UNCLAS SECTION 01 OF 03 TEL AVIV 001623

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SENSITIVE

USDOC FOR 500/KJUSTER/AKUNTAMUKKALA
USDOC FOR 1000/GALDONAS
USDOC FOR 4521/HVINEYARD
USDOC FOR 4520/CLOUSTAUNAU/NWIEGLER
USDOC FOR 3131/BORR/GLITMAN
STATE FOR IPA/DGREENE

E.O. 12958: N/A
TAGS: ETRD BEXP KIPR KWBG IS ISRAEL RELATIONS ECONOMY AND FINANCE LABOR AND COMMERCE
SUBJECT: COMMERCE U/S JUSTER RAISES TRADE ISSUES AND LOOKS
AT EXPORT LICENSING REGIME


This message is sensitive but unclassified. Please handle accordingly.


1. (SBU) SUMMARY. In a visit to Israel March 2-4, Under Secretary of
Commerce Kenneth I. Juster, head of the Bureau of Industry and Security
met with high-ranking Israeli officials, as well as with both Israeli a
leaders from the private and public sectors in Israel's hi-tech and def
industries. U/S Juster discussed U.S.-Israel cooperation in the area o
technology trade, held meetings with BIS's Israeli counterparts in the
met with leading private and public sector players in Israel's sophisti
and defense sectors. Throughout the meetings with GOI officials, Juste
U.S. government concerns about the worsening U.S. trade deficit with Is
U/S urged Israeli government officials to reexamine specific policies a
that restrict the ability of U.S. companies to compete in Israel and al
affect the interests of Israeli consumers. In particular, Juster discu
Israeli procurement practices that fail to promote transparent and fair
the lack of protection of certain intellectual property rights, and the
enacting technical standards and regulations that do not discourage U.S
from competing for business in Israel. END SUMMARY.

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Meeting with Vice Prime Minister Olmert
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2. (SBU) Under Secretary Juster told Vice PM and Minister of Industry
Olmert that he was "alarmed" by the rising U.S. trade deficit in Israel
almost $6 billion in 2003, especially at a time when the EU has a very
surplus with Israel. Israel should take steps to remove the obstacles
exports, such as inadequate protection of intellectual property -- espe
protection of proprietary pharmaceutical data -- non-transparent govern
procurement procedures, and the use of technical standards as a non-tar
to trade.


3. (SBU) Olmert responded that the Ambassador has pushed these issues
hard with the Government of Israel. It is nonetheless difficult, he sa
trade patterns easily, because Israel is an open pr

ivate economy and pu
buy products from wherever they like. He said, however, that he is ope
about how to reduce the U.S. trade deficit and asserted that there has
on trade issues. All of the obstacles to signing a new bilateral agricu
agreement have been removed and, according to Olmert, the agreement sho
finalized soon.


4. (SBU) Turning to IPR, he noted that Israel has formed an intermini
committee, comprised of MOIT, Health and Justice, to look closely at th
protection issue. The committee will make recommendations by the end o
month and the USG should expect "good news." Olmert did not provide sp
but said the GOI will "move in the direction of your expectations." "S
frankly," Olmert said, "I don't think your complaints are right." Neve
GOI has decided to reconsider its previous positions on the matter, in
make it easier for U.S. firms to operate in Israel.


5. (SBU) Turning to procurement and standards issues, Olmert said he w
arrange a meeting with the Ambassador to review specific ideas the U.S.
have. Olmert said that the GOI desires a less "lopsided" and more coll
trade relationship. (A meeting between Olmert and the Ambassador has b
up for mid- March.)



6. (SBU) Olmert noted that Israel has a few trade issues of concern a
include the difficulty that Israeli firms have had getting access to U.
homeland security-related procurement. U/S Juster said he would look i
made the point that openness and transparency in the procurement proces
sides would be beneficial. Olmert also noted that the U.S. has negotia
the process of negotiating, a number of new free trade agreements. Isr
interested, he said, in tying into those agreements through favorable t
under rules of origin. He asked U/S Juster to convey these views to US
Zoellick. Finally, Olmert raised the problem that the Israeli firm Che
been having in gaining USG approval for the purchase of a U.S. company.
said that the deal has been signed off on by all USG agencies, except t
Department of Homeland Security. U/S Juster replied that the purchase
considered by the USG and that an interagency group would make the deci
He promised to convey Olmert's views to Washington. Olmert said that he
to call Secretary Ridge about the issue.

