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Viewing cable 08AMMAN813, Promoting the U.S.-Jordan Free Trade Agreement

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Reference ID Created Released Classification Origin
08AMMAN813 2008-03-13 15:26 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Amman
VZCZCXRO4071
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHAM #0813/01 0731526
ZNR UUUUU ZZH
R 131526Z MAR 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 2046
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHEE/GCC COLLECTIVE
RUEHEG/AMEMBASSY CAIRO 3575
RUEHDM/AMEMBASSY DAMASCUS 3834
RUEHTV/AMEMBASSY TEL AVIV 1075
RUEHJM/AMCONSUL JERUSALEM 4914
RUEHLB/AMEMBASSY BEIRUT 2815
RUEHME/AMEMBASSY MEXICO 0036
RUEHOT/AMEMBASSY OTTAWA 0226
RUEHSG/AMEMBASSY SANTIAGO 0014
RUEHRB/AMEMBASSY RABAT 0401
RUEHGP/AMEMBASSY SINGAPORE 0047
RUEHPE/AMEMBASSY LIMA 0029
RUEHBY/AMEMBASSY CANBERRA 0104
UNCLAS SECTION 01 OF 05 AMMAN 000813 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS TO USTR 
STATE PLEASE PASS TO OPIC 
STATE PLEASE PASS TO EXIM 
STATE PLEASE PASS TO TDA 
STATE FOR EEB, NEA/ELA, and CA/VO 
CAIRO FOR AGCOUNS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EAGR WTRO JO
SUBJECT: Promoting the U.S.-Jordan Free Trade Agreement 
 
Refs: A) Amman 573 
      B) Amman 551 
      C) Amman 51 
      D) 07 Amman 4083 
      E) 07 Amman 3814 
      F) 07 Casablanca 195 
 
1.  (SBU) Summary: Although total U.S.-Jordan trade has continued to 
grow, Jordanian exports to the U.S. under the U.S.-Jordan Free Trade 
Agreement (FTA) represented a mere 23% of total exports to the U.S. 
in 2007, and grew only modestly over 2006.  Garment exports, 
primarily shipped under the Qualifying Industrial Zone (QIZ) 
agreement, continue to represent the bulk of Jordanian exports to 
the United States, and decreased in 2007.  Jordan did import more 
American goods in 2007, which contributed to the overall growth in 
two-way trade, but the purchase of aircraft and aircraft parts 
represented the lion's share of this increase.  Post continues to 
encourage greater use of the FTA, which has been hindered by lack of 
know-how on the Jordanian side and lack of awareness on the American 
side, similar to the Moroccan experience (ref F).  Diversification, 
more practical training, FTA-specific public diplomacy, and outreach 
on both sides of the trade ledger are needed to overcome these 
obstacles.  End Summary. 
 
Jordanian Exports to U.S. Down, Imports Up 
------------------------------------------ 
 
2.  (U) According to USITC, total bilateral trade in 2007 reached 
$2.19 billion.  NOTE: Government of Jordan (GOJ) figures differ 
slightly, as reported in ref B.  END NOTE.  U.S. exports to Jordan 
increased 31.8% to $857 million, mostly due to the purchase of $146 
million in aircraft and associated parts.  The rise in U.S. exports 
offset a 6.2% drop in Jordanian exports to the U.S., which reached 
$1.33 billion.  The fall in Jordanian exports is largely attributed 
to an 8.6% decrease in garment exports totaling $1.15 million. 
 
3.  (SBU) As tariffs continue to drop under the FTA with the goal of 
complete elimination by 2010, a natural shift has been seen from 
exporting under the QIZ agreement to the FTA.  In 2007, $923 million 
or 69% of Jordanian exports to the U.S. were shipped under the QIZ 
agreement, compared to 72% in 2006 and 90% in 2002.  Meanwhile, $313 
million or 23% of Jordanian exports to the U.S. were shipped under 
the FTA in 2007, compared to 22% in 2006 and 3% in 2002.  Most 
Jordanian exporters look forward to no longer having to meet the 8% 
Israeli input requirement currently mandated by the QIZ agreement, 
which they claim is too expensive.  Others have indicated that they 
will continue buying from their Israeli partners, given their 
established relationships, and ship under whichever trade regime 
makes financial sense. 
 
