US embassy cable - 05CAIRO5860

C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 005860 
 
SIPDIS 
 
USTR FOR SAUMS 
USDOC FOR 4520/ITA/MAC/SAMS, TALAAT AND JACOBS/WIEHAGEN 
 
E.O. 12958: DECL: 07/31/2015 
TAGS: ETRD, PGOV, PREL, ECON, EG, USTR, Trade, QIZ 
SUBJECT: EGYPTIAN TRADE MINISTER JUSTIFIES EXPANSION OF QIZ 
PROGRAM 
 
Classified by Charge Stuart Jones for reasons 1.5 b and d. 
 
1.  (C) During Charge's July 28 courtesy call on Minister of 
Trade and Industry Rachid, the Minister raised the issue of 
expanding Egypt's Qualifying Industrial Zones (QIZs).  Rachid 
noted that he had sent Deputy Secretary Zoellick a letter 
detailing the need for expansion (text of letter below), and 
that his staff was consulting with the Embassy and USTR on 
the necessary elements of a formal request for QIZ expansion. 
 Rachid's point person on QIZ, Sayed El Bous, said that he 
hoped that Egypt and Israel would make a formal joint request 
for expansion during the first week of August. 
 
2.  (C) The Charge noted that the previous day's 
congressional approval of CAFTA was good news for Egypt.  It 
cleared the way for consideration of the GOE's QIZ expansion 
request and removed a potential political impediment on the 
path to an FTA. 
 
3.  (C) Noting that only about 70 of the 397 companies 
registered under QIZ were currently exporting, at a 
relatively modest volume, Rachid said he hoped for a quick 
and favorable decision on QIZ expansion.  As for the FTA, he 
praised the technical groups that were reviewing FTA 
obligations, stating that the experts were forging good 
working relations.  The work of the expert groups and the 
successful launch and implementation of the QIZ program, he 
said, should help build support for, and speed negotiation 
of, an FTA. 
 
4.  (SBU) Begin text of letter from Minister Rachid to Deputy 
Secretary Zoellick. 
 
SIPDIS 
 
H.E. Robert Zoellick 
Deputy Secretary of State 
United States of America 
 
Cairo, July 18, 2005 
 
Dear Bob, 
 
      It was a pleasure meeting you in Cairo last week. I was 
delighted to discuss some of the important issues with 
respect to the relations between our two countries.  In this 
regard, I highly appreciate your support to extend the 
Qualifying Industrial Zones (QIZ) as we have agreed before. 
 
      Since the signing of the QIZ, which currently includes 
3 zones, Greater Cairo, Alexandria, and Suez Canal Zone, 397 
companies, mostly small and medium enterprises, are 
registered and started exporting to the U.S.  Between 
February and May 2005, the total exports of these companies 
reached around $42 million. 
 
      Within the framework of Egypt's efforts to positively 
integrate into the global economy, the QIZ is definitely one 
of the key instruments we can use to boost the economic 
reform process.  By providing Egyptian products free-market 
access into the U.S., the QIZ can help the Egyptian industry 
withstand global competition.  Hence, costs of reform can be 
minimized, especially with respect to the issue of 
unemployment, which is key to the sustainability of reform in 
a populous country like Egypt. 
 
      More importantly, the fact that the QIZ is the first 
trade agreement signed by the U.S., Israel and Egypt gives 
all its economic benefits great political ramifications for 
the Middle East.  Trickling down the benefits of the QIZ to 
the people on the street in Egypt means a change in the 
mindset of the Egyptians with respect to Israel.  The 
extension of the QIZ to more zones ensures that more people 
will be affected by this change.  And we cannot underline the 
importance of such a mindset change for Middle East peace 
enough.  To say the least, it is key to allow Egypt, as a 
regional leader, to play an active role in the normalization 
of Arab-Israeli relations. 
 
      I look forward to the opportunity of further discussing 
all these issues with you. 
 
Sincerely, 
 
Rachid M. Rachid 
Minister of Foreign Trade and Industry 
 
End text of letter. 
 
 
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State Department's Classified SIPRNET website. 
 
JONES