JORDAN, ISRAEL SEEK QIZ CONTENT OF EIGHT PERCENT

C O N F I D E N T I A L AMMAN 000783

SIPDIS

PASS TO USTR - A/USTR CATHERINE NOVELLI

E.O. 12958: DECL: 01/29/2014
TAGS: ETRD PREL IS JO
SUBJECT: JORDAN, ISRAEL SEEK QIZ CONTENT OF EIGHT PERCENT
FOR AN INDEFINITE PERIOD

REF: AMMAN 686

Classified By: DAVID M. HALE, CDA. REASONS 1.5 (B.D)


1. (U) This is an action cable. See paras 7 - 9.


2. (SBU) Government of Jordan (GOJ) Deputy Prime Minister
and Minister of Industry and Trade January 29 delivered a
package to the Ambassador containing a letter addressed to
USTR Zoellick informing the USG that Israel and Jordan have
reached an agreement on the specified Israeli content in
products manufactured in Qualifying Industrial Zones (QIZs)
under the FTA. In an agreed letter to be signed by both DPM
Halaiqa and Vice Prime Minister Ehud Olmert, they state that
they will be "maintaining the 8 percent Israeli content." No
period for the length of the agreement is stated. GOJ
Ministry of Industry and Trade has delivered to Israeli
counterparts in Tel Aviv via express courier the letter
Halaiqa has signed; VPM Olmert is expected to initial the
letter as early as January 30. (Embassy is faxing copy of
the draft letter from Halaiqa and Olmert to NEA/ARN and
Embassy Tel Aviv.)

INDEFINITE AGREEMENT LIKELY TO HOLD
--------------


3. (C) Amer Hadidi, a senior MOIT official, explained
January 29 that the agreement is indefinite in length by
mutual agreement. He stated that both sides are satisfied
with the agreement on the technical trade terms. Because of
"turbulence in the political relationship," the agreement
will probably remain unchanged, he added. He said that he
did not foresee either side returning to the negotiating
table on QIZ content anytime soon, if at all.


4. (SBU) The letter requests that USTR Zoellick approve the
proposal. (NOTE: This follows the terms of the U.S.-Israeli
Free Trade Agreement Law, as amended in 1996, which governs
this QIZ provision. END NOTE.) "It is our intention that it
(the agreement) will enter into force after your approval,"
the letter to USTR concludes.

PLANS TO CONTINUE QIZ'S WITHOUT INTERRUPTION
--------------


5. (C) Hadidi said that a GOJ draft version of the letter
had proposed entry into force "immediately" after USTR's
approval. However, the Israelis asked to drop the reference
to "immediately", explaining that the GOI would have to take
one final step of reviewing and approving any USTR-sanctioned
agreement. Hadidi confirmed that Jordan is prepared to
continue with the 8 percent Israeli content specification
without interruption. (COMMENT: Given the current political
irritants, if USTR is prepared to approve, any USG action to
quickly finalize the agreement is strongly recommended. END
COMMENT.)


6. (SBU) In the meantime, manufacturers have been awarded
QIZ product approvals that last 12 months; there is little
prospect QIZ operations will be severely hampered. In
addition, January has seen an uptick in the number of QIZ
products approved, an indication that QIZ factories have been
making contingency plans to keep their production lines going.

ACTION REQUESTS:
--------------


7. (SBU) FOR TEL AVIV: Hadidi stated that the GOJ has
asked the GOI to forward the signed letter to Embassy Tel
Aviv for final transmission to Washington. The GOJ will be
on an extended Eid holiday until February 8, and would not be
able to follow through in a timely fashion. To avoid the
uncertainties of a lapsed QIZ Israeli content agreement, we
request that Embassy Tel Aviv follow up with Israeli
counterparts immediately, and secure a signed letter as soon
as possible for transmission to Department.


8. (SBU) If USTR approves this agreement, post requests
that Embassy Tel Aviv press for the GOI's final approval of
the USTR-sanctioned deal as soon as possible.


9. (SBU) FOR DEPARTMENT: Embassy strongly recommends
USTR's immediate approval of this agreement and urges
Department to use all means possible to secure and send a
reply soonest.
HALE