READOUT FROM THE 15TH QIZ JOINT COMMITTEE MEETING

UNCLAS CAIRO 002410 SENSITIVE SIPDIS DEPT FOR NEA/ELA AND NEA/IPA TEL AVIV FOR APRIL COHEN TREASURY FOR BRYAN BALIN AND FRANCISCO PARODI WHITE HOUSE FOR USTR/SONIA FRANCESKI E.O. 12958: N/A TAGS: ECON EFIN ETRD EINV PGOV PREL IS EG SUBJECT: READOUT FROM THE 15TH QIZ JOINT COMMITTEE MEETING REF: A. 07 CAIRO 3305 ¶B. 08 TEL AVIV 1754 ¶C. 08 CAIRO 2404 ¶1. (SBU) Summary: the Qualifying Industrial Zone (QIZ) Joint Committee held its quarterly meeting in Cairo on November 24. The Egyptians requested a reduction in Israeli inputs, citing insufficient supply, and the Israelis agreed to work with companies in both sides to help them meet the existing input requirements. Both sides focused on the need to expand QIZ's into Upper Egypt and proposed a more limited pilot project as a first step toward expansion throughout Upper Egypt as laid out in their 2007 request to the office of the United States Trade Representative (USTR). End Summary. ¶2. (U) On November 24, Israeli and Egyptian trade officials met in Cairo for the quarterly meeting of the Qualifying Industrial Zones (QIZ) Joint Committee. The Israeli delegation was headed by Gabby Bar of the Ministry of Trade and Labor, and the Egyptian delegation was headed by Sayed Elbous of the Ministry of Trade and Industry. ¶3. (SBU) Both the Israeli and Egyptian delegations asked the US Observer about progress on the joint request to expand QIZ's to Upper Egypt that was sent to the office of the United States Trade Representative (USTR) in October 2007.(ref. A) The Observer noted that the proposal was still under consideration and that the Egyptian delegation had a discussion on this topic with Nicole Shampaine, Director of NEA/ELA, on the topic the week before. (ref. C) ¶4. (SBU) The delegations suggested that the proposed expansion could be introduced via a pilot project where two zones could be included initially, and the remaining zones could be phased in at a later time based on the success of the pilot. Bar and Elbous told the US Observer that they would prepare a written proposal for the pilot project and would provide it to the Embassy in a few days. Both Bar and Elbous said that they were prepared to travel to Washington to meet jointly with the USTR and other interested parties. Elbous reiterated that the GOE was interested in broadening the exports to the US through the proposed Upper Egypt expansion, but that Egyptian exports to the US were competing with imports from Southeast Asia rather than domestic US producers. ¶5. (SBU) The Egyptian officials renewed their request for an additional reduction in the percentage of Israeli components to 8.5% (from the current level of 10.5%) claiming that there is insufficient Israeli supply to meet current demand. The Israeli officials countered that their producers were working to increase capacity and they reiterated an offer to facilitate meetings between Egyptian and Israeli manufacturers to identify additional potential Israeli inputs. ¶6. (SBU) Egyptian QIZ exports for the quarter ending 30 September 2008 were $206 million, up slightly from the prior quarter. This represents an increase of 9.5% over the same period a year ago. (Note: The Egyptians told us privately that they expected volumes to drop soon as a result of global economic conditions. End note.) ¶7. (U) During the meeting, the Committee found three companies to be out of compliance with protocol provisions, approved 11 new QIZ companies, and renewed 83 QIZ certificates. SCOBEY