US embassy cable - 05CAIRO2482

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 002482 
 
SIPDIS 
 
E.O. 12958: DECL: 03/29/2015 
TAGS: OREP, ETRD, PREL, EG, Visits 
SUBJECT: CODEL SMITH MARCH 21-24 VISIT TO CAIRO:  MEETING 
WITH TRADE MINISTER RACHID 
 
Classified by Acting DCM Michael Corbin for reasons 1.4 (b) 
and (d). 
 
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Summary 
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1. (C) During a March 23 meeting, Senator Gordon Smith and 
Egyptian Minister of Foreign Trade and Industry Rachid 
discussed the recent QIZ agreement and prospects for an 
eventual FTA with the U.S.  Smith underlined the importance 
of further Egyptian progress in particular areas, including 
IPR.  Smith also emphasized the important role issues like 
political reform, religious freedom, and anti-Semitism play 
in shaping the overall bilateral relationship.  On Iraq, 
Smith noted progress and continuing challenges.  Rachid 
advised Smith that the GOE was providing assistance to the 
new Iraqi government in various areas, including technical 
training in his own ministry for Iraqi trade officials. 
Smith welcomed this engagement.  End summary. 
 
2.  (C) In his March 23 meeting with Minister of Foreign 
Trade and Industry Rachid Mohamed Rachid, Senator Smith 
opened the conversation by asking about the Minister's recent 
visit to Washington.  Rachid said that the visit had gone 
very well.  He said there was a good understanding in 
Washington about what is going on in Egypt in terms of 
economic reform and trade issues.  He said that there was 
particular interest in the recently concluded Qualifying 
Industrial Zone (QIZ) agreement between Egypt and Israel. 
Noting that Free Trade Agreements (FTAs) often become tied to 
political issues, Senator Smith said that the QIZ agreement 
and President Mubarak's work on Egypt's relationship with 
Israel was resonating well in Congress.  The Senator said 
that he also personally appreciated the Minister's help with 
the issues that affect his district, like resolving the 
single-sourcing problem for Nike and Egypt's continuing 
purchases of wheat from the U.S., a portion of which was 
supplied by Oregon farmers. 
 
3. (C) Minister Rachid spoke about how trade was helping to 
change the political environment in Egypt.  He said that with 
the QIZ, the government had expected strong reactions to the 
broadening of trade relations with Israel.  To its surprise, 
the only demonstrations that occurred were by workers whose 
jobs might be threatened because their factories were not 
included in the first set of designated zones.  Rachid said 
that QIZ was the first time the average Egyptian could see a 
direct link between the peace process and his own personal 
welfare. 
 
4.  (C) Rachid stated that although Egyptians had high 
expectations about the reforms, there would be a long and 
difficult transition period to restructure the economy. 
During this period, trade would be "one of the best things we 
can do" to improve people's welfare.  For this reason an FTA 
with the U.S. was a priority for Egypt, he said.  He said 
that Egypt's interest in an FTA was not because it sought 
greater access to the U.S. market; Egypt's access was already 
substantial thanks to the QIZ.  Rather, the government wanted 
an FTA because it would elevate Egypt's relationship with the 
U.S. to a new level, would be a catalyst for further reform, 
and would attract foreign direct investment. 
 
5.  (C) Senator Smith said that some of the strongest 
resistance to expanded trade has been from U.S. firms that 
believe intellectual property rights (IPR) are not being 
sufficiently protected in the countries seeking FTAs with the 
U.S.  He said that whatever Egypt could do to respond to U.S. 
firms' IPR concerns would make it easier for Congress to 
support an FTA with Egypt.  Rachid said that Egypt's legal 
structure for IPR protection was in place and generally 
working well.  The main issue was with pharmaceuticals, which 
was really a combination IPR protection and 
affordability/access to medicine.  As for IPR protection, one 
of the main issues was the lack of transparency for 
government approvals of generics.  Rachid said that after the 
recent discussions with U.S. firms and the USG, the Minister 
of Health and Population was now taking steps to address that 
problem.  The real challenge, he said, was how to make 
medicines affordable and accessible.  He believed that a 
solution could be found through discussions between the 
concerned parties rather than confrontation, as had sometimes 
been the case in the past.  In general, however, he agreed 
that IPR was an area that the government needed to work on. 
 
6.  (C) Rachid asked the Senator if he had particular 
concerns with respect to Egypt.  Senator Smith said that 
political reform had been a concern in Congress and the 
Senator himself was concerned about whether Egypt was going 
in the right direction.  President Mubarak's announced 
intention to open up the political process was welcome in the 
U.S., and many Congressional concerns about Egypt would go 
away if the steps taken by the GOE were indeed real and not 
symbolic.  Moreover, Egypt could enhance its position by 
continuing to play a constructive role in the peace process, 
which was a priority for President Bush.  Finally he noted 
that anti-Semitism was a political concern, one that Egypt 
appeared to be addressing. 
 
7.  (C) Senator Smith added that an issue of personal concern 
was the situation of Mormons in Egypt.  He had heard from his 
co-religionists in Egypt that there were half a dozen cases a 
year in which Egyptians who had converted freely to Mormonism 
while living outside of Egypt had been prevented from 
attending services in Egypt.  He said that his concerns were 
not just for the Mormons, but for adherents of other minority 
faiths who faced similar problems.  The Minister affirmed 
that he would look into the situation. 
 
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Iraq 
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8.  (C) The Minister then asked the Senator for his 
impression of the situation in Iraq.  Senator Smith noted 
that the U.S. military was doing an excellent job, but faced 
a difficult task dealing with insurgents, who offered only 
death and destruction and no plan for the future.  He hoped 
the new government would be established soon and that Iraqis 
could begin to take over more security operations so that the 
U.S. could start to bring the troops home.  The Minister said 
that Egypt was offering various forms of assistance to Iraq. 
In fact, after the meeting with the Senator, Rachid was due 
to officiate over a graduation ceremony of 60 Iraqis who had 
received technical training from his ministry.  A second 
group of Iraqis was due to arrive shortly to receive 
specialized training on trade matters.  Smith welcomed the 
GOE's assistance to Iraq. 
 
9. (U) CODEL Smith did not have an opportunity to clear this 
message before departing Egypt. 
 
 
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GRAY