-------------------- 
Jordanian Challenges 
-------------------- 
 
Diversification is the Name of the Game 
--------------------------------------- 
 
4.  (SBU) The drop in garment exports in 2007 - the first decline in 
eight years - sent a wake-up call to the apparel industry.  Garment 
producers face various challenges, including lack of local labor, 
rising production costs, and pressure by U.S. companies to reduce 
prices given worldwide competition (ref D).  USAID funded a garment 
expert to work with an initial group of factories to enhance 
competitiveness and efficiency in the garment sector through better 
factory training programs and recruitment targeting Jordanians.  The 
GOJ is also exploring with the private sector the concept of 
establishing satellite garment factories in rural areas of high 
 
AMMAN 00000813  002 OF 005 
 
 
female unemployment that would ship under the FTA. 
 
5.  (SBU) Given that garment exports represented 86% of Jordan's 
exports to the U.S., the decline also underscored the need to 
diversify.  The GOJ is fully aware of the dangers of having the 
majority of exports concentrated in one sector, and diversification 
has been cited continuously as the key to continued export-driven 
growth.  USAID has been working with the GOJ to develop a new 
national trade strategy to identify sectors with significant export 
potential, and intends to provide assistance to Jordanian companies 
in such sectors to build export readiness and attend trade shows in 
the U.S.  In March, USAID began a series of trade workshops for 
stakeholders in the information technology, medical services, and 
architect and engineer industries to raise awareness of the 
potential export opportunities under Jordan's various free trade 
arrangements, including the FTA. 
 
6.  (SBU) Key to Jordan's success will be finding those industries 
that offer niche products to the U.S. and can take advantage of 
preferential FTA treatment.  Market research in the U.S. will also 
be important for advising companies in this regard.  The Jordan 
Investment Board (JIB) had an investment program in the U.S. - 
JOINUS - to provide those services, but after two years, the program 
showed little results.  JIB is now considering opening an office in 
the U.S., whose services would hopefully be well exploited by the 
Jordanian and U.S. business communities. 
 
Lack of Export Know-How 
----------------------- 
 
7.  (SBU) Given the competitive edge provided by the FTA, it begs 
the question why more Jordanian companies are not taking greater 
advantage of it.  MOIT Secretary General Montaser Oklah commented 
that the FTA is the best trade agreement that Jordan has, and yet 
Jordan continues to import more expensive goods from Europe, mostly 
because of its geographic proximity.  Increased transportation 
costs, due to higher world fuel prices, have made importing from 
closer Europe more attractive.  Jordanians also have long 
established private sector trade partnerships with European 
counterparts. 
 
8.  (SBU) Jordanian business people commonly indicate that they know 
the FTA exists, but simply do not know how to use it.  They yearn 
for insight into the basic rules and regulations of exporting to the 
U.S. on a practical level - i.e., filling out customs paperwork, 
understanding Harmonized Tariff System (HTS) codes, determining the 
best shipping methods and other logistics.  FCS plans to conduct a 
training seminar in 2008 with Department of Commerce and U.S. 
Customs representatives for import- and export-ready companies in 
Jordan to help address some of these more technical issues.  The 
USAID-funded Business Development Center (BDC) also began a series 
of articles in the major daily Arabic papers in March 2008 to 
increase awareness of FTA opportunities.  Additionally, USAID funded 
the development of an Arabic Exporters' tool kit in 2008. 
 
