VZCZCXYZ0018
RR RUEHWEB

DE RUEHEG #6666 3061209
ZNR UUUUU ZZH
R 021209Z NOV 06
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 2361
INFO RUEHAM/AMEMBASSY AMMAN 1440
RUEHBJ/AMEMBASSY BEIJING 0126
RUEHTV/AMEMBASSY TEL AVIV 1280
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS CAIRO 006666 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ECON EFIN EAID IS CH EG
SUBJECT: AMBASSADOR DISCUSSES QIZ, RAIL EQUIPMENT SALES 
WITH MINISTER OF TRADE 
 
Sensitive but unclassified.  Not for internet distribution. 
 
¶1.  (SBU)  SUMMARY:  In an October 30 call on Minister of 
Trade and Investment Rachid, Ambassador pressed for favorable 
GOE consideration of US-produced rail equipment and raised 
the issue of Egypt's continued ban on US poultry part 
exports.  Rashid asked for an expansion of QIZs to Upper 
Egypt in support of the government's efforts to promote 
development in that region and said that Egypt was continuing 
to discuss with Israel the possibility of a reduction of 
Israeli inputs into QIZ exports from 11.7 to 8 percent. 
Rachid was noncommittal in response to the Ambassador's 
request for his help in pushing for a timely GOE response to 
the USAID sectoral reform benchmark proposal, originally 
promised for end-October.  END SUMMARY. 
 
¶2. (SBU) In advance of Egyptian President Mubarak's visit to 
China this week, the Ambassador called on Minister of Trade 
and Investment Rachid Rachid to urge the GOE to purchase 
US-manufactured locomotives as part of their planned upgrade 
of Egypt's rail transportation infrastructure.  (Note:  After 
the August 2006 train crash in which 58 Egyptians were 
killed, the GOE announced plans to spend $873 million to 
upgrade the rail sector, and asked for USG help in addressing 
continuing rail safety concerns.  End note.)  The Ambassador 
asked the GOE to look beyond the issue of price and also 
consider quality and maintenance.  He pointed out to Rachid 
that seventy percent of locomotives currently in use 
worldwide are US-produced.  Rachid responded that Egypt will 
conduct the locomotive purchase process in an open and 
transparent way.  He noted the Europeans are also in the 
running, but recognized the merit in the Ambassador's 
argument in favor of US-manufactured engines. 
 
¶3. (SBU)  QIZs:  Rachid outlined ambitious GOE plans for 
development in Upper Egypt, and said this is now a major 
focus of Prime Minister Nazif's economic team.  The team, he 
said, feels an obligation to move forward on economic 
development in Egypt,s poorest region.  The program involves 
new factories, as well as transport, health and education 
infrastructure to lure senior and mid-level managers to the 
region.  Rachid suggested the USG could support this effort 
by extending QIZ coverage to Upper Egypt.  He stressed the 
positive brand appeal of QIZ, which would draw positive 
attention to GOE,s efforts in the region. 
 
¶4.  (SBU) Under current QIZ rules, Israeli content in 
Egyptian-produced goods must be 11.7 percent, compared to 8 
percent for QIZ's in Jordan.  When asked if the GOE is 
talking to the Israelis about  the possibility of reducing 
the required Israeli content, Rachid said yes.  In fact, he 
said, Israeli PM Olmert had promised this change to Mubarak 
at their June 2006 summit in Sharm El Sheik.   According to 
Rachid, however, since then the Israeli trade minister has 
been trying to renegotiate the deal.  Rachid has rebuffed 
him, he said, noting that he couldn't back off his own 
president's agreement.  The Ambassador asked if Rachid wanted 
USG support on the issue; Rachid replied that it would be 
better for Egypt and Israel to work the matter out among 
themselves.  He complained, however, that the Israeli 
position is "frustrating." 
 
¶5.  (SBU)  POULTRY EXPORTS:  Ambassador also raised the 
Egyptian ban on US poultry part exports, noting that its 
connection with low-pathogenic Avian Flu outbreaks in the US 
was unscientific.  He also emphasized that the ban deprives 
Egyptians of cheap protein at a time of rising food costs; 
several factors have contributed to food prices increases of 
up to 20-30 percent in recent weeks.  The poultry parts ) 
legs and thighs -- have the benefit of being cheaper than 
other imported chicken products.  Rachid agreed and said he 
is working on a solution.  He hopes to have something soon. 
 
 
¶6.  (SBU)  USAID BENCHMARKS:  The Ambassador also reviewed 
the status of USAID sectoral cash transfer negotiations, 
underlining the need for a timely GOE response.  Rachid said 
he is  aware of the issue but is not directly involved in the 
process.  Note:  The GOE promised a response to the 
US-proposed aid reform benchmarks by the end of October; to 
date, we have not received anything from the GOE. 
RICCIARDONE