VZCZCXYZ7375
PP RUEHWEB

DE RUEHRB #0196/01 0631438
ZNR UUUUU ZZH
P 031438Z MAR 08
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 8214
INFO RUEHCL/AMCONSUL CASABLANCA 3927
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/USDA FAS WASHDC 1058
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3541
RUEHFR/AMEMBASSY PARIS 4953
RUEHNK/AMEMBASSY NOUAKCHOTT 3675

UNCLAS RABAT 000196 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR NEA/MAG, EB/IFD/OIA and EB/TPP/BTA 
STATE PLEASE PASS TO USTR SHAUN DONNELLY, PAUL BURKHEAD, AND MARY 
LATIMER 
USDOC FOR ITA/MAC/ONE ROTH 
TREASURY FOR OASIA 
USDA FOR FAS CHUCK BERTSCH AND BOB MACKE 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EFIN EAGR PGOV MO
SUBJECT: SCENESETTER FOR U.S.-MOROCCO FTA JT COMMITTEE 
 
¶1.  (U) The U.S. Mission welcomes the U.S. delegation to the FTA 
Joint Committee meeting.  The FTA, together with the recently signed 
USD 697 million Millennium Challenge Account (MCA) Compact, is one 
of our two most visible bilateral accords.  Although Morocco has 
embraced trade liberalization, you will find a country that is 
increasingly debating whether this policy has benefited its trade 
partners more than Morocco itself.  Critics point particularly to 
agreements with the U.S., Turkey, and the Arab States as examples 
where trade is more imbalanced than it is with the European Union. 
 
 
------------------ 
General Background 
------------------ 
 
¶2.  (SBU) We had anticipated this debate would lead Morocco to 
prefer to treat the joint committee meeting more as a technical 
"in-house" exchange between experts than an opportunity to highlight 
the agreement publicly.  Nonetheless, your hosts are preparing a 
joint press conference and an outreach session with business 
associations.  These two events are scheduled for Friday, March 14 
in Casablanca.  The Joint Committee meeting itself is scheduled for 
the afternoon of Thursday, March 13 in Rabat. 
 
¶3.  (SBU) Recently installed Minister of External Commerce 
Abdellatif Maazouz, who previously served as the Directeur General 
of the Maison de l'artisan, will head the Moroccan delegation. 
Maazouz's Ministry was previously only a supporting player on 
bilateral trade policy.  In his initial public interviews, Maazouz 
has highlighted several broad priorities for his Ministry: 
operationalizing Morocco's free trade agreements; developing and 
effectively publicizing a "Made in Morocco" logo and image that 
attracts international customers; elaborating a national export 
strategy that includes reorganizing the Ministry; simplifying export 
procedures; and ensuring Morocco is in conformity with its 
international obligations. 
 
--------------- 
Growth in Trade 
--------------- 
 
¶4.  (U) The primary purpose of the Joint Committee, of course, is to 
review developments in bilateral trade, and we believe we have a 
very positive story to tell.  After a decade in which trade remained 
stagnant at around a billion USD per year, trade nearly doubled in 
the two years since the agreement entered into force.  Public 
criticism stems from the fact that while Morocco's exports have 
grown significantly over the period (up 35 percent), American 
exports have exploded, increasing by over 150 percent. 
 
¶5.  (U) As you know, we confront the added complication of clashing 
statistics.  The underlying imbalance is even starker in Moroccan 
figures, as is evident below. 
 
      MOROCCAN FIGURES             U.S. FIGURES 
Exports from Morocco to the U.S.: 
2005  USD 290.7 Million            445.8 Million 
2006  USD 234.3 Million (-19pct)   521.4 Million 
2007  USD 349.7 Million (+49pct)   609.9 Million 
 
Exports from the U.S. to Morocco: 
2005  USD  700.0 Million            525.0 Million 
2006  USD 1019.5 Million (+46pct)   878.4 Million 
2007  USD 1916.6 Million (+88pct)  1343.0 Million 
 
¶6.  (U) If questioned about this imbalance, we recommend 
accentuating those areas where Morocco has enjoyed success, such as 
textiles, as well as pointing out the macro factors that have 
contributed to the imbalance.  Textiles, one of the key industries 
targeted by the government, has seen a 43 percent rise in exports to 
the U.S.  Additionally, while the FTA has certainly had an impact on 
our bilateral trade, so too has a booming Moroccan economy, a 
depressed dollar, and a very disappointing 2007 Moroccan grain 
harvest. 
 
¶7.  (U) Regarding the statistical disparity itself, with the support 
of the Commercial Law Development Program (CLDP), the Foreign Trade 
Division of the U.S. Census Bureau agreed to a merchandise trade 
reconciliation study with Morocco.  Post believes the study will 
find that a large portion of the disparity stems from transshipment 
of Moroccan exports through Europe.  However, the initial exchange 
of information in the study has just begun, and final conclusions 
will not be available for some time. 
 
--------------------------------------------- ----- 
Moroccan Frustration at Gaining U.S. Market Access 
--------------------------------------------- ----- 
 
¶8.  (SBU) Chief among the issues that Morocco is likely to bring to 
the table is its frustration over securing the certificates 
necessary to permit it to ship some agricultural products to the 
United States.    In an October 2007 meeting, the Animal and Plant 
Health Inspection Service (APHIS) advised Morocco that it had all 
the information that was needed on this issue and that the process 
had entered an internal review.  Morocco will at the very least look 
for an update on the situation.  It has asked for a private meeting 
with Agricultural Minister Aziz Akhannouch, which we suspect is 
intended to push the issue. 
 
---------------------------- 
No Movement on Transshipment 
---------------------------- 
 
¶9.  (SBU) Since implementation, Moroccan interpretation of 
permissible transshipment under the FTA's rules of origin has denied 
preferential treatment for some U.S. originating goods.  Moroccan 
customs officials continue to insist that transshipments from a 
third country must be preceded by an order (as reflected in an 
invoice or bill of lading) from a Moroccan customer before departing 
the U.S.  This restrictive interpretation effectively prevents U.S. 
companies from pre-staging U.S. originating goods in Europe, prior 
to receiving an order from a Moroccan customer.  Morocco's stance on 
this issue was explained in a response to AUSTR Donnelley's letter 
and during a February 29 DVC.  During the DVC, the Moroccans 
compared the specific language included in the U.S.-Jordan FTA 
against the corresponding language found in the U.S.-Moroccan FTA. 
In short, the Moroccans understand our position and our desired 
interpretation, but insist it is neither what was negotiated nor 
what was written into the agreement.  Given this firm Moroccan 
stance, our only recourse is to treat Moroccan goods in the same 
manner when they arrive in the U.S. via Europe, with the hope that 
this will ultimately induce the Moroccans to display greater 
flexibility in future. 
 
-------------------- 
Wheat Quotas Removed 
-------------------- 
 
¶10.  (SBU) Although the FTA created provisions for U.S. wheat 
producers to benefit from new tariff-rate quotas (TRQs) on durum and 
common wheat, they went unfulfilled in 2006.  In 2007, as a result 
of the country's extremely poor harvest (down 81 percent from 2006), 
the government eliminated tariffs on all imported wheat through May 
31, 2008, effectively rendering the quotas meaningless.  The GOM has 
suggested that implementation difficulties during the first year of 
the FTA were related to the incompatibility between the calendar 
year TRQ and the local marketing year.  When Moroccan grain 
production returns to normal levels in 2008, implementation issues 
will likely resurface. 
 
RILEY 
 
 
 
SENSITIVE BUT UNCLASSIFIED