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. 
 
-------------- 
Moving Forward 
-------------- 
 
¶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. 
 
-------- 
Services 
-------- 
 
¶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 
---------- 
 
¶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. 
 
--- 
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 
------------- 
 
¶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. 
 
------------------------------ 
Potential Pitfalls and Tactics 
------------------------------ 
 
¶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 
--------------- 
 
¶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