9.  (SBU) Jordanian companies also have indicated a lack of 
understanding of the U.S. market and ways to match up with U.S. 
suppliers, buyers, and distributors, often looking to the government 
to help provide those links.  One Jordanian businessman faulted lack 
of entrepreneurship and dynamism in the Jordanian business 
community, commenting that a long history of being a state economy 
generated a "what can the government do for me?" attitude that 
persists today.  Another successful Jordanian exporter of air 
conditioning systems, Omar Wishah of Petra Engineering, also noted 
that Jordanian companies need to take the initiative and be more 
aggressive by traveling to the U.S. for trade shows, rather than 
waiting for the business to come knocking on their doors.  He added 
 
AMMAN 00000813  003.2 OF 005 
 
 
that American consumers also want high-quality products delivered 
on-time, when promised, which is a mind-set that many Jordanian 
businesses still need to adopt.  Part of Petra's marketing strategy 
has included bringing American buyers to Jordan on an annual basis 
to introduce not only the company, but also the country to Americans 
who may be wary of traveling to the Middle East.  This tactic has 
increased Petra's sales. 
 
Need for Better Marketing, Labeling, and Packaging 
--------------------------------------------- ----- 
 
10.  (SBU) Minister of Industry and Trade Amer Hadidi recently noted 
that 98% percent of the businesses in Jordan are small and medium 
enterprises (SMEs).  SMEs often do not have the capacity or 
resources to set up satellite offices in the U.S. or find American 
partners.  BDC, which has been working with SMEs in Jordan to 
develop export readiness, also noted that Jordanian products are not 
yet well-known in the U.S.  Once the goods make it to U.S. shelves, 
the Jordanian companies lack marketing representatives in the U.S. 
to continue to promote the products.  In some cases, such as olive 
oil, the companies formed an export consortium, but then each 
producer had to try to tell a different story about his oil in order 
to differentiate it from the others. 
 
11.  (SBU) The BDC has also been stressing the importance of 
labeling for providing a marketing edge.  Jordan has a number of 
food and other products, such as soap, that BDC believes might have 
a market in the U.S. if they use "organic" or "ethnic" labels.  BDC 
also promotes using the "fair wage label" as a tool for 
differentiating a product.  Packaging is another area in which 
improvements can be made for some products.  BDC showed Econoff a 
pet shampoo developed by one of its clients that uses dead sea 
minerals and might be a niche product, but the packaging looked 
amateurish and needed to be improved in order to attract U.S. 
buyers.  The Embassy is looking to support a course offered by the 
State of Texas-run Business Development Center to help Jordanian 
companies, which are not yet export-ready, better understand how to 
market their product to the U.S., select suppliers, and transport 
their goods. 
 
Lack of Financing 
----------------- 
 
12.  (U) Lack of access to financing presents another important 
challenge to Jordanian exporters.  USAID has been working with the 
Association of Banks in Jordan to expand SME financing at all retail 
banks.  Most of the major banks, including Arab Bank, have now set 
up SME Financing Units.  The primary obstacle with the banks is 
their inability to analyze and price risk generally.  This causes an 
acute problem for SMEs, because most of their assets are current 
assets, such as inventory, which banks will not agree to use as 
collateral.  Letters of credit (L/C) provide a similar problem in 
that banks require a certain percentage of cash collateral in order 
to issue an L/C for a client.  BDC hosted a February 24-27 SME 
Finance Conference that aimed to disseminate research, strategies, 
best practices and technological tools for building the capacity of 
SMEs to access financing. 
 
--------------- 
U.S. Challenges 
--------------- 
 
Small, Risky Market 
------------------- 
 
13.  (SBU) For U.S. exporters, Jordan represents a relatively small 
market of only about five and a half million people, unfamiliar to 
 
AMMAN 00000813  004 OF 005 
 
 
most American businesses.  Add to that its location in the heart of 
the politically fragile Middle East, and many U.S. companies see 
Jordan as a risky investment in a bad neighborhood.  Jordan has few 
promotional agencies and ad campaigns in the U.S. to distinguish it 
from the rest of the Middle East as an oasis of stability that 
offers real business incentives and serves as a platform for doing 
business in other parts of the region, particularly Iraq.  Nor does 
the Jordanian government or American Chamber of Commerce in Jordan 
aggressively get the word out about potential privatization or other 
investment opportunities in Jordan.  Bids for proposals are put on 
the government websites, but are not massively distributed over the 
internet or through other channels to possible investors. 
 
14.  (SBU) To better inform the American business community, FCS has 
been advertising opportunities for U.S. investment in Jordan through 
a monthly newsletter distributed in the U.S., works with Export 
Assistant Centers in the U.S. to educate U.S. companies on the FTA, 
and provides information on the FTA and links to U.S. companies 
through the FCS website.  FCS is also exploring opportunities for 
additional U.S. trade missions to Jordan. 
 
---------------------- 
What Else Can Be Done? 
---------------------- 
 
15.  (SBU) In addition to providing more hands-on, sector-specific 
training for and public outreach to Jordanian companies looking to 
export to the U.S., post plans to use more public diplomacy tools 
for educating the Jordanian population on U.S. trade policy and the 
FTA, such as International Visitors programs and Digital Video 
Conferences with U.S. trade experts.  We also intend to have an FTA 
component in programs for the 60th anniversary in 2009 of 
U.S.-Jordan diplomatic relations; in particular, Jordanian companies 
would welcome a U.S. speaker who could provide practical guidance on 
exporting to the U.S. or importing U.S. goods.  The American Chamber 
of Commerce is also exploring the possibility of beginning an ad 
campaign, such as small blurbs in daily Arabic papers informing the 
public of tariff reductions available under the FTA for various 
products.  On the Washington end, we encourage USG officials dealing 
with Jordan to continue to raise awareness about the opportunities 
presented by the FTA when meeting with the American companies. 
 
16.  (U) Post plans to encourage more activities by private sector 
associations, such as the Jordan Exporters' Association, to organize 
serious trade missions to the United States.  FCS also intends to 
continue supporting International Buyers Programs in which Jordanian 
companies travel to trade shows in the U.S. and learn about 
opportunities to buy American products. 
 
17.  (SBU) The USG should support efforts by the Jordanian private 
sector to expand "ethnic" product lines.  For example, Jordanian 
food processing company Nabil Food has requested permission to 
export to the U.S. ethnic food produced in Jordan, with meat from 
American sources (ref C).  We also encourage USDA's Animal Plant and 
Health Inspection Service to conduct pest risk analysis for 
identified Jordanian agricultural products - i.e., strawberries and 
cucumbers (ref E).  We have also asked the GOJ to identify areas for 
potential OPIC assistance in cold packaging and storage for 
agricultural exports (ref A). 
 
18.  (SBU) With Jordan's energy sector opening up, opportunities 
exist for U.S. investment in this area as well.  We would welcome 
feedback from the EXIM bank as to possible avenues of support for 
U.S. exporters in the energy and other sectors. 
 
19.  (U) Post continues to promote the start of the Jordan Science 
and Technology Incubator (JSTI) Pilot project, which is awaiting 
 
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Jordanian funding.  Through this program, 80 Jordanian technologies 
will be screened for a potential fit for entry into the U.S. market, 
and 20 short-listed companies will have a special commercialization 
plan drawn up for U.S. market entry.  The iPark business incubator 
will also receive training in the market commercialization program 
from the University of Texas at Austin's commercialization program. 
 
20.  (SBU) The GOJ and USG have been in protracted discussions to 
extend the length of E-1/E-2 treaty trader visas from the current 
single-entry three month visa, to a multiple-entry five year visa, 
which would facilitate business.  We encourage Washington to 
conclude its review of the Jordanian proposal. 
 
21.  (SBU) Jordan's ongoing negotiations within the World Trade 
Organization (WTO) for a Government Procurement Agreement (GPA) are 
expected to conclude in 2008.  Such an agreement will open up new 
investment and trade opportunities for U.S. companies to bid on 
government contracts in Jordan. 
 
Visit Amman's Classified Web Site at 
http://www.state.gov.sgov.gov/p/nea/amman/ 
 
HALE