VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #0821/01 1331908
ZNR UUUUU ZZH
R 131908Z MAY 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 2411
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS CAIRO 000821 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR 
 
E.O. 12958:  N/A 
TAGS: ETRD EAGR ECON PGOV EG
SUBJECT:  PROPOSAL TO EXPAND GSP COVERAGE 
 
Sensitive but unclassified.  Please protect accordingly. 
 
¶1.  (U) Key points: 
 
-- Potatoes are grown by smallholder farmers throughout Egypt  who 
have successfully exported their crops to the Gulf and to Europe. 
Spinach is not widely grown, although analysts believe that this 
crop might have potential. 
 
-- Increased farm incomes are key to alleviating rural poverty in 
Egypt, and USAID public-private partnerships supporting food 
production includes work in the potato production sector. 
 
-- Egypt is an excellent market for U.S. seed potatoes, and USDA is 
nearing agreement with the GOE on lifting phytosanitary restrictions 
on the import of U.S. seed potatoes into Egypt. 
 
-- This cable has been cleared by USAID, the Foreign Agricultural 
Service and Foreign Commercial Service at post. 
 
¶2.  (SBU)  COMMENT:  Egypt is one of the largest producers of 
potatoes for the region, and the largest importer of seed potatoes. 
FAS is working with the GOE to resolve remaining phytosanitary 
issues that will allow U.S. exports of seed potatoes to Egypt.  We 
believe that U.S. producers are competitive in this market.  In 
addition, the U.S. has a very large trade surplus in agricultural 
goods with Egypt.  U.S. agriculture exports in 2008 were about $2 
billion, while Egyptian sales to the U.S. were only about $57 
million.  Egypt is the largest importer of wheat in the world, and a 
major American market for wheat.  Demand is likely to remain high 
for the foreseeable future given population pressures, Egypt's 
underdeveloped agricultural capacity, and consumption patterns.  To 
date, the Egyptian press has not focused on the trade imbalance. 
Given overall trade flows, the GSP program has been a useful talking 
point in our discussions with GOE trade and other officials.  Adding 
potatoes to this list, a product that Egypt does export, would be 
helpful. 
 
Development Impact 
------------------ 
¶3.  (U) Potatoes are a crop grown by smallholders throughout Egypt. 
Production is marketed in both domestic and export markets. 
Egyptian farmers have successfully exported potatoes to Europe and 
the Gulf, and Egypt has a comparative advantage within the region in 
growing potatoes.   Spinach is not currently cultivated in large 
quantities by smallholders in Egypt. However, agronomists feel that 
there is a great potential for spinach given soil and climate 
conditions,  Spinach is also a good crop rotation for tomatoes, 
which are now being produced for processing and export (see para 5). 
 Spinach cultivation requires a small-scale washer to remove sand 
before packaging. 
 
¶4.  (U) Increased farm incomes are a key determinant in alleviating 
poverty. Increases in high value horticultural production will lead 
to increased employment up and down the value chain as the need for 
input suppliers and post-harvest services, such grading, packing, 
sorting, packaging, and processing develops. Increased employment is 
another key instrument in addressing poverty alleviation.  Increased 
on-farm production will improve food security both on and off-farm. 
Increased availability of a wider range of horticultural commodities 
will lead to improved consumption both on-farm and in local markets. 
  The ability to increase incomes and develop employment 
opportunities in rural Egypt and in Upper Egypt will also slow 
emigration to already over-crowded cities such as Cairo and 
Alexandria. 
 
USAID activities 
---------------- 
¶5.  (U) Under previous USAID-funded Agricultural Projects such as 
Agriculture Technology Utilization and Transfer (ATUT), Agricultural 
Linkages (AgLink) and Agricultural-Led Export Business (ALEB) 
projects, USAID assistance organized large and small land holding 
farmer groups in Egypt to collectively produce and market high value 
horticultural crops, meat and dairy products. ATUT worked closely 
with potato producers to introduce new types and produce export 
quality potatoes and also produce export quality processed potato 
products. All these efforts helped Egypt regain its niche in the 
potato market in Europe.  USAID/Egypt's currently funded Alliance 
for Progress in Egyptian Horticulture: A Global Development Alliance 
with H.J. Heinz Company is working with smallholders predominantly 
in Upper Egypt to grow horticultural crops.  While the tomato has 
garnered much of the publicity, alternate horticultural crops, such 
as potatoes, grapes, melons, are where small farmers will 
significantly increase incomes per acre. 
 
Implications for U.S. exports 
----------------------------- 
¶6.  (U) The Foreign Agriculture Service (FAS) in Cairo has been 
working with the Ministry for Agriculture and Land Reclamation 
(MALR) since August 2008 to resolve the last remaining phytosanitary 
issues that will allow U.S. exports of seed potatoes to Egypt.  This 
summer,, FAS will sponsor four Egyptian participants (two from the 
MALR and two from the private sector) to attend the Annual Seed 
Potato conference in Nevada.  The visitors will also visit seed 
potato farms in Idaho and Montana as Cochran Fellows (FAS /Office of 
Capacity Building) as part of ongoing USG efforts to open up the 
Egyptian market. At present Egypt imports its seed potatoes from 
Europe.  Egypt remains one of the largest producers of potatoes for 
the region, and therefore the largest importer of seed potatoes.  We 
believe that U.S. producers are competitive in this market. 
 
Total production 
---------------- 
¶7.  (U) Potatoes in Egypt are cultivated in both the summer and 
along the Nile during the traditional flood season.  The two 
harvests are of the same type of potatoes.  According to CAPMAS, 
Egypt's statistical agency, recent potato planting and crop numbers 
were as follows: 
 
Summer Potatoes (2004-2007) 
(Figures in thousands) 
 
--   2004  2005  2006  2007 
Feddans  97  113  79  86 
Metric tons 1137  1338  935  1039 
(Note:  1 feddan = 1.038 acres) 
Source: CAPMAS, December 2008 
 
Nile Valley Potatoes (2004-2007) 
(Figures in thousands) 
 
--   2004  2005  2006  2007 
Feddans  61  46  39  62 
Metric tons 504  406  368  589 
Source: CAPMAS, December 2008 
 
¶8.  (U) CAPMAS reports the following exports from Egypt of 
potatoes: 
 
Potato Exports (2003-2004) 
(millions of Egyptian pounds, LE) 
 
  2003  2004  2005  2006  2007 
LE  262.7 416.3 448.4 374.6 609.0 
Source: CAPMAS, December 2008 
SCOBEY