<DOC>
[106 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:65843.wais]
106th Congress WMCP:
2d Session COMMITTEE PRINT 106-12
_______________________________________________________________________
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
__________
REPORT
ON
TRADE MISSION TO CZECH REPUBLIC,
EGYPT, AND MOROCCO
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
JULY 27, 2000
Prepared for the use of Members of the Committee on Ways and Means by
members of its staff. This document has not been officially approved by
the Committee and may not reflect the views of its Members
__________
U.S. GOVERNMENT PRINTING OFFICE
65-843 WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
LETTER OF TRANSMITTAL
----------
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC, July 27, 2000.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.
Dear Chairman Archer: I am pleased to transmit to you the
enclosed delegation report on the recent Committee mission to
the Czech Republic, Egypt, and Morocco. This report contains an
overview of the mission, summaries of meetings with foreign and
U.S. officials, and copies of several documents pertinent to
the mission.
The report describes the bilateral economic and trade
issues which were investigated during the trip.
Sincerely,
Angela P. Ellard
Staff Director and Counsel, Subcommittee on Trade
Enclosure.
MEMBERS OF THE DELEGATION
Members of Congress
HON. BILL ARCHER, Chairman HON. JIM McDERMOTT
HON. NANCY JOHNSON HON. JOHN TANNER
HON. AMO HOUGHTON
HON. JENNIFER DUNN
HON. ROB PORTMAN
HON. PHIL ENGLISH
Staff
ANