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Cablegate: Egypt and Israel Request Usg to Expand Qiz To

VZCZCXRO6593
PP RUEHROV
DE RUEHEG #3022/01 2840931
ZNR UUUUU ZZH
P 110931Z OCT 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 7160
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 CAIRO 003022

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA, NEA/RA
USTR FOR DONNELLY
COMMERCE FOR 4520/ITA/ANESA/OBERG

E.O. 12958: N/A
TAGS: ECON ETRD PREL IS EG
SUBJECT: EGYPT AND ISRAEL REQUEST USG TO EXPAND QIZ TO
UPPER EGYPT

REF: 2006 CAIRO 7219

1. (U) The GOE and Government of Israel are jointly
requesting that USTR expand the Qualified Industrial Zone
(QIZ) agreement to cover several cities in Upper Egypt. In a
letter to USTR Schwab dated October 9, GOE Trade Minister
Rachid Rachid and Israeli Minister of Industry, Trade and
Labor Eliyahu Yishai request that USTR designate areas
surrounding the cities of Al Fayium, Beni Suwayf, Al Minya,
Assuit, Suhag, Qena, Luxor, and Aswan as eligible for
duty-free exports to the United States under the agreement.
The text of the letter follows. Embassy will forward to the
Department the original letter and a map indicating the
boundaries of the proposed expansion.

2. (U) The GOE, GOI, and USG signed the QIZ agreement in
December 2004 to permit duty-free access to the United States
for products that contain a certain percentage of Israeli
content (reftel). Currently, the QIZ program covers
particular industrial areas in parts of the Nile Delta, Suez
Canal cities, Cairo and Alexandria. USTR approved one
expansion of the program -- to cover certain areas in and
around Ismailia and Mahalla -- in 2005.

3. (U) The GOE and Government of Israel also agreed on
October 9 to reduce the required level of Israeli content in
QIZ products from 11.7 percent to 10.5 percent (septel).

4. (SBU) Comment: Unlike the industrial areas previously
designated for the QIZ, the areas of upper Egypt now proposed
for QIZ expansion are in general underdeveloped and lack easy
access to transportation and industrial infrastructure. The
GOE interest in this proposal appears more political than
economic: an attempt to demonstrate that President Mubarak is
working to fulfill his promises to promote economic
development in Upper Egypt. However, some Egyptian
industrialists appear genuinely interested in QIZ expansion
in the area. One factory owner told econoff he would like to
develop processed food factories in Upper Egypt for QIZ
exports, although textile exports will remain the primary
attraction for QIZ investors. End comment.

5. (U) Begin text of letter.

The Government of the Arab Republic of Egypt

The Government of the State of Israel

H.E. Ambassador Susan C. Schwab
United States Trade Representative
Washington D.C.

October 9, 2007

Your Excellency,

Reference to the protocol signed on December 14, 2004
between the Government of the Arab Republic of Egypt and the
Government of the State of Israel on Qualifying Industrial
Zones.

We have the pleasure to inform you that the last three
years that witnessed the launch and implementation of the
above-mentioned Protocol has shown positive results in terms
of meeting the expectations of our two countries and
achieving the objectives of Proclamation no. 6955 of the
President of the United States of America and section 9 of
the United States - Israel Free Trade Area Implementation Act
of 1985, as amended.

To maximize the benefits of the protocol and maintain
the momentum that consolidates cooperation between the
business communities in the two countries, we have the honor
to request the approval of the USTR to expand, for the
purpose of the protocol, the boundaries of the existing QIZ
areas and designating as QIZ the following zone:

- Upper Egypt (Al Fayium, Beni Suwayf, Al Minya,
Assuit, Suhag, Qena, Luxor, Aswan, map is enclosed)

Upon receiving your approval the Egyptian Government
shall supply the USTR with any required data.

Please accept Your Excellency our thanks and the
assurances of our highest consideration,

CAIRO 00003022 002 OF 002

Yours sincerely,

Rachid Mohamed Rachid
Minister of Trade and Industry
Arab Republic of Egypt

Eliyahu Yishai
Deputy Prime Minister
Minister of Industry, Trade and Labor
State of Israel
JONES

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