Identifier
Created
Classification
Origin
05AMMAN5130
2005-06-27 14:41:00
CONFIDENTIAL
Embassy Amman
Cable title:  

JORDAN-ISRAEL TRADE AND RESEARCH INITIATIVES

Tags:  ETRD PREL KTIA SENV ECON PGOV KDEM EG IS JO 
pdf how-to read a cable
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 005130 

SIPDIS

STATE FOR NEA FRONT OFFICE; NEA/ELA
STATE ALSO FOR NEA/RA LAWSON, OES/PCI SHAW
NSC FOR ABRAMS/DANIN/MUSTAFA
COMMERCE FOR 4520/ITA/MAC/AMESA/OME/CLOUSTAUNAU
STATE PASS TO USTR

E.O. 12958: DECL: 06/27/2015
TAGS: ETRD PREL KTIA SENV ECON PGOV KDEM EG IS JO
SUBJECT: JORDAN-ISRAEL TRADE AND RESEARCH INITIATIVES

REF: A. AMMAN 4440

B. AMMAN 1515

C. 04 AMMAN 1971

Classified By: CHARGE DAVID HALE FOR REASONS 1.4 (B) AND (D).

C O N F I D E N T I A L SECTION 01 OF 03 AMMAN 005130

SIPDIS

STATE FOR NEA FRONT OFFICE; NEA/ELA
STATE ALSO FOR NEA/RA LAWSON, OES/PCI SHAW
NSC FOR ABRAMS/DANIN/MUSTAFA
COMMERCE FOR 4520/ITA/MAC/AMESA/OME/CLOUSTAUNAU
STATE PASS TO USTR

E.O. 12958: DECL: 06/27/2015
TAGS: ETRD PREL KTIA SENV ECON PGOV KDEM EG IS JO
SUBJECT: JORDAN-ISRAEL TRADE AND RESEARCH INITIATIVES

REF: A. AMMAN 4440

B. AMMAN 1515

C. 04 AMMAN 1971

Classified By: CHARGE DAVID HALE FOR REASONS 1.4 (B) AND (D).


1. (C) SUMMARY: The Government of Jordan (GOJ) has pursued
trade discussions with Israel and Egypt related to Qualifying
Industrial Zones (QIZs). The GOJ seeks USG support of
Jordanian positions to lower Israeli content to five percent
in QIZ products and to use the simpler Egyptian QIZ product
audit system, should the Israelis prove receptive. The
Jordanians are also seeking to advance two trilateral
research efforts: Bridging the Rift (BTR) project, a new
life sciences research institution to be constructed on the
Israel-Jordan border and involving Stanford and Cornell
Universities (Ref C); and the U.S.-Israel-Jordan TRIDE
research program, which some are proposing should be expanded
from its current base of $1 million to $10 million (Ref B).
END SUMMARY

Egypt - Jordan Seeks QIZ Complementarity
--------------


2. (C) Dr. Hani Mulki, a royal court advisor and former
Foreign Minister, briefed Charge and Econoff recently on his
efforts to promote closer trade cooperation with Israel and
Egypt.


3. (C) Mr. Galal El Zorba, ex-co-chairman of the Egyptian
U.S. Business Council was the chief Egyptian interlocutor.
(NOTE: El Zorba is considered a leading architect of the
Israeli-Egyptian QIZ concept. END NOTE.) Mulki conveyed
Jordan's continuing interest in a product content auditing
system that matched the Egyptian model, calling for
quarterly, post-facto audits of factories (versus a costly
and time-consuming product-by-product QIZ pre-qualification
review in Jordan). The most significant initiative raised
was a trilateral cumulation system between Israel, Egypt, and

Jordan whereby assembly operations in Egypt could be
complemented by finishing and packing in Jordan. The GOJ
argues that, with this system, two cooperating factories
would share the Israeli content requirement. The Egyptians
had bluntly asked "what's in it" for them, Mulki recounted.
In the end, however, the Egyptians gave the green light to
the GOJ to discuss the concept with the Israelis. (COMMENT:
We suspect that the GOJ is playing to its domestic
constituency with this latter offer, and that the GOJ wishes
to be perceived by QIZ investors as having made every attempt
to further GOJ QIZ factories' interests, regardless of the
feasibility of the proposals. END COMMENT.)


4. (C) Mulki stressed to Charge that he was not negotiating
in parallel with Jordanian Minister of Industry and Trade
Sharif Zu'bi. (Trade Minister Zu'bi had reported on some of
these developments separately and appeared to have been fully
briefed by Mulki.) Rather, Mulki emphasized, he was laying
the groundwork for any final negotiations and also providing
a "safety net" mechanism.

Israel - DPM Olmert "Positive"
--------------


5. (C) In Israel, Mulki said that he saw both Foreign
Minister Sylvan Shalom and Deputy Prime Minister and Minister
of Industry and Trade Ehud Olmert. With both, he raised
three Jordanian trade initiatives: (1) moving Jordan's QIZs
to the same type of product content review as found in the
Egyptian QIZ audit system; (2) reducing the required Israeli
content in Jordan QIZ products from eight percent to five
percent; and, (3) the trilateral cumulation scheme. Shalom
was receptive, he said. On the audit system, DPM Olmert
related that the Israelis were still evaluating the quarterly
approach, but that if they decided to keep it with Egypt,
then Israel would adopt the same system in Jordan. Mulki
commented to Charge that it was important to Jordan to
accomplish this very quickly, because the Jordanian QIZ
investors were seeing themselves put at a disadvantage and it
was important for them to be "treated the same."


