunisia serious about TIFA and an FTA 
------------------------------------- 
 
¶4. (C)  Jouini said that part of the growth strategy was to 
diversify Tunisia's trade exchange, now focused primarily (80 
percent) on the EU.  In this context, he told A/S Welch that 
Tunisia was serious about pursuing the Trade and Investment 
Framework Agreement (TIFA) process with the U.S., and 
ultimately negotiating an FTA.  He said that Tunisia may 
proceed more deliberately than other Arab countries on trade 
issues, but its economy was much more complex.  In addition, 
Tunisia's approach made the process more stable and 
predictable; when the GOT finally concludes an agreement it 
is "generally irreversible" Jouini said.  He told A/S Welch 
that the GOT was ready to engage more deeply on TIFA issues 
(as identified by USTR in recent non-papers) but felt that 
USTR sometimes sent mixed signals about its desire to move 
ahead; it seemed to pay a lot of attention to Tunisia for a 
period, followed by a relative lull.  (NB: The Ambassador, 
present at the meeting, explained this was mainly because 
other Arab states were more aggressive in pressing to move 
trade talks forward very quickly.) 
 
¶5. (C)  A/S Welch cautioned Jouini to observe what had 
happened to TIFA talks in Egypt; a TIFA process should not 
prompt automatic expectations of an FTA.  It was important to 
remember that internal developments in Tunisia affected the 
salability of an FTA in the U.S. regardless of successful 
negotiations.  Jouini had no specific response other than to 
reiterate his willingness to mobilize the relevant ministries 
and the private sector once USTR was ready.   He also made a 
plea for continued technical assistance despite the lack of a 
structured AID program in Tunisia. 
 
 
Comment 
------- 
¶6. (C) Although the GOT often professes its desire to 
diversify trade beyond its heavy EU-weighting, there has been 
virtually no diminishment of its Eurocentric profile in 
recent years.  Tunisia's business culture, its inherited 
French administrative procedures, and its relatively small 
market make serious increases in trade with the U.S. probably 
overly-ambitious in the near-term, though we appreciate the 
GOT's official position and maintain the goal of an eventual 
Free Trade Agreement.  We believe that the GOT will use the 
coming full implementation of its FTA with the EU (2008) as 
its primary litmus test, deciding seriously whether to tackle 
a more ambitious and comprehensive U.S. FTA only after this 
experience with the EU.  We view Jouini's comments on USTR as 
illuminating, but mildly disingenuous.  Engagement with USTR 
on theoretical divergence analyses is fine, but we fully 
understand USTR's need to see the GOT's real structural 
reform and economic opening before more serious negotiations 
at an increased pace are embraced.  Like most things 
Tunisian, the GOT wants to appear not to rock the boat and to 
make its advances gradually and methodically.  Trade 
relations with the U.S. are no exception to this norm. 
HUDSON