VZCZCXRO9359
PP RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #0252/01 0791416
ZNR UUUUU ZZH
P 191416Z MAR 08 ZDK
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC PRIORITY 8285
INFO RUEHCL/AMCONSUL CASABLANCA 3969
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/USDA FAS WASHDC 1060
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3550
RUEHFR/AMEMBASSY PARIS 4959
RUEHNK/AMEMBASSY NOUAKCHOTT 3690

UNCLAS SECTION 01 OF 03 RABAT 000252 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR NEA/MAG, EB/IFD/OIA and EB/TPP/BTA 
STATE PLEASE PASS TO USTR SHAUN DONNELLY, PAUL BURKHEAD, CAROYL 
MILLER AND MARY LATIMER 
USDOC FOR ITA/MAC/ONE MASON 
TREASURY FOR OASIA 
USDA FOR FAS CHUCK BERTSCH AND BOB MACKE 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EFIN EAGR PGOV MO
SUBJECT: U.S.-MOROCCO FTA: IMRESSIVE START, OBTIMISTIC FUTURE 
 
 
RABAT 00000252  001.2 OF 003 
 
 
¶1.  (U) The Joint Committee of the U.S.-Morocco Free Trade Agreement 
(FTA) met in Rabat on March 13, 2008 for the first time since the 
agreement's implementation on January 1, 2006.  Assistant U.S. Trade 
Representative for Europe and the Middle East, Shaun Donnelly, 
headed the U.S. delegation, while Moroccan Minister of Foreign 
Trade, Abdellatif Maazouz, led the Moroccan side.  Both sides 
accentuated the overall success of the agreement during its first 
two years, and called for a reinvigoration of the subcommittee 
process in order to resolve issues.  Key issues raised by the U.S. 
were Moroccan interpretation of permissible transshipment and 
Moroccan administration of wheat quotas.  Morocco's principal issues 
were a desire to expedite U.S. phytosanitary approval of key 
Moroccan agricultural products and improved customs cooperation. 
The day following the plenary session, the U.S. delegation met with 
representatives of the private sector, where they heard an 
assessment very similar to that of the government. 
 
-------------------------- 
Impressive First Two Years 
-------------------------- 
 
¶2.  (U) While noting discrepancy in bilateral trade statistics, 
which an ongoing "Trade Merchandise Reconciliation" study is seeking 
to explain, the two sides concurred that the agreement has had a 
positive effect on trade, with bilateral commerce increasing 101 
percent.  U.S. exports to Morocco increased 155 percent from USD 
527.5 million in 2005, to USD 1343 million in 2007.  In spite of an 
over 30 percent depreciation of the dollar in relation to the 
dirham, Moroccan exports to the U.S. increased 38 percent, from USD 
442.5 million in 2005, to USD 609.9 million in 2007. 
 
¶3.  (SBU) In private meetings with Moroccan Foreign Trade Minister 
Maazouz and Minister of Commerce and Industry Ahmed Rena Chami, 
Ambassador Donnelly highlighted the FTA's influence in attracting 
foreign investment.  Acknowledging that objective measurement was 
impossible to quantify, Donnelly suggested that the U.S.-Morocco FTA 
certainly contributed to the record level of foreign investment 
Morocco has experienced in the past five years by demonstrating 
Morocco's commitment to business reform, IPR protection, and trade 
liberalization.  Chami said the GOM was proud to have an FTA with 
the U.S. and that it regularly used the FTA as a sales tool with 
prospective investors.  He added that Morocco needed two additional 
things to make the FTA work better.  First, Moroccan businesses 
needed to "crack the code" of American consumers' desires and do a 
better job of selling themselves to the American market.  Second, 
Morocco needs to convince other major economic powers, such as 
China, Spain and Italy, to take advantage of the FTA by investing in 
Morocco. 
 
-------------------------------------------- 
U.S. Issues - Transshipment and Wheat Quotas 
-------------------------------------------- 
 
¶4.  (SBU) Following this overview, the two sides moved on to clarify 
and articulate national positions on implementation issues that have 
emerged over the last two years.  Chief among the U.S. issues was 
Morocco's strict interpretation of permissible transshipment under 
the FTA's rules of origin.  Moroccan customs officials insist that 
shipments can only transit a third country if they depart the U.S. 
following an order (as reflected in an invoice or bill of lading) 
from a Moroccan customer.  Stressing that the whole purpose of the 
FTA was to liberalize, not restrict trade, Donnelly emphasized that 
this restrictive interpretation effectively prevents U.S. companies 
from pre-staging U.S. goods in Europe prior to receiving an order 
from a Moroccan customer, and thereby fails to reflect the realities 
of modern international commerce.  Donnelly asked the Moroccan 
delegation to ponder the ramifications of a similar U.S. application 
and its effect on Moroccan goods that are first exported to Europe 
before distribution to U.S. retailers.  While Customs officials 
defended Morocco's position, Minister Maazouz agreed that bilateral 
consultations through the market access subcommittee should be 
intensified to attempt to find a mutually agreeable solution. 
 
