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Cablegate: Readout From the 15th Qiz Joint Committee Meeting

VZCZCXYZ0003
PP RUEHWEB

DE RUEHEG #2410 3291416
ZNR UUUUU ZZH
P 241416Z NOV 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 0920
INFO RUEHAM/AMEMBASSY AMMAN PRIORITY 1982
RUEHTV/AMEMBASSY TEL AVIV PRIORITY 1802
RUEHJM/AMCONSUL JERUSALEM PRIORITY 1085
RHEHAAA/WHITE HOUSE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

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

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