VZCZCXRO6593
PP RUEHROV
DE RUEHEG #3022/01 2840931
ZNR UUUUU ZZH
P 110931Z OCT 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 7160
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 CAIRO 003022 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA 
USTR FOR DONNELLY 
COMMERCE FOR 4520/ITA/ANESA/OBERG 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PREL IS EG
SUBJECT: EGYPT AND ISRAEL REQUEST USG TO EXPAND QIZ TO 
UPPER EGYPT 
 
REF: 2006 CAIRO 7219 
 
 ¶1.  (U) The GOE and Government of Israel are jointly 
requesting that USTR expand the Qualified Industrial Zone 
(QIZ) agreement to cover several cities in Upper Egypt.  In a 
letter to USTR Schwab dated October 9, GOE Trade Minister 
Rachid Rachid and Israeli Minister of Industry, Trade and 
Labor Eliyahu Yishai request that USTR designate areas 
surrounding the cities of Al Fayium, Beni Suwayf, Al Minya, 
Assuit, Suhag, Qena, Luxor, and Aswan as eligible for 
duty-free exports to the United States under the agreement. 
The text of the letter follows.  Embassy will forward to the 
Department the original letter and a map indicating the 
boundaries of the proposed expansion. 
 
¶2.  (U) The GOE, GOI, and USG signed the QIZ agreement in 
December 2004 to permit duty-free access to the United States 
for products that contain a certain percentage of Israeli 
content (reftel). Currently, the QIZ program covers 
particular industrial areas in parts of the Nile Delta, Suez 
Canal cities, Cairo and Alexandria.  USTR approved one 
expansion of the program -- to cover certain areas in and 
around Ismailia and Mahalla -- in 2005. 
 
¶3.  (U) The GOE and Government of Israel also agreed on 
October 9 to reduce the required level of Israeli content in 
QIZ products from 11.7 percent to 10.5 percent (septel). 
 
¶4.  (SBU) Comment: Unlike the industrial areas previously 
designated for the QIZ, the areas of upper Egypt now proposed 
for QIZ expansion are in general underdeveloped and lack easy 
access to transportation and industrial infrastructure. The 
GOE interest in this proposal appears more political than 
economic: an attempt to demonstrate that President Mubarak is 
working to fulfill his promises to promote economic 
development in Upper Egypt. However, some Egyptian 
industrialists appear genuinely interested in QIZ expansion 
in the area.  One factory owner told econoff he would like to 
develop processed food factories in Upper Egypt for QIZ 
exports, although textile exports will remain the primary 
attraction for QIZ investors. End comment. 
 
¶5.  (U) Begin text of letter. 
 
The Government of the Arab Republic of Egypt 
 
The Government of the State of Israel 
 
H.E. Ambassador Susan C. Schwab 
United States Trade Representative 
Washington D.C. 
 
October 9, 2007 
 
Your Excellency, 
 
      Reference to the protocol signed on December 14, 2004 
between the Government of the Arab Republic of Egypt and the 
Government of the State of Israel on Qualifying Industrial 
Zones. 
 
      We have the pleasure to inform you that the last three 
years that witnessed the launch and implementation of the 
above-mentioned Protocol has shown positive results in terms 
of meeting the expectations of our two countries and 
achieving the objectives of Proclamation no. 6955 of the 
President of the United States of America and section 9 of 
the United States - Israel Free Trade Area Implementation Act 
of 1985, as amended. 
 
      To maximize the benefits of the protocol and maintain 
the momentum that consolidates cooperation between the 
business communities in the two countries, we have the honor 
to request the approval of the USTR to expand, for the 
purpose of the protocol, the boundaries of the existing QIZ 
areas and designating as QIZ the following zone: 
 
      -     Upper Egypt (Al Fayium, Beni Suwayf, Al Minya, 
Assuit, Suhag, Qena, Luxor, Aswan, map is enclosed) 
 
      Upon receiving your approval the Egyptian Government 
shall supply the USTR with any required data. 
 
      Please accept Your Excellency our thanks and the 
assurances of our highest consideration, 
 
CAIRO 00003022  002 OF 002 
 
 
 
Yours sincerely, 
 
Rachid Mohamed Rachid 
Minister of Trade and Industry 
Arab Republic of Egypt 
 
Eliyahu Yishai 
Deputy Prime Minister 
Minister of Industry, Trade and Labor 
State of Israel 
JONES