US embassy cable - 04TELAVIV1335

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 001335 
 
SIPDIS 
 
FOR E, NEA/IPA AND EB/IFD/OMA 
PLEASE PASS USTR FOR SAUMS 
 
E.O. 12958: DECL: 03/04/2009 
TAGS: ECON, EFIN, PREL, EG, IS, GOI EXTERNAL, ECONOMY AND FINANCE 
SUBJECT: U/S LARSON DISCUSSES "GREATER MIDDLE EAST," AN 
ISRAEL-EGYPT QIZ, AND OECD EXPANSION WITH ISRAEL'S MINISTRY 
OF FOREIGN AFFAIRS 
 
 
Classified By: Deputy Chief of Mission Richard LeBaron for Reasons 1.4 
(B) and (D) 
 
1.  (C)  Summary.  Under Secretary Larson reviewed the 
President's "Greater Middle East" vision with Ministry of 
Foreign Affairs Director General Yoav Biran February 23, 
noting the initiative's efforts at promoting democracy, 
expanding education, and increasing economic cooperation. 
Larson suggested to Biran that Israel and Egypt should work 
to "strike while the iron is hot" and attempt to reach a deal 
on prospective QIZs within the next few weeks.  The 
opportunity, he cautioned, might slip away.  Biran said the 
GOI would send representatives to Egypt in early March to try 
to reach a deal.  Larson also discussed the latest state of 
play regarding OECD expansion.  He said the U.S. believed the 
OECD needed to reform before it could expand, but advised the 
GOI to "be ready" in case momentum builds for expansion.  End 
summary. 
 
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Greater Middle East 
------------------- 
 
2.  (C)  Under Secretary Larson reviewed the main components 
of the "Greater Middle East" vision, including promoting 
democracy and good governance, expanding educational 
opportunities and expanding economic opportunities.  Larson 
highlighted the economic aspects of the GME vision, noting 
the initiative's focus on trade and on financial reform. He 
said the USG's recent success with Mexico in allowing more 
access for U.S. programs (including the Peace Corps and 
OPIC), might serve as a model for how to fight poverty and 
increase business activity in the Middle East.  Larson noted 
that a Canadian initiative to involve the private sector in 
the fight against poverty worldwide was very promising.  He 
said the USG wanted to once again explore the concept of a 
regional development bank.  Biran said that the Europeans 
seemed quite interested in participating in the development 
of the GME vision and were already engaged on financial and 
trade initiatives through the Barcelona process.  He stressed 
that Israel was also keen to play a part in the GME 
initiative. 
 
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Regional Trade and an Israel-Egypt QIZ 
-------------------------------------- 
 
3. (C)  In response to a question from Biran, U/S Larson 
touched on trade initiatives in the region, such as Saudi 
Arabia's interest in joining the WTO, and USG progress in 
negotiating free trade agreements with Morocco and Bahrain. 
A functioning Israel-Egypt QIZ, he continued, would also 
promote regional cooperation.  He said, after delays of many 
years, the Government of Egypt had finally come around, and 
was anxious to reach a deal.  Larson said the terms of the 
QIZ agreement were up to the two parties, but advised the GOI 
to "strike while the iron is hot" and try hard to reach a 
deal now.  Larson said he would offer the same advice to the 
GOE during his visit to Cairo.  Biran replied that Israel 
wanted to reach an agreement, but it needed to make economic 
sense.  The Egyptians, he said, were fixated on receiving the 
same terms (8% Israeli content) as Jordan.  That, he 
insisted, was not reasonable, since the 8% content provision 
only went into effect years after the original Israel-Jordan 
QIZ agreement was signed.  Likewise, Biran continued, the 
initial Israeli content requirement in an Israel-Egypt 
agreement should be over 8%, but could possibly be reduced 
later.  In addition, the GOI wanted a "trilateral agreement" 
with Egypt and the U.S., not a mechanism where Egypt and 
Israel have "parallel agreements" with the U.S. 
 
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OECD Enlargement 
---------------- 
 
4.  (C)  U/S Larson reviewed the status of OECD enlargement, 
arguing that the OECD needed to undergo reform before 
effective expansion could take place.  He said that the U.S. 
supported Israel's entry into the OECD, but enlargement was 
unlikely to take place this year.  Nevertheless, Israel needs 
to be ready, in case momentum on enlargement builds more 
quickly than expected.  Israel is doing the right things to 
get ready, he noted, such as joining in the activities of as 
many committees as possible. 
 
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Iran and the WTO 
---------------- 
 
5.  (C)  Biran concluded the meeting by reiterating Israel's 
opposition to Iran's bid to join the WTO.  He said that Iran 
must be held to all WTO criteria, including a commitment not 
to engage in an economic boycott against Israel. 
 
6. (U)  This message was cleared by Under Secretary Larson. 
 
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Attendees 
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USG: 
Alan Larson, Under Secretary of State for Economic, Business 
and Agricultural Affairs 
Dayna Cade, Special Assistant to Alan Larson 
Tom Engle, Deputy Director, EB Office of Monetary Affairs 
David Greene, NEA Office of Israel and Palestinian Affairs 
Theodore Mann, Economic Counselor (Notetaker) 
 
GOI: 
Yoav Biran, Director General, Ministry of Foreign Affairs 
Yoram Ben-Zeev, Deputy Director General for North America, MFA 
Yosef Gal, Deputy Director General for Economic Affairs 
Roni Yaar, Deputy Director General for International 
Organizations 
Ilan Baruch, Head, Middle Eastern Economic Affairs 
 
 
 
 
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