¶5.  (SBU) The second major issue raised by the U.S. was Morocco's 
administration of wheat quotas negotiated into the FTA.  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 
 
RABAT 00000252  002 OF 003 
 
 
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.  Officials at the 
Moroccan Ministry of Agriculture suggested that failure to fill the 
quota in 2006 resulted from incompatibility between the calendar 
year TRQ and the local marketing year.  They asked that the U.S. 
define a "quota year" that corresponds to the Moroccan marketing 
year (June-May).  Donnelly repeated the U.S. position on the wheat 
quota and drew the committee's attention to a new U.S. concept paper 
that was presented to Moroccan officials during a DVC the week prior 
to the Joint Committee.  Minister Maazouz pledged to study the U.S. 
concept and to send a formal response in advance of the April Ag and 
SPS subcommittee meetings in Washington. 
 
--------------------------------------------- ----- 
Moroccan Issues - Tomatoes and Customs Cooperation 
--------------------------------------------- ----- 
 
¶6.  (SBU) Foremost among Moroccan issues was frustration with delays 
in securing phytosanitary certificates that would permit shipment of 
agricultural products (namely tomatoes) from the Agadir region.  In 
addition, Morocco reiterated its longstanding request for tariff 
acceleration on canned artichokes, and added "processed olives" to 
the list, justifying the requests based on the large trade imbalance 
for agricultural products.  Donnelly acknowledged the importance and 
sensitivity of the agriculture issue for Morocco and pledged to do 
all he could to facilitate USDA processing of the requests, but 
noted that U.S.'s ability to accelerate duty reductions for 
sensitive products, such as olives, was limited. 
 
¶7.  (SBU) While acknowledging Morocco's appreciation of the 
technical training provided to its counterparts by U.S. Customs, the 
Moroccan delegation expressed concern about the lack of customs 
cooperation on operational issues.  It noted six instances where 
Moroccan textile imports had been delayed or denied preferential 
treatment upon entry to the U.S., yet for which Moroccan Customs had 
received neither an explanation nor a request for information, 
something provided for under the agreement.  Donnelly agreed that 
routine and operational customs cooperation was vital, and said he 
would take the issue with him to D.C., in hopes of establishing a 
U.S. customs point of contact. 
 
--------------------------------------------- ------- 
Moroccan Business Leaders Reinforce Government Views 
--------------------------------------------- ------- 
 
¶8.  (U) The day after the plenary session, the U.S. delegation met 
with leaders of Morocco's business community in Casablanca to hear 
firsthand their thoughts on the agreement's first two years.  The 
meeting, organized by the country's leading business lobby, the 
Confederation Generale des Entreprises du Maroc (CGEM), grouped 
representatives from a range of business federations, including 
textile, artisan, agro-industry, and financial sectors.  Those 
present concurred with the government's assessment that things were 
moving in the "right direction," and that even if Morocco's exports 
have not grown as quickly as they would wish, they were "optimistic" 
for the future.  Specific issues also echoed those raised in the 
formal committee meeting: textile companies expressed concern about 
the customs problems they have encountered, and appealed for the 
U.S. to reconsider its refusal to accelerate reduction of the duties 
that would enable Moroccan companies to source material from the 
U.S.  Agro-industry groups pressed for speedy completion of Agadir's 
phytosanitary certification, as well as for better dissemination of 
information on U.S. market standards. 
 
¶9.  (U) Several additional issues were raised, including the need 
for technical assistance to bring Moroccan artisan production up to 
U.S. standards and a desire for U.S. investment in the energy field, 
where Morocco faces a looming capacity shortage.  Business 
representatives echoed government concerns about the 100 percent 
scanning requirement which will take effect for U.S. imports in 
2012, while also expressing hope that a future direct shipping line 
from the new Tangier Med port to the U.S. East Coast will further 
boost bilateral trade. 
 
¶10.  (SBU) Comment: The Joint Committee meeting was two years in 
 
RABAT 00000252  003 OF 003 
 
 
coming, but achieved its purpose of permitting the two parties to 
sit down and take stock of where we are.  Key outcomes were 
agreement to reinvigorate the tempo of meetings of the subcommittees 
established under the agreement, to work towards settlement of the 
nagging implementation issues that have divided the two sides. 
Nonetheless, there was broad agreement that these concerns pale in 
comparison with the overall success registered in the last two 
years.  The challenge now is to deepen and extend that opening.  End 
Comment. 
 
RILEY 
 
 
 
SENSITIVE BUT UNCLASSIFIED