6. (C) Mulki explained that the GOJ's requested reduction
in Israeli QIZ content to five percent had an alternative,
more complex formula: a sliding scale based on
"free-on-board" (FOB) pricing of the particular QIZ product.
The more expensive the item, the lower the required Israeli
content. Starting with an FOB price of $0 to $2 dollars,
which would continue to require eight percent Israeli
content, each additional $2 dollar increment in FOB price
would see a concomitant drop in Israeli content of one
percent, so that FOB prices of $8-10 dollars or more would
require five percent Israeli content. Olmert "looked very
positively" on the sliding scale concept, especially since it
would tend to be less irksome to the Egyptians than an
across-the-board three percentage point reduction. (NOTE:
Egyptian QIZs are required to manufacture products with 11.7
percent Israeli content. END NOTE.)


7. (C) On the trilateral cumulation scheme, Mulki said that
Olmert wanted to know what the Egyptians thought and that he
would review it if the Egyptians were disposed to the program.

Jordan Seeking Help with the Israelis
--------------


8. (C) The royal advisor repeated the GOJ trade minister's
standing request for USG assistance to convince Israel to
support Jordan's trade proposals (Ref A). The QIZ audit, he
said, was a matter of some urgency. If Israel decided to
extend the quarterly review system in Egypt, it was important
to help Jordan with the Israelis so that they quickly
extended the same privilege to Jordan. The bracketed,
sliding scale of Israeli content was important to help Jordan
move to the very highest high-end products, he said.
(COMMENT: Five percent of just 2000 $100-dollar garments
gives a better return to Israeli suppliers than does eight
percent of 50,000 $2-dollar garments. But Jordan cannot be
competitive if Israel demands the full eight percent on these
high-end garments. There could be Israeli interest in the
Jordanian proposal to gain wider joint access to this
up-scale market. END COMMENT.)

Research: The Bridging the Rift Free Education Zone
-------------- --------------


9. (C) Mulki reviewed his discussion with GOI FM Shalom on
the new 150-acre desert complex devoted to life sciences
research that is under construction in the southern Wadi
Araba desert straddling the Jordan-Israel border. Bridging
the Rift (BTR),located about 30 miles south of the Dead Sea,
will house researchers sponsored by Stanford and Cornell
Universities under the financial support of the BTR
Foundation created by New York-based Israeli businessman Mati
Kochavi (Ref C). A major issue was how to implement the
program across a border when a myriad of sovereignty issues
were raised such as personal legal culpability or insurance.
He said that the GOJ solution proposed had been simple:
persons in the free education zone would be treated under the
laws of the nation from whence they came (just as occurred at
the border crossing zones now). Mulki said that the Israeli
Under Secretary of Justice liked the idea. The imaginary
borderline running down the middle of the equally apportioned
BTR zone would be marked by a long stretch of garden, Mulki
noted. (COMMENT: Israeli Ambassador Yacob Handlesman on
June 22 gave Charge a similarly positive description of this
meeting on BTR. We take this mutual advancement on sensitive
issues to indicate the proposed opening date for the BTR
desert campus at the end of the year would appear to be
realistic. END COMMENT.)

TRIDE: Jordan Presses for More Money...Bigger Ideas
-------------- --------------


10. (C) The Trilateral Industrial Research and Development
(TRIDE) fund was raised with DPM Olmert. After meetings were
held last November in the U.S. and in February in Jordan to
revive the fund which had been dormant since the second
Intifada in 2000 (Ref B),Jordan had been committed to
providing its third of the $1 million fund. The plan had
been to start a new round of entrepreneurial R&D projects
requiring a relatively small amount of seed money. However,
Mulki indicated that the GOJ wanted to see the fund expanded
to $10 million, an idea first raised last February. Charge
indicated that he was unaware of any USG funds available in
its budget to contribute to this new concept.


11. (C) Mulki stated that he thought $10 million would be
more suitable to attracting the type of industrial-scale R&D
that Jordan could host. He added that one project being
contemplated -- requiring the strictest confidence -- was an
industrial park located in Jordan where Israeli
high-technology would be used to make products or provide
technical services to Iraq. He referred to Iraq's
electricity and manufacturing sectors in the coming decade as
a rich market to tap. The GOJ could foresee a time in the
next few years ahead when such a concept would no longer
appear to be so radical. However, now was the time to get in
on the ground floor and establish this joint venture --
located in Jordan and exporting nominally "Jordanian"
products to Iraq -- to establish a market advantage.

TRIDE to be Promoted by King or to Re-Start?
--------------


12. (C) Aside from the project directed at Iraq, he noted,
there was merit in promoting the larger-scale investment in
TRIDE of $10 million. Jordan would want to promote any
investments that came through this unique platform, he said.
It would be a way to attract a more diversified industrial
base to Jordan in one of the technology sectors. With the
larger TRIDE fund, more Jordanian, American and Israeli
investors could be attracted to permanently "root" a
particular industry in Jordan, he noted. King Abdullah could
heavily promote TRIDE on his next visit to the United States
(likely in September),Mulki indicated. This would be a good
mechanism to attract more investment. Charge replied that it
would be important to hear the Israeli position on such a
proposal. (NOTE: Israeli DCM Danny Nevo, who participated
in the February TRIDE discussions (Ref B),indicated to
Charge June 22 that the GOI was still waiting for Jordan to
contribute its $330,000, to match the U.S. and Israeli
contributions, so that an already-delayed Request for
Proposals can go out under the current, agreed-upon TRIDE
program. END NOTE.)
HALE