US embassy cable - 05CAIRO4061

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 004061 
 
SIPDIS 
 
FAS FOR CMP/FRANK LEE 
FAS FOR ITP/PATRICIA SHEIKH 
FAS FOR KIRK MILLER/OA/GSM 
FAS FOR HOWARD WETZEL/CMP/DLP 
STATE PASS USTR SAUMS 
 
E.O. 12958: DECL: 09/18/2015 
TAGS: EAGR, ETRD, ECON, EAID, EG 
SUBJECT: GOVERNMENT OF EGYPT MAY USE USDA'S GSM-102 PROGRAM 
TO PURCHASE U.S. FOOD COMMODITIES 
 
Classified by Agricultural Counselor Asif Chaudhry for 
reasons 1.4 (b) and (d). 
 
1.    (C) Summary:  On May 26, AgCounselor Asif J. Chaudhry 
met with Hassan Kheder, Minister of Supply and Internal 
Trade, to discuss Egypt's participation in the GSM-102 
Program.  The Vice-Chairman of General Authority for Supply 
Commodities (GASC) also attended the meeting.  The meeting 
was a follow-up to previous discussions centering around the 
requirement for a Credit Guarantee Assurance (CGA) from the 
Government of Egypt to participate in the program.  Minister 
Kheder promised delivery of the requested guarantee within 
the next few days, and expressed an interest in purchasing 
wheat and possibly poultry parts from the United States, 
despite the technical barriers to trade that currently 
restrict poultry imports.  End summary. 
 
2.    (C) Egypt is the third largest market in the world for 
U.S. wheat exports.  Over the years, the GOE has consistently 
purchased approximately 35-55 percent of its wheat 
requirements from U.S. suppliers.  GASC is the main entity 
that purchases food commodities, including wheat, for the 
government.  From July 2004 to date, GASC purchased over 1.6 
million tons of U.S. wheat.  The AgCounselor pointed out to 
Minister Kheder that participation in the GSM program would 
offer favorable financing terms for future purchases of wheat 
and more leverage in the purchase of other commodities.  The 
Minister concurred and promised to deliver a CGA within the 
next few days. 
 
3.    (C) Minister Kheder then inquired about the possibility 
of using GSM to purchase poultry parts and turkey meat. 
Though there is no ban on imports, Egypt maintains technical 
barriers to trade, such as halal requirements that 
effectively deny market access.  The Minister pointed out 
that there are currently serious discussions throughout the 
GOE with regard to the need for openness and a commitment to 
strong laissez-faire market principles.  Discussions are 
being held at the Prime Minister level as well as among the 
Ministers themselves.  Minister Kheder stated his desire to 
see more competition in the poultry market, owing to his 
frustration with high domestic prices, which distort prices 
for other industries also, and "gimmicks" from local 
producers to maintain the status quo.  He also pointed out 
that most of the local producers are members of Parliament, 
and as such had a vehicle for expressing their opposition to 
changes in policies. 
 
4.    (C) Minister Kheder said the Prime Minister has a 
strong desire to open the market for poultry.  However, 
opposition from the Ministry of Agriculture and reluctance of 
the Ministry of Foreign Trade and Industry to vigorously 
pursue the issue are stifling progress.  Minister Kheder 
requested the assistance of the AgCounselor in obtaining 
price information on U.S. poultry, leg quarters in 
particular.  He is of the impression that information showing 
lower prices will make a strong case for opening the market 
to benefit consumers.  He is of the mindset that a reduction 
in the price for poultry products would lead to a reduction 
in price for other meat products.  He sees this as a win-win 
situation.  He does not believe there are as many people in 
poultry production as alleged by MinAg.  He feels that MinAg 
is taking a protectionist position to benefit a few producers 
at the expense of millions of consumers; efficient producers 
will survive even with competition from imports.  The 
Minister stated he is committed to open market policies, and 
he is willing to work with those opposed.  He added that he 
would be very interested in importing poultry meat from the 
U.S. for the government-run stores to supply cheap protein to 
lower income Egyptians, and in the process help lower prices 
in the market in general. 
 
5.  (C) Comment:  The Ministry of Supply could be an 
important ally in our efforts to open the Egyptian poultry 
market for imports, which have been absent for several years 
due to non-tariff barriers.  Post will continue to explore 
possible options with Minister Kheder to gain market access 
for U.S. poultry imports through all available channels.  End 
comment. 
 
 
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GRAY