Cablegate: Austr Strickler Reassures Goe, Business On Qiz


DE RUEHEG #2381/01 3621510
P 281510Z DEC 09

C O N F I D E N T I A L CAIRO 002381



E.O. 12958: DECL: 12/23/2019

AUSTR STRICKLER REASSURES GOE, BUSINESS ON QIZ REF: 09 CAIRO 02239 Classified By: Econ-Political Minister-Counselor Donald Blome for reaso ns 1.4(b) and (d)
1.(C) Key Points - Assistant United States Trade Representative (AUSTR) for Textiles Gail Strickler met with key public and private sector stakeholders in the Qualifying Industrial Zones (QIZ) program, assuring them that the USG wanted to see the program succeed and would work with the GOE to help the program reach its potential. - Strickler urged private sector garment and textile manufacturers to work with the GOE to further develop the QIZ program and expand it to where employment is most needed. --------------------------------------------- ------ Strickler Assures GOE that U.S. Wants QIZ to Thrive --------------------------------------------- ------ 2, (C) On December 9, Assistant United States Trade Representative (AUSTR) for Textiles Gail Strickler met with Mohamed Ashour, the new head of the Qualifying Industrial Zones (QIZ) Unit at the Egyptian Ministry of Trade and Industry (MOTI), and Dr. Ali Awni, who recently stepped down as head of the QIZ Unit but continues to work with the unit in a high-level advisory capacity. Strickler reassured Ashour and Awni of the USG's good faith intention to see the QIZ program expand and benefit Egypt, but emphasized that the USG insists on approving QIZ expansion on a factory-by-factory basis to prevent illegal trans-shipment of goods through QIZ's, and make sure employment goes where it is most needed.

3.(C) The GOE has previously expressed its concern that implementing the QIZ program for the handful of currently operating factories in Minya and Beni Suef would be politically difficult, and that large companies that wish to expand in the two governorates may be reluctant to invest in this region without assurance ahead of time that the factories will be QIZ-designated (reftel). Awni re-iterated to Strickler that he views a factory-by-factory approval by the USG as "inflexible."

4.(C) Strickler told Awni and Ashour that the USG's goal is to see its trade preference programs, including the QIZ program, which Strickler called the "most generous US preference program," work for its partners. She assured the GOE that the USG could approve a factory that applied to join the QIZ program quickly, provided that the USG can verify that the factory is operational and has invested in equipment and Egyptian workers. --------------------------------------------- ----- QIZ Companies Offered Certification upon Expansion --------------------------------------------- -----

5.(C) Strickler also spoke separately with owners and board members of several QIZ companies who are planning to expand in Minya and Beni Suef, but have been reluctant to invest without a guarantee that their new factories will be able to participate in QIZ. Strickler delivered the same message she relayed to the QIZ Unit, that the USG has no objection to new factories joining the QIZ program, but that the factories would have to be fully built and operational before they join. "If you build it and it meets acceptable standards, we will certify it," Strickler stated.

7.(C) On December 9 and 10, Strickler repeated this in meetings with the heads of leading industry groups, XXXXXXXXXXXX. XXXXXXXXXXXX told Strickler that he has already purchased land in Minya for a factory, but has not yet built it. Upon being told by Strickler in a meeting on December 9 that she would work towards certifying new factories quickly, especially ones owned and operated by existing QIZ participants with good track records, he said he would begin building a new factory in Minya in the next 2-3 months.

8.(SBU) Along with XXXXXXXXXXXX, other major Egyptian garment E manufacturers have expressed an interest in expanding in Minya and Beni Suef, provided their factories will be included in the QIZ. XXXXXXXXXXXX Both XXXXXXXXXXXX and XXXXXXXXXXXX told Strickler that their orders remain high despite the economic crisis, and that labor shortages that negatively impact their capacity would be alleviated by expanding in Upper Egypt.

9.(SBU) In a meeting at the American Chamber of Commerce in Egypt (AMCHAM), Strickler encouraged a group of private sector stakeholders in the QIZ program to work with USTR and Egypt,s MOTI to make factory-by-factory expansion of the QIZ program in Upper Eqypt possible and facilitate its development. --------------------------------------------- ------- Private Sector Urged to Consider U.S. Cotton Imports --------------------------------------------- -------

10.(SBU) While meeting with QIZ exporters in the ready-made garments industry, AUSTR Strickler encouraged Egyptian businessmen to look at the benefits of using U.S. cotton in their production. She explained how the HVI-VHS system available with U.S. cotton purchases would provide for just the needed blending information Egypt is seeking. Both XXXXXXXXXXXX expressed interest, noting that most Egyptian garment manufacturers currently source much of their cotton outside of Egypt, especially from India, and could benefit from U.S. cotton inputs in production. --------------------------------------------- ---- Better Marketing Key to Growth in Textile Exports --------------------------------------------- ----

11.(SBU) Drawing on her experience in marketing textiles in the private sector, Strickler urged both the GOE and the private sector to invest more effort into using the Egyptian cotton brand as a key to marketing garment exports. When local cotton is blended with U.S. cotton, Strickler said, the result is a strong brand recognition and a positive image well understood by U.S. consumers. ---------- Next Steps ----------

12.(C) AUSTR Strickler sent a clear message of U.S. good faith in support for the QIZ program. Strickler's message added, however, that to fully take advantage of its QIZ trade preferences, both the private sector and the GOE would have to take the lead. Despite some disagreement from the QIZ Unit on USG approval of new factories, both private and public sector stakeholders responded positively to Strickler's visit. With U.S. intentions and conditions on QIZ expansion clarified, it is likely that the private sector will urge the GOE to work with USTR to move the process forward.

13.(U) AUSTR Strickler has cleared on this cable. Scobey

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