CODEL SMITH MARCH 21-24 VISIT TO CAIRO: MEETING

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 002482

SIPDIS

E.O. 12958: DECL: 03/29/2015
TAGS: OREP ETRD PREL EG
SUBJECT: CODEL SMITH MARCH 21-24 VISIT TO CAIRO: MEETING
WITH TRADE MINISTER RACHID

Classified by Acting DCM Michael Corbin for reasons 1.4 (b)
and (d).

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Summary
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1. (C) During a March 23 meeting, Senator Gordon Smith and
Egyptian Minister of Foreign Trade and Industry Rachid
discussed the recent QIZ agreement and prospects for an
eventual FTA with the U.S. Smith underlined the importance
of further Egyptian progress in particular areas, including
IPR. Smith also emphasized the important role issues like
political reform, religious freedom, and anti-Semitism play
in shaping the overall bilateral relationship. On Iraq,
Smith noted progress and continuing challenges. Rachid
advised Smith that the GOE was providing assistance to the
new Iraqi government in various areas, including technical
training in his own ministry for Iraqi trade officials.
Smith welcomed this engagement. End summary.


2. (C) In his March 23 meeting with Minister of Foreign
Trade and Industry Rachid Mohamed Rachid, Senator Smith
opened the conversation by asking about the Minister's recent
visit to Washington. Rachid said that the visit had gone
very well. He said there was a good understanding in
Washington about what is going on in Egypt in terms of
economic reform and trade issues. He said that there was
particular interest in the recently concluded Qualifying
Industrial Zone (QIZ) agreement between Egypt and Israel.
Noting that Free Trade Agreements (FTAs) often become tied to
political issues, Senator Smith said that the QIZ agreement
and President Mubarak's work on Egypt's relationship with
Israel was resonating well in Congress. The Senator said
that he also personally appreciated the Minister's help with
the issues that affect his district, like resolving the
single-sourcing problem for Nike and Egypt's continuing
purchases of wheat from the U.S., a portion of which was
supplied by Oregon farmers.


3. (C) Minister Rachid spoke about how trade was helping to
change the political environment in Egypt. He said that with
the QIZ, the government had expected strong reactions to the
broadening of trade relations with Israel. To its surprise,
the only demonstrations that occurred were by workers whose
jobs might be threatened because their factories were not
included in the first set of designated zones. Rachid said
that QIZ was the first time the average Egyptian could see a
direct link between the peace process and his own personal
welfare.


4. (C) Rachid stated that although Egyptians had high
expectations about the reforms, there would be a long and
difficult transition period to restructure the economy.
During this period, trade would be "one of the best things we
can do" to improve people's welfare. For this reason an FTA
with the U.S. was a priority for Egypt, he said. He said
that Egypt's interest in an FTA was not because it sought
greater access to the U.S. market; Egypt's access was already
substantial thanks to the QIZ. Rather, the government wanted
an FTA because it would elevate Egypt's relationship with the
U.S. to a new level, would be a catalyst for further reform,
and would attract foreign direct investment.


5. (C) Senator Smith said that some of the strongest
resistance to expanded trade has been from U.S. firms that
believe intellectual property rights (IPR) are not being
sufficiently protected in the countries seeking FTAs with the
U.S. He said that whatever Egypt could do to respond to U.S.
firms' IPR concerns would make it easier for Congress to
support an FTA with Egypt. Rachid said that Egypt's legal
structure for IPR protection was in place and generally
working well. The main issue was with pharmaceuticals, which
was really a combination IPR protection and
affordability/access to medicine. As for IPR protection, one
of the main issues was the lack of transparency for
government approvals of generics. Rachid said that after the
recent discussions with U.S. firms and the USG, the Minister
of Health and Population was now taking steps to address that
problem. The real challenge, he said, was how to make
medicines affordable and accessible. He believed that a
solution could be found through discussions between the
concerned parties rather than confrontation, as had sometimes
been the case in the past. In general, however, he agreed
that IPR was an area that the government needed to work on.


6. (C) Rachid asked the Senator if he had particular
concerns with respect to Egypt. Senator Smith said that
political reform had been a concern in Congress and the
Senator himself was concerned about whether Egypt was going
in the right direction. President Mubarak's announced
intention to open up the political process was welcome in the
U.S., and many Congressional concerns about Egypt would go
away if the steps taken by the GOE were indeed real and not
symbolic. Moreover, Egypt could enhance its position by
continuing to play a constructive role in the peace process,
which was a priority for President Bush. Finally he noted
that anti-Semitism was a political concern, one that Egypt
appeared to be addressing.


7. (C) Senator Smith added that an issue of personal concern
was the situation of Mormons in Egypt. He had heard from his
co-religionists in Egypt that there were half a dozen cases a
year in which Egyptians who had converted freely to Mormonism
while living outside of Egypt had been prevented from
attending services in Egypt. He said that his concerns were
not just for the Mormons, but for adherents of other minority
faiths who faced similar problems. The Minister affirmed
that he would look into the situation.

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Iraq
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8. (C) The Minister then asked the Senator for his
impression of the situation in Iraq. Senator Smith noted
that the U.S. military was doing an excellent job, but faced
a difficult task dealing with insurgents, who offered only
death and destruction and no plan for the future. He hoped
the new government would be established soon and that Iraqis
could begin to take over more security operations so that the
U.S. could start to bring the troops home. The Minister said
that Egypt was offering various forms of assistance to Iraq.
In fact, after the meeting with the Senator, Rachid was due
to officiate over a graduation ceremony of 60 Iraqis who had
received technical training from his ministry. A second
group of Iraqis was due to arrive shortly to receive
specialized training on trade matters. Smith welcomed the
GOE's assistance to Iraq.


9. (U) CODEL Smith did not have an opportunity to clear this
message before departing Egypt.


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