VZCZCXYZ0001
RR RUEHWEB

DE RUEHEG #0946/01 1471521
ZNY CCCCC ZZH
R 271521Z MAY 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 2596
INFO RUEHAM/AMEMBASSY AMMAN 2048
RUEHTV/AMEMBASSY TEL AVIV 1920

C O N F I D E N T I A L CAIRO 000946 
 
SIPDIS 
 
STATE PASS USTR FOR MOWREY 
 
E.O. 12958: DECL: 05/28/2019 
TAGS: ETRD ECON PREL IS EG
SUBJECT: EGYPT'S QIZ:  NO AGREEMENT ON REDUCTION IN ISRAELI 
CONTENT REQUIREMENT 
 
Classified by DCM Matthew Tueller for reason 1.4 (b) and (d).
¶1. (C) Key issues: --At the May 25 QIZ meeting, the Israeli and Egyptian delegations disagreed over results of a one-on-one meeting May 11 between trade ministers in Sharm El Sheikh, with the Egyptian side insisting a reduction in Israeli content to 8% had been agreed, and the Israelis insisting it had not. --The two sides discussed why the expansion of the QIZ to cover Beni Suef and Minya had not been announced; the Egyptian del told the Israelis the USG had asked the Egyptian embassy in Washington not to make a public announcement due to concerns about industry reaction. We noted the announcement had been published in the Federal Register.

¶2. (SBU) The Egyptian delegation to the quarterly QIZ meeting, held in Cairo on May 25, was led by MTI's Said El Bous. Gaby Bar led the Israeli delegation. Econ counselor attended first part of the meeting as an observer. The meeting opened with a discussion of Egyptian exporters that may not have met Israeli content requirements and declared one firm out of compliance. According to the trade data for the first quarter of 2009, total exports were LE 191.2 million (USD 34.0m), of which LE 20.2 million (USD 3.6m), or 10.5%, represented the Israeli content. Israeli exports to Egypt were up ten percent in the first quarter of 2009 over 2008 levels. AGREEMENT ON OUTDATED INVOICES ------------------------------

¶3. (SBU) Bar asked about outdated invoices submitted by Egyptian exports. He argued firms should not be submitting invoices dating back to 2006 and 2007 to demonstrate that Israeli content requirements had been met, and asked if this was linked to the economic slowdown. He argued that the older receipts were difficult to verify, given that his team had only a few days before the quarterly meeting to contact the Israeli firms. The Egyptian side agreed that the invoices were old, but noted that the QIZ agreement did not limit their use and said it was not a result of the economic slowdown. Ali Awny, chief of Egypt's QIZ unit, said sometimes firms did not use invoices on a "first in, first out" basis. The Israeli side observed that some of the firms still relying on these older invoices were among the biggest exporters.

¶4. (SBU) Eventually, the Egyptian side agreed that Egyptian firms would be asked to submit all remaining invoices from 2006 and 2007. These would be verified, and the firms given carryover credit for those invoices to apply to future exports. The Israeli side would then have time to verify the invoices and both sides would have a better picture of how many were still outstanding. ANNOUNCEMENT OF QIZ EXPANSION -----------------------------

¶5. (SBU) The group next discussed the delay in announcing the expansion of the QIZ to cover Minya and Beni Suef. The Israelis asked this be announced during a planned trip to Jerusalem by Egyptian Minister of Trade Rachid. EL Bous responded that Rachid plans to announce the expansion of the QIZ during Rachid's May 26 visit to Washington. Bar asked why the GOE had not been willing to announce the expansion to date, given that the notice had been published in the Federal Register, that the business community was already aware of the decision, and that Egypt was losing export opportunities. El Bous responded that the Egyptian Embassy in Washington had reported that the USG was concerned about the reaction of U.S. industry. He said, however, that his government was ready to announce the program and would do so shortly. ACRIMONIOUS DISCUSSION OF ISRAELI CONTENT REQUIRMENT --------------------------------------------- -------

¶6. (C) After our departure, and once the trade certificates renewals were signed, the group opened discussion of Egyptian Minister of Trade Rachid's visit to Jerusalem. The Israeli side said Rachid had been invited to Jerusalem to discuss the proposal to reduce Israeli content requirements, among other issues. According to an Israeli embassy official (please protect), the Egyptian delegation appeared to believe that this requested reduction, from 10.5% to 8%, had been agreed upon in a one on one meeting between Rachid and Israeli Minister of Trade Ben Elezer in Sharm, and confirmed in Tel Aviv in A meeting with the Egyptian Ambassador. Gaby Bar said Israel had not yet agreed to a reduction. Reportedly, the meeting deteriorated into a shouting match, with Said El Bous claiming Bar had called the Egyptian ambassador to Israel a liar.

¶7. (C) Eventually, both sides retired to their corners to consult with their respective ministers, and then adjourned the meeting, which by then had lasted nearly five hours. They agreed to meet again to discuss the Rachid visit to Jerusalem and the proposed reduction again in about three weeks. The location of the meeting has not been set. The Israeli embassy officer said told us that what she called "serious misunderstanding" stemmed from the one-on-one meeting in Sharm. She had earlier reported to us that this misunderstanding had come to light almost immediately, during the May 11 Mubarak-Netanyahu lunch in Sharm, but was not cleared up at the time. SCOBEY