VZCZCXRO9752
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #0571/01 0890922
ZNR UUUUU ZZH
R 300922Z MAR 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 6198
INFO RUEHCL/AMCONSUL CASABLANCA 2840
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3253
RUEHFR/AMEMBASSY PARIS 4573
RUEHNK/AMEMBASSY NOUAKCHOTT 3453

UNCLAS SECTION 01 OF 03 RABAT 000571 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR NEA/MAG, EB/IFD/OIA and EB/TPP/BTA 
STATE PLEASE PASS TO USTR DOUG BELL AND MARY LATIMER 
USDOC FOR ITA/MAC/ONE ROTH 
TREASURY FOR OASIA 
USDA FOR ITP PAT SHIEKH AND BARBARA CHATTIN 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EFIN EAGR PGOV MO
SUBJECT: PREPARING FOR THE ANNUAL REVIEW OF THE FTA 
 
REF: A. RABAT 00304 
 ¶B. RABAT 00405 
 ¶C. Casablanca 00057 
 
Sensitive but unclassified.  Please protect accordingly. 
 
¶1. (U) Summary and action request:  With the envisioned May/June 
time frame for the first annual review of the bilateral Free Trade 
Agreement fast approaching, post recommends renewed engagement in 
coming months with the GOM on key outstanding issues from the first 
year of the agreement, including transshipment, agricultural quotas, 
and accelerated reduction of textile tariffs.  Moroccan thinking 
about the overall "Joint Committee" meeting is still in its early 
stages, but our contacts believe that the formal meeting should 
"accentuate the positive" and leave detailed discussion of these 
issues to preparatory meetings, preferably of the Agricultural and 
Market Access committees provided for in the Agreement.  Moroccan 
readiness to celebrate and give a high profile to the anniversary is 
clouded by discrepancies in bilateral trade data: while U.S. 
statistics show an 18 percent increase in Moroccan exports to the 
U.S. to USD 521 million, Moroccan trade figures show a decline over 
2005 figures to USD 250 million.  We are working with our Moroccan 
counterparts to understand and explain this divergence.  End 
Summary. 
 
--------------------------------------------- ----- 
First Joint Committee Meeting Since Implementation 
--------------------------------------------- ----- 
 
¶2. (SBU) Econ Counselor and Econoff met on March 26 with the MFA's 
FTA expert Houda Marrakchi to follow up on her recent contacts with 
USTR and discuss preparations for the first Joint Committee meeting. 
 Marrakchi stressed that she has not yet received guidance from 
Minister-Delegate Fassi-Fihri, but anticipated that he would lead 
the Moroccan delegation.  Three locations were mentioned as possible 
venues:  Washington, DC; Rabat, Morocco; and North Carolina. 
Although Washington would be the most convenient for the U.S. 
delegation, Marrakchi agreed that the event would not receive the 
same degree of publicity as it would in Morocco.  North Carolina was 
suggested because of an upcoming MEPI-funded Moroccan textile 
sourcing mission there in June, which the Joint Committee could 
build upon.  Regardless of the location, Marrakchi agreed that 
approximately 45-days notice would be required to properly 
coordinate the meeting. 
 
------------------------- 
Accentuating the Positive 
------------------------- 
 
¶3. (SBU) Marrakchi emphasized her belief that the Joint Committee 
meeting should accentuate the positive, and leave areas of 
disagreement to be addressed by technical committees and ongoing 
informal discussions.  She expressed hope that difficult issues 
could be considered in the run-up to the annual review by the 
technical committees created by the agreement: i.e., the Market 
Access Committee could consider transshipment, GSP preferences, and 
accelerated reduction of textile tariffs, while the agricultural 
committee could address the full range of agricultural issues and 
build on recent video-conferences between U.S. and Moroccan 
officials that have focused on wheat quota issues. 
 
¶4. (SBU) Marrakchi did flag one concern that she indicated might 
influence how high a profile Morocco wishes to accord the 
anniversary event: Moroccan trade figures differ significantly from 
U.S. trade data.  Far from showing an increase in Moroccan exports 
to the U.S. (U.S. trade data complied by OTII/Dept of Commerce show 
Moroccan exports to the U.S. increased 18 percent to USD 521 
million), Moroccan data compiled by the Office des Changes shows 
2006 Moroccan exports to the U.S. below USD 250 million, slightly 
below their 2005 level.  Marrakchi acknowledged that the Office des 
Changes data was contrary to Ministry of Industry data that showed 
Moroccan textile exports to the U.S. in 2006 increased 52 percent 
over 2005. 
 
