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Cablegate: Goe Missing Trade Opportunities with U.S., Israel

VZCZCXYZ0000
PP RUEHWEB

DE RUEHEG #2371 3611243
ZNY CCCCC ZZH
P 271243Z DEC 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 4564
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L CAIRO 002371

SENSITIVE
SIPDIS

DEPT FOR NEA/ELA,
DEPT PLEASE PASS TO USTR/SFRANCESKI

E.O. 12958: DECL: 12/27/2019
TAGS: ECON EG ETRD PGOV
SUBJECT: GOE MISSING TRADE OPPORTUNITIES WITH U.S., ISRAEL

REF: 08CAIRO2409 Classified By: Econ-Political Minister-Counselor Donald Blome for reaso ns 1.4(b) and (d)
1.(C) Key points: -A former Ministry of Trade and Industry (MOTI) consultant studied several possible FTA's for the GOE, and concluded that only a free trade pact with Israel made sense for Egypt. -The consultant told us that he advised the GOE to pursue an FTA with Israel, but political hurdles appear too much to overcome. -The consultant also told us that Egyptian exporters are not well-informed about the U.S. Generalized System of Preferences (GSP) program, causing them to miss duty-free opportunities.

2.(C) On December 20, EconOff discussed Egyptian trade policy with Dr. Arne Klau, a former WTO trade policy specialist. Klau recently worked as a consultant for Dr. Samiha Fawzy, a top advisor to Minister of Trade and Industry Rachid M. Rachid. Klau was asked by Fawzy to assess whether potential free trade agreements (FTA's) with various countries and blocs would benefit Egypt. Klau concluded that for most entities with which Egypt was considering an FTA (the Gulf Cooperation Council, Mercosur, and Singapore), Egypt would not benefit because it either already has good market access or lacked export products with a comparative advantage in the markets.

3.(C) The only country that Klau recommended to MOTI for an FTA was Israel, which Klau concluded could offer major economic benefits to Egypt. Klau told us that his recommendation was not seriously considered by MOTI because of the inevitable political backlash it would cause.

4.(SBU) Klau also studied the U.S. Generalized System of Preferences (GSP) program for MOTI, and found that many Egyptian exporters were failing to claim duty-free credit for GSP-eligible products. Klau said that these exporters were either unaware of the program's existence or unsure how to properly label their products to receive preferential treatment (Note: Post and USTR have promoted GSP in Egypt in the past, particularly with the American Chamber of Commerce in Egypt).

5.(C) Comment: Dr. Klau's assessment that Egypt will not benefit from these potential FTA's underscores the difficultly the GOE will face in broadening its export market access beyond traditional destinations in Europe and the U.S. While expanding trade with Israel beyond natural gas exports and the Qualifying Industrial Zones (QIZ) program would likely boost Egypt's economy, the political obstacles to such a deal are likely too much to overcome at the present time. Scobey

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