VZCZCXYZ0001
RR RUEHWEB

DE RUEHAS #0889/01 2741344
ZNY CCCCC ZZH
R 011344Z OCT 09
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC 7951
INFO RUCNMGH/MAGHREB COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

C O N F I D E N T I A L ALGIERS 000889 
 
SIPDIS 
 
DEPT PASS TO USTR PBURKHEAD 
 
E.O. 12958: DECL: 09/30/2019 
TAGS: ETRD ECON PREL AG
SUBJECT: COMMERCE MINISTER SAYS ALGERIA SERIOUS ABOUT WTO, 
AND NEW INVESTMENT OBSTACLES 
 
Classified By: Ambassador David D. Pearce; reasons 1.4 (b) and (d). 
 
¶1. (C) SUMMARY: Commerce Minister El Hachemi Djaaboub told 
USTR Director for the Middle East and Europe Paul Burkhead on 
September 28 that WTO accession is still a priority and 
Algeria looked to the U.S. for support in its efforts to 
complete negotiations.  Djaaboub nevertheless defended new 
rules that increase controls on foreign investment and 
imports, arguing the country's right to protect key domestic 
industries and respond to unique political and social 
conditions.  He downplayed the concerns of foreign investors 
and noted that in the case of the ban on pharmaceutical 
imports, restrictions were limited to medication produced 
domestically.  Burkhead said that many of these new rules 
were contrary to WTO accession.  He suggested an informal 
meeting in Washington to take stock of Algeria's WTO efforts 
and to revive the 2001 TIFA framework as a forum to discuss 
bilateral trade and investment issues.  Djaaboub welcomed 
both ideas and offered Algiers as a venue as well.  Djaaboub 
said that Algeria remained open to foreign investors.  While 
he did not rule out revisions to the investment rules at some 
point, he cautioned that Algeria's interests would always 
come first.  END SUMMARY. 
 
U.S. A KEY PARTNER 
------------------ 
 
¶2. (C) Commerce Minister El Hachemi Djaaboub told USTR 
Director for the Middle East and Europe Paul Burkhead that 
Algeria viewed the United States as its number one commercial 
partner.  Djaaboub said that bilateral commercial engagement 
was improving, a U.S. - Algeria business council existed and 
several commercial agreements were in play. He said Algeria 
and the U.S. should reinforce commercial ties, but added that 
U.S. support for Algeria's WTO accession was still in 
question.  Djaaboub told Burkhead that Algeria started WTO 
negotiations 13 years ago and the government believed that it 
had met the organization's basic requirements for membership. 
 He said U.S. political support for Algeria's membership was 
necessary to ensure his country's negotiation efforts 
succeed. 
 
¶3. (C) Burkhead agreed that our commercial ties had grown, 
noting that many U.S. companies had operations in Algeria and 
many more U.S. investors were interested in the Algerian 
market. Thus it was important to foster a cooperative 
bilateral commercial relationship.  Burkhead underscored our 
interest in seeing Algeria's economy grow, diversify and 
integrate into world markets.  Becoming a member of the WTO 
was important step in this process, and the U.S. was willing 
to be a partner in helping Algeria achieve this goal. 
Burkhead cautioned, however, that recent changes in Algeria's 
investment rules had made a negative impression on U.S. 
investors and contradicted basic WTO principles.  U.S. firms 
see economic opportunities in Algeria, he said, but they 
express concern over uncertainties in the regulatory 
environment.  Furthermore, the investment rules codified in 
the 2009 complementary finance law (CFL) and the January ban 
on pharmaceutical imports created potential obstacles to WTO 
negotiations. 
 
¶4. (C) Djaaboub agreed that changing laws and lack of 
transparency hindered trade and investment.  Algeria's 
economic transition, he said, required the government to 
adopt more open investment rules, but it also required the 
government to consider opponents of such policies.  Djaaboub 
said certain economic sectors are not prepared to compete in 
a free market economy and need more time to adjust to new 
circumstances.  Algeria also faced the legacy of a 
centralized, command economy.  Yet he claimed that foreign 
firms were adapting to the new institutional arrangements, 
and Algeria was working to ease conditions for ''our 
allies.''  Djaaboub said that Algeria sought the same level 
of commercial support that the U.S. gives Morocco and 
Tunisia.  He took note of the concerns U.S. firms about the 
CFL, but defended Algeria's right to protect infant 
industries and make them more competitive.  Djaaboub also 
argued that many WTO member countries have restrictions 
similar to the 30 percent partnership rule for foreign import 
companies.  In its WTO negotiations, Algeria might seek 
recognition of this measure as an exception. 
 
¶5. (C) The Ambassador interjected that the Embassy was 
working hard to increase bilateral commercial exchanges. 
President Bouteflika, the Ambassador recalled, expressed his 
desire to see more economic cooperation outside of the 
hydrocarbons sector, an interest we share.  Critics of 
foreign direct investment (FDI), the Ambassador argued, 
 
tended to focus narrowly on how investment profits are 
divided.  However, FDI brings other important benefits such 
as the creation of infrastructure and knowledge transfer that 
strengthen the economy as a whole.  Djaaboub clarified that 
the government recognized the value-added FDI contributes. 
He said Algeria needed foreign expertise and some 
competition, he admitted, would give Algerian companies an 
incentive to produce better, more affordable products for 
citizens. 
 
PHARMA BAN HERE TO STAY 
----------------------- 
 
¶6. (C)  Djaaboub said pharmaceutical imports reached 1 
billion dollars in 2008.  The government's goal was to 
eventually rely 100 percent on domestic production, at least 
for generics.  The ban aimed to protect Algeria's infant 
pharmaceutical industry while keeping the door open to 
imports of drugs not produced here.  Burkhead warned that 
Algeria's policy could have a lasting negative impact on 
Algeria's investment climate.  Djaaboub brushed aside the 
criticism, saying that the ban would encourage investors to 
come to Algeria.  The ban applied only to medications 
produced domestically, predominantly generics.  Foreign 
companies, including U.S. firms, continued to export to 
Algeria ingredients used by Algerian producers, he added. 
Djaaboub concluded by acknowledging the importance of 
protecting intellectual property rights for pharmaceuticals. 
 
TAKING STOCK OF WTO PROGRESS, TIFA 
---------------------------------- 
 
¶7. (C) Burkhead, in turn, acknowledged that WTO negotiations 
were long and complicated, and that they increase in 
difficulty as more time goes by.  Burkhead said the U.S. 
shared Algeria's goal of moving forward on WTO, but no 
progress had been made in the past year.  Burkhead suggested 
an informal meeting in Washington to take stock of prior 
bilateral and multilateral WTO negotiations, and discuss 
steps to move forward.  Djaaboub agreed and offered Algiers 
as a venue for the meeting as well.  In addition to WTO, 
Burkhead proposed reviving the 2001 Trade and Investment 
Framework Agreement (TIFA) as a forum for discussing specific 
bilateral commercial interests.  Djaaboub agreed that we 
could take better advantage of the TIFA framework and said 
his door was open to dialogue. 
PEARCE