¶5. (SBU) Comment:  Post believes the large disparity in trade data 
reflects how Moroccan customs classifies Moroccan goods that are 
shipped to European distributors before transshipment to the U.S. 
Europe remains Morocco's principal trading partner and the majority 
 
RABAT 00000571  002 OF 003 
 
 
of Moroccan industrial goods are shipped to European distributors. 
Even though these goods eventually arrive in the U.S., Moroccan 
customs classifies the commerce as between Morocco and Europe.  End 
Comment. 
 
---------- 
Key Issues 
---------- 
 
¶6. (SBU) The differing trade figures highlight one of the most 
significant differences of interpretation in the agreement: namely, 
what constitutes permissible transshipment under Chapter 5 "rule of 
origin" provisions.  Morocco continues to hew to a restrictive 
interpretation, whereby transshipment via European ports is 
permissible, the shipment must be dispatched following an order by a 
Moroccan customer and cannot be pre-staged by U.S. exporters in 
European facilities.  In our March 26 meeting, Marrakchi argued that 
the limiting provisions were introduced by U.S. negotiators, and 
that Moroccan officials did not believe the text of the agreement 
supported the U.S. interpretation, whereby transshipment was 
permissible so long as a product does not enter into commerce or 
advance in value. 
 
¶7. (SBU) Although Morocco's Parliament passed legislation in 
December 2005 (Law 31/05) that fulfilled its intellectual property 
commitments under the FTA, enforcement of the provisions remains in 
issue.  Recently, Procter and Gamble North West Africa, which 
markets a product called "Always," reports difficulty in blocking 
counterfeit goods from entering Morocco and that the Moroccan 
Trademark Office (OMPIC) has issued trademarks for counterfeit 
products marketed as "All Well's."  While post continues to address 
these instances on a case-by-case basis, Moroccan enforcement of the 
FTA's IPR provisions remains an issue, as reported in Ref C. 
 
¶8. (SBU) If more liberal interpretation of transshipment provisions 
and effective IPR protection are key U.S. concerns, Morocco remains 
focused on its loss of GSP preferences for certain textile and 
agricultural products and its desire to accelerate reduction of 
tariffs on textile inputs.  In clarifying the Moroccan desire to 
accelerate the FTA's tariff reduction schedule, Marrakchi explained 
that between the end of FTA negotiations and its entry into force, 
Morocco had made the reduction proposal to both the U.S. and the EU. 
 While the U.S. has not formally responded, the EU did so 
immediately, and reached agreement with Morocco on a more 
preferential tariff schedule.  Marrakchi argued that as a result 
many categories of U.S. raw goods are less competitive than their EU 
counterparts. 
 
¶9. (SBU) Marrakchi also clarified the Moroccan desire to restore GSP 
benefits for certain Moroccan products, while admitting Morocco 
could not agree to reciprocal treatment.  She explained that Morocco 
is not afraid of U.S. products entering Morocco in the affected 
categories, but is afraid that the EU will seek to take advantage of 
any concession Morocco accords the U.S.  Marrakchi suggested that 
these issues, together with other market access issues, be addressed 
by a meeting of the agreement's market access committee in the 
run-up to the Joint Committee meeting. 
 
------------------------------------------ 
Opaque Moroccan Wheat Quota Administration 
------------------------------------------ 
 
¶10. (SBU) As reported in Ref B, Moroccan implementation of wheat 
Tariff Rate Quotas (TRQ) continues to hinder U.S. exports.  At issue 
is agreement on the timing and method for calculating the annual 
size of the TRQ, Morocco's failure to publish a schedule of tenders 
for use by both importers and exporters, the country's failure to 
re-tender unallocated quota from previous tenders, and the GOM's 
failure to accept all bids from importers who are willing to pay the 
negotiated duty under the TRQ.  Marrakchi commented that Morocco's 
stance on re-tendering is unlikely to change, as it is also the 
approach applied under its agreement with the European Union.  She 
agreed, however, that it would be useful for the formal Agricultural 
Committee envisioned by the agreement to meet in the near future to 
consider the full range of outstanding agricultural issues. 
 
¶11. (SBU) Comment and action request: The Moroccan public is still 
largely unfamiliar with the U.S.-Morocco FTA, Moroccan economists 
 
RABAT 00000571  003 OF 003 
 
 
remain largely undecided on its utility, and Moroccan businesses are 
just beginning to learn how to exploit it.  We have launched an 
aggressive public campaign to highlight the positive results of the 
first year of the agreement, as reflected in American statistics. 
Nonetheless, respected Moroccan business journals continue to 
publish anti-FTA articles and will most certainly use the misleading 
Moroccan Office des Changes export statistics to their editorial 
advantage.  As the Moroccan bureaucracy increasingly focuses on the 
Joint Committee meeting, we believe now is the moment to renew our 
engagement with Moroccan counterparts on the nagging issues outlined 
above, and to ensure that the Joint Committee meeting itself retains 
the positive focus both sides desire.  End Comment. 
 
BUSH