GOVERNMENT OF EGYPT MAY USE USDA'S GSM-102 PROGRAM

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 004061

SIPDIS

FAS FOR CMP/FRANK LEE
FAS FOR ITP/PATRICIA SHEIKH
FAS FOR KIRK MILLER/OA/GSM
FAS FOR HOWARD WETZEL/CMP/DLP
STATE PASS USTR SAUMS

E.O. 12958: DECL: 09/18/2015
TAGS: EAGR ETRD ECON EAID EG
SUBJECT: GOVERNMENT OF EGYPT MAY USE USDA'S GSM-102 PROGRAM
TO PURCHASE U.S. FOOD COMMODITIES

Classified by Agricultural Counselor Asif Chaudhry for
reasons 1.4 (b) and (d).


1. (C) Summary: On May 26, AgCounselor Asif J. Chaudhry
met with Hassan Kheder, Minister of Supply and Internal
Trade, to discuss Egypt's participation in the GSM-102
Program. The Vice-Chairman of General Authority for Supply
Commodities (GASC) also attended the meeting. The meeting
was a follow-up to previous discussions centering around the
requirement for a Credit Guarantee Assurance (CGA) from the
Government of Egypt to participate in the program. Minister
Kheder promised delivery of the requested guarantee within
the next few days, and expressed an interest in purchasing
wheat and possibly poultry parts from the United States,
despite the technical barriers to trade that currently
restrict poultry imports. End summary.


2. (C) Egypt is the third largest market in the world for
U.S. wheat exports. Over the years, the GOE has consistently
purchased approximately 35-55 percent of its wheat
requirements from U.S. suppliers. GASC is the main entity
that purchases food commodities, including wheat, for the
government. From July 2004 to date, GASC purchased over 1.6
million tons of U.S. wheat. The AgCounselor pointed out to
Minister Kheder that participation in the GSM program would
offer favorable financing terms for future purchases of wheat
and more leverage in the purchase of other commodities. The
Minister concurred and promised to deliver a CGA within the
next few days.


3. (C) Minister Kheder then inquired about the possibility
of using GSM to purchase poultry parts and turkey meat.
Though there is no ban on imports, Egypt maintains technical
barriers to trade, such as halal requirements that
effectively deny market access. The Minister pointed out
that there are currently serious discussions throughout the
GOE with regard to the need for openness and a commitment to
strong laissez-faire market principles. Discussions are
being held at the Prime Minister level as well as among the
Ministers themselves. Minister Kheder stated his desire to
see more competition in the poultry market, owing to his
frustration with high domestic prices, which distort prices
for other industries also, and "gimmicks" from local
producers to maintain the status quo. He also pointed out
that most of the local producers are members of Parliament,
and as such had a vehicle for expressing their opposition to
changes in policies.


4. (C) Minister Kheder said the Prime Minister has a
strong desire to open the market for poultry. However,
opposition from the Ministry of Agriculture and reluctance of
the Ministry of Foreign Trade and Industry to vigorously
pursue the issue are stifling progress. Minister Kheder
requested the assistance of the AgCounselor in obtaining
price information on U.S. poultry, leg quarters in
particular. He is of the impression that information showing
lower prices will make a strong case for opening the market
to benefit consumers. He is of the mindset that a reduction
in the price for poultry products would lead to a reduction
in price for other meat products. He sees this as a win-win
situation. He does not believe there are as many people in
poultry production as alleged by MinAg. He feels that MinAg
is taking a protectionist position to benefit a few producers
at the expense of millions of consumers; efficient producers
will survive even with competition from imports. The
Minister stated he is committed to open market policies, and
he is willing to work with those opposed. He added that he
would be very interested in importing poultry meat from the
U.S. for the government-run stores to supply cheap protein to
lower income Egyptians, and in the process help lower prices
in the market in general.


5. (C) Comment: The Ministry of Supply could be an
important ally in our efforts to open the Egyptian poultry
market for imports, which have been absent for several years
due to non-tariff barriers. Post will continue to explore
possible options with Minister Kheder to gain market access
for U.S. poultry imports through all available channels. End
comment.


Visit Embassy Cairo's Classified Website:
http://www.state.sgov.gov/p/nea/cairo

You can also access this site through the
State Department's Classified SIPRNET website.

GRAY