VZCZCXRO7572
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #1531/01 3301156
ZNR UUUUU ZZH
R 261156Z NOV 07 ZDK CTG LGB # 03031
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 7080
INFO RUEHJB/AMEMBASSY BUJUMBURA 2605
RUEHKM/AMEMBASSY KAMPALA 3091
RUEHLGB/AMEMBASSY KIGALI 1038
RUEHNR/AMEMBASSY NAIROBI 0845
RUEHBJ/AMEMBASSY BEIJING 0342
RUEHDS/AMEMBASSY ADDIS ABABA 3260
RUEHBS/USEU BRUSSELS
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 001531 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
DEPT AF/E FOR MBEYZEROV, AF/EPS FOR THASTINGS 
PASS TO USTR FOR FLISER, WJACKSON 
PASS ALSO TO COMMERCE/ITA FOR BERKUL 
NAIROBI FCS FOR JSULLIVAN 
ADDIS FOR AU MISSION 
 
E.O. 12958:  N/A 
TAGS: ETRD EFIN EAID ECON PREL TZ
 
SUBJECT: EAC SAYS IT IS READY TO MOVE FORWARD ON THE US-EAC TIFA 
 
 
DAR ES SAL 00001531  001.3 OF 003 
 
 
Summary 
------- 
¶1. (U) The Secretary General of the East African Community (EAC), 
Ambassador Juma Mwapachu, told Assistant United States Trade 
Representative (AUSTR) for Africa Florie Liser November 13 that the 
proposed U.S.-EAC Trade and Investment Framework Agreement (TIFA) 
would be at the top of the agenda of the EAC's next summit meeting. 
SG Mwapachu gave Ms. Liser a few suggested EAC changes to the draft 
text, which she promised to have USG colleagues review upon her 
return to Washington.  The EAC staff offered an update of the 
ongoing discussions on the Economic Partnership Agreement (EPA) with 
the European Union.  Liser urged the EAC to review its Common 
External Tariffs for used clothing and almonds and encouraged the 
EAC member countries to work cooperatively, especially in the 
textile and apparel sectors, to improve value-added production 
chains and exports under AGOA.  End summary. 
 
¶2. (U) AUSTR Liser was in Arusha to attend the African World 
Business Congress and Tanzania Investment Forum.  In her remarks at 
the November 12 opening of the conference, she mentioned that the 
USG was still waiting to hear from the EAC on the USG offer, first 
made in June 2006, to undertake a TIFA between the United States and 
the EAC.  Tanzanian President Kikwete, who was also at the opening, 
intervened to publicly ask Liser, from the dais, "what the hold-up 
was" with the TIFA.  When she replied that she honestly did not 
know, he indicated that he would be following up with Secretary 
General Mwapachu, who it turns out was also at the opening. 
President Kikwete was seen meeting with Mwapachu immediately after 
the conference. 
 
¶3. (U) Thus it was no surprise that Mwapachu was eager to discuss 
the TIFA in his previously scheduled November 13 meeting with Liser 
at the EAC Headquarters in Arusha.  The Secretary General explained 
to Liser that the EAC trade ministers had requested that the TIFA be 
drafted as an agreement between the United States and the East 
African Community, rather than bilaterally with member states as in 
the original draft.  Liser noted that the United States has TIFAs 
with other regional economic organizations in Africa, such as 
COMESA, and therefore has no objection to doing the TIFA with the 
EAC.  She reminded Mwapachu that the possibility of an EAC TIFA was 
initially raised by USTR at the June 2006 AGOA Forum in Washington 
DC and the original draft was sent to the EAC and its members in 
August 2006.  In late June 2007, USTR's William Jackson met with EAC 
officials in Arusha, where he learned of the EAC Members' preference 
that the agreement be with the EAC rather than with its members.  In 
August 2007 USTR transmitted to the EAC an updated version of the 
draft TIFA reflecting this change. 
 
¶4. (SBU) SG Mwapachu assured Liser that "at the political level the 
TIFA is endorsed."  He stated that since USTR submitted the updated 
language in August, the draft TIFA has been circulated to all EAC 
member countries and would be on the agenda at the next ministerial 
level Sectoral Council of Trade, Investment and Finance. He noted 
that, the previous day, President Kikwete had expressed to him that 
the TIFA should have the highest priority on the EAC agenda. 
"Yesterday President Kikwete inquired whether the Sectoral Council 
was ready to consider the TIFA and told me that we must open up to 
the United States," Mwapachu said.  Kikwete asked that once a date 
was set for the EAC summit, the TIFA should be discussed by the 
heads of state at the pre-consultative meeting.  Mwapachu added that 
Uganda's President Museveni, the current chair of the EAC Summit, 
had also indicated his intent that the U.S.-EAC TIFA be a top agenda 
item for the EAC. 
 
EAC Common External Tariff: Almonds, Used Clothing 
--------------------------------------------- -- 
¶5. (SBU) AUSTR Liser raised with Mwapachu U.S. concerns about 
increased tariffs on some U.S. exports to EAC countries since the 
establishment of the EAC Customs Union and its related Common 
External Tariff (CET) in January 2005.  She noted that the U.S. has 
asked the EAC to reconsider the classification of almonds under the 
CET and to place almonds in the "semi-finished" product category. 
She also asked that the EAC look closely at the extraordinary 
tariffs imposed on used clothing under the Customs Union.  The EAC 
staff commented that in mid-2005, the tariff was lowered from 50 
percent to 45 percent, or an average of about 30 cents per kilo, and 
that a number of other taxes (e.g. excise) had also been removed as 
a result of the CET.  The tariff reduction was primarily in response 
 
DAR ES SAL 00001531  002.2 OF 003 
 
 
to strong lobbying by East African used clothing importers and 
middlemen who claimed the higher tariff hurt not only their 
businesses but severely affected the buying power of lower-income 
consumers.  (Comment:  Despite the modest mid-2005 reduction, the 
EAC tariff on used clothing is still substantially higher than 
before the EAC Customs Union and continues to serve as a hindrance 
to U.S. exports of this product to the region.  End comment.) 
 
¶6. (SBU) SG Mwapachu insisted the higher CET on used clothing was 
still needed for the moment: "The textile industry is only now 
beginning to revive; we need to have a breathing space."  Ms. Liser 
countered that studies show that suppressing the used clothing 
market usually does not yield the intended result.  Often the gap 
between locally produced textiles and apparel is filled by cheap, 
poorly made imports, predominantly from China. 
 
¶7. (SBU) The EAC secretariat staff said a comprehensive review of 
the used clothing tariff is now underway.  The review includes a 
thorough analysis of all textile and apparel sectors and is being 
conducted by the members' respective Ministries of Finance.  A key 
goal is to assess the utilization of used clothing at current tariff 
levels and the capacity of the region.  SG Mwapachu pointed out the 
need for the review to also analyze results through a 
country-by-country breakdown. 
 
EPA Discussions with European Union 
----------------------------------- 
¶8. (U) In response to AUSTR Liser's request for an update on the 
EAC's negotiations with the European Union on an Economic 
Partnership Agreement, the EAC staff commented that an October 11 
meeting in Nairobi had been key.  At that time, an EAC harmonized 
offer on access was presented to and accepted by the EU; all EAC 
trade ministers had signed the document.  EAC Deputy SG Julius Onen 
was currently in Brussels to lead the final negotiations supported 
by the trade representatives of Tanzania, Uganda and Kenya. 
 
¶9. (SBU) SG Mwapachu said an interim EPA was the goal because the EU 
had realized that none of the regional entities were yet ready to 
conclude the broader WTO-compliant agreement that the EU is seeking. 
Only certain market access issues would be agreed to; other issues 
will continue to be negotiated after January 1.  The EAC goal is not 
to liberalize too quickly, to seek exceptions for sensitive goods, 
and to eliminate certain subsidies. 
 
African Support Needed to Secure WTO Waiver 
------------------------------------------ 
¶10. (U) Liser appreciated African nations' willingness to liberalize 
trade and emphasized that the U.S. wants to give as much preference 
as possible to sub-Saharan African nations for as long as possible. 
She added that USTR has been watching the EPA negotiations carefully 
since, ultimately, the United States would also look toward 
reciprocal agreements with African nation partners.  At present, 
AGOA has been approved by Congress until 2015 with no reciprocal 
obligations.  However, the United States must obtain a WTO waiver to 
continue the AGOA preferences.  The U.S. request for a waiver is 
still pending in the WTO, with Paraguay being one of the last 
hold-outs standing in the way of the waiver.  Ms. Liser urged that 
the EAC countries press Paraguay to remove its objections to the 
waiver. 
 
Textiles and Apparel 
-------------------- 
¶11. (SBU) USTR Liser reiterated the need for EAC and all 
AGOA-eligible countries to take advantage of opportunities in the 
apparel sector. "There is a bright market for African-produced 
textiles in the United States."   She also noted the need to work 
cooperatively to guard against counterfeits: "I saw many fake 
textiles in West Africa, particularly in Nigeria, that had been 
copied by hand, then counterfeited, often by Chinese companies." 
 
¶12. (U) Liser stressed that textiles and apparel can enter the U.S. 
duty-free under AGOA and noted that a number of AGOA-eligible 
countries have increased their apparel exports within the last two 
years, including several East African countries.  However, nearly 
96% of the fabric used in AGOA apparel exports was from non-AGOA 
countries. "Africa has a huge under-utilized capacity to produce 
African-grown cotton and cotton-blend textiles." She strongly 
encouraged SG Mwapachu to guide the EAC members to produce more 
 
DAR ES SAL 00001531  003.2 OF 003 
 
 
textiles and apparel for export. 
 
EAC Strategy and Cooperation is Key 
----------------------------------- 
¶13. (SBU) AUSTR Liser also challenged Ambassador Mwapachu to focus 
on increasing cooperation among AGOA-eligible countries within the 
EAC: "One country can produce the cotton, another can spin the yarn, 
another can weave the fabric, and yet another can transform the 
fabric into apparel for export.  Strategize to take advantage of 
AGOA and create an aggressive regional approach from the cotton 
farms all the way through the value-added chain," she suggested.  SG 
Mwapachu agreed that such an approach should be a central industrial 
and investment policy for the EAC.  While adding that many of the 
needed instruments are in place, the SG still queried: "How do we 
make the shift?"  Liser stressed the USG is ready to work with the 
EAC through OPIC, USAID and other USG agencies to support a 
coordinated East African regional strategy to increase AGOA exports. 
 
 
Timing 
------ 
¶14. (U) SG Mwapachu indicated that the regularly scheduled November 
2007 EAC meetings, both Sectoral Council and the Summit, might be 
postponed due to the ongoing presidential and parliamentary 
elections in Kenya.  "The Kenyans, from President Kibaki downward, 
are very involved in the campaign," he said.  Consequently, the 
Summit might not be convened until early 2008 which could lead to a 
slight delay in approving the TIFA. "But rest assured it is an 
extremely high priority for the EAC," Mwapachu concluded. 
 
GREEN