EGYPTIAN TRADE MINISTER JUSTIFIES EXPANSION OF QIZ

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 005860

SIPDIS

USTR FOR SAUMS
USDOC FOR 4520/ITA/MAC/SAMS, TALAAT AND JACOBS/WIEHAGEN

E.O. 12958: DECL: 07/31/2015
TAGS: ETRD PGOV PREL ECON EG USTR QIZ
SUBJECT: EGYPTIAN TRADE MINISTER JUSTIFIES EXPANSION OF QIZ
PROGRAM

Classified by Charge Stuart Jones for reasons 1.5 b and d.


1. (C) During Charge's July 28 courtesy call on Minister of
Trade and Industry Rachid, the Minister raised the issue of
expanding Egypt's Qualifying Industrial Zones (QIZs). Rachid
noted that he had sent Deputy Secretary Zoellick a letter
detailing the need for expansion (text of letter below),and
that his staff was consulting with the Embassy and USTR on
the necessary elements of a formal request for QIZ expansion.
Rachid's point person on QIZ, Sayed El Bous, said that he
hoped that Egypt and Israel would make a formal joint request
for expansion during the first week of August.


2. (C) The Charge noted that the previous day's
congressional approval of CAFTA was good news for Egypt. It
cleared the way for consideration of the GOE's QIZ expansion
request and removed a potential political impediment on the
path to an FTA.


3. (C) Noting that only about 70 of the 397 companies
registered under QIZ were currently exporting, at a
relatively modest volume, Rachid said he hoped for a quick
and favorable decision on QIZ expansion. As for the FTA, he
praised the technical groups that were reviewing FTA
obligations, stating that the experts were forging good
working relations. The work of the expert groups and the
successful launch and implementation of the QIZ program, he
said, should help build support for, and speed negotiation
of, an FTA.


4. (SBU) Begin text of letter from Minister Rachid to Deputy
Secretary Zoellick.

SIPDIS

H.E. Robert Zoellick
Deputy Secretary of State
United States of America

Cairo, July 18, 2005

Dear Bob,

It was a pleasure meeting you in Cairo last week. I was
delighted to discuss some of the important issues with
respect to the relations between our two countries. In this
regard, I highly appreciate your support to extend the
Qualifying Industrial Zones (QIZ) as we have agreed before.

Since the signing of the QIZ, which currently includes
3 zones, Greater Cairo, Alexandria, and Suez Canal Zone, 397
companies, mostly small and medium enterprises, are
registered and started exporting to the U.S. Between
February and May 2005, the total exports of these companies
reached around $42 million.

Within the framework of Egypt's efforts to positively
integrate into the global economy, the QIZ is definitely one
of the key instruments we can use to boost the economic
reform process. By providing Egyptian products free-market
access into the U.S., the QIZ can help the Egyptian industry
withstand global competition. Hence, costs of reform can be
minimized, especially with respect to the issue of
unemployment, which is key to the sustainability of reform in
a populous country like Egypt.

More importantly, the fact that the QIZ is the first
trade agreement signed by the U.S., Israel and Egypt gives
all its economic benefits great political ramifications for
the Middle East. Trickling down the benefits of the QIZ to
the people on the street in Egypt means a change in the
mindset of the Egyptians with respect to Israel. The
extension of the QIZ to more zones ensures that more people
will be affected by this change. And we cannot underline the
importance of such a mindset change for Middle East peace
enough. To say the least, it is key to allow Egypt, as a
regional leader, to play an active role in the normalization
of Arab-Israeli relations.

I look forward to the opportunity of further discussing
all these issues with you.

Sincerely,

Rachid M. Rachid
Minister of Foreign Trade and Industry

End text of letter.


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JONES