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The Arab Boycott and the WTO
--------------


7. (SBU) Olmert noted that several countries in the region, most notab
Arabia, had expressed interest in joining the WTO. He stressed that it
important that each candidate for WTO membership commit, in writing, no
support any boycott against Israel, as a prerequisite for joining the o
U/S Juster, noting that he is responsible for Arab boycott issues at th
of Commerce, said the USG agreed that endorsement of a boycott was inco
with WTO membership.

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Olmert Says the Jawwal Problem Will Be Solved
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8. (SBU): U/S Juster noted that the USG remains concerned that equipme
for the Palestinian telecommunications company Jawwal continues to be h
Israeli ports. Olmert said that he is well aware of the issue, and has
Jawwal Chairman Zahi Khouri about the problem at length. Olmert promise
the goods would be released soon. (Note: key components Jawwal needs to
upgrade its infrastructure have been held up for months despite GOI ass
the embassy that the parts would be released.)

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Breakthrough on Gas Pipeline Standards Issue?
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9. (SBU) At a working luncheon hosted March 2 by the Ministry of Natio
Infrastructure, U/S Juster noted the fact that MNI's decision to build
natural gas transmission pipeline under a little-known Dutch standard h
disadvantaged U.S. firms in bids for up to $500 million in contracts.
prime example, he said, of how technical standards act as a serious non
barrier. MNI Director General Eli Ronen and other MNI officials initia
that it was far too late to change the standard now. Later during the
however, Ronen said that it "might be possible" to get the selection of
reexamined. Ronen's assistant later told Emboffs that many officials i
come to the conclusion that using the Dutch standard was a mistake and
USG would petition PM Sharon on the issue. He noted, however, that the
remained many vested interests supporting the Dutch standard.

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Israeli MOD on the Israeli Export Control Regime
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10. (SBU) On March 3, Ministry of Defense (MOD) officials, led by Direc
General Amos Yaron, gave U/S Juster a detailed, two-hour presentation a
MOD role in defense export controls. Ehud Ben-Aharon, head of the MOD
defense export control office, reviewed the legislative basis for MoD's
regulate the export of defense articles and described its current scope
and overall GOI defense export control policy. He provided a step-by-s
of the process for issuing to would-be exporters the two key authorizin
documents: a negotiation permit, which must ultimately be signed by the
General, and the export license, signed by the Director of SIBAT, the M
Foreign Defense Assistance and Defense Export Division. Ben-Aharon dre
special attention to the requirement for exporters of U.S.-origin compo
present their U.S. re-export licenses. Deputy Director Meir Shalit of
followed with a presentation on GOI controls on the export of cryptogra
technology. While MOIT generally issues export licenses for dual-use t
MOD has authority over the export of dual-use cryptographic technology.
noted that the GOI controls the export of about 1,800 cryptographic pro
issues more than 100 export licenses a year in the sector.

--------------
AmCham Members Share Views
--------------


11. (SBU) At a breakfast meeting on March 4 with AmCham officials and
representatives from Intel, Lockheed Martin, Samedan, IBM, and National
Semiconductor, U/S Juster repeated USG concerns about the trade deficit
technical standards, and certain GOI tendering practices. The represen
shared their views about doing business in Israel, which were quite pos
general, and noted that U.S. firms already operating in the country ten
affected as much by the problems with tenders and standards as those fi
seeking to enter the market. The Lockheed representative pointed to $50
million of business in Israel over 10 years, almost all through joint v
Israeli companies and resulting in exports to other countries. One com
representative raised the issue of linking USG financial assistance to
progress on Israeli trade practices of concern. The IBM rep proudly no
firm's presence in Israel for 54 years. (Note: IBM's first research fa
located outside North America was in Israel.) The National Semiconduct
representative asked the U/S to tell "the home office" it is safe to co
Miron-Wapner of the USDOC-supported United States - Israel Science and
Technology Commission pointed to the strength of life-science industrie
and asked how such firms could help promote the USG's message. The Sen
Commercial Officer explained the objectives of the AmCham's Forum of U.
Companies in Israel, which the Embassy actively supports, and its ad-ho
committees on IPR, Standards and Regulations, Public Procurement, and
Taxation/Work Permits. AmCham President Zalman Shoval concluded the
meeting by suggesting that the Chamber might organize "reverse trade mi
the United States in order to highlight large upcoming infrastructure p
Israel.

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PM Bureau Chief: Putting our Money where our Hearts Are
-------------- --------------

12. (SBU) In a March 4 meeting with Chief of the Prime Minister's Bure
Weissglas, the U/S again conveyed USG concerns about Israeli trade prac
discourage U.S. companies from competing for business in Israel. In re
Weissglas stated that a "ministerial committee has been formed to exami
the board the source of why U.S. firms don't get a fair deal" and promi
the intention of the government to "react with our wallets the same way
our hearts" toward the United States. On IPR, Weisglass explained the b
Israeli patent law in the British tradition, but finally indicated that
intellectual curiosity, [he] would see if there is some way to amend th

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Juster Conveys Concerns to MFA Officials
-------------- --------------


13. (SBU) U/S Juster also broached bilateral trade issues in his March
with Yossi Gal, MFA Deputy Director General for Economic Affairs, and Y
Ben-Ze'ev, MFA Deputy Director General for North America. The existenc
sizable U.S. trade deficit with Israel at the same time as the EU enjoy
surplus was an anomaly, Juster said. Israel should address U.S. trade
said, since it is not in either country's interest that this is an issu
relations. The USG is not asking that Israel favor one country over an
the USG and U.S. companies are only expecting a level playing field.



14. (SBU) Juster recounted his visits to U.S. hi-tech companies active
cited hi-tech as a successful example of U.S./Israeli cooperation. Add
opportunities exist in the biotech and life science fields, he said, ad
pharmaceutical firms are interested in increasing their engagement in I
However, the country's lack of protection for proprietary test data rem
problem in the bilateral trade relationship, he said, and he told Gal a
that the GOI must now finally address the problem.

-------------- --------------
Economic Consequences of Security Measures
-------------- --------------


15. (SBU) Responding to a question by Gal, Juster confirmed that he had
PA officials and Palestinian business people. He said he delivered a s
message to PA Minister Maher al-Masri that the PA must finally address
issues. Al-Masri replied that he understood that the PA must act. Jus
Al-Masri also addressed the economic difficulties created by Israeli se
measures. Juster also recounted his visit to the Palestinian telecommu
firm Jawwal. Jawwal appears to be a good corporate business model, but
security measures had caused Jawwal economic problems, he said. He told
GOI officials that they should consider the economic side effects of an
measures.

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Greater Middle East Initiative
--------------


16. (SBU) Ben-Ze'ev addressed the Greater Middle East Initiative. In
eyes, the breadth of the initiative makes it a task for the entire comi
he told Juster. Israel is concerned whether the USG will have the stay
stay focused on implementing the initiative, particularly if there shou
in the U.S. administration. In order for the initiative to gain accept
broader Arab world, Ben-Ze'ev said, the USG should ensure that it does
to be imposed from the outside. In addition, Ben-Zeev cautioned agains
progress on implementation of the initiative to progress in solving the
Israeli/Palestinian conflict. The conflict has nothing to do with "ill
Yemen," Ben-Ze'ev said. Juster said that the USG is now gathering comm
the initiative, and is aware of such concerns. However, action is need
status quo is unacceptable. There should be progress on all aspects of
simultaneously, he told his GOI interlocutors.

Undersecretary Juster has cleared this cable.


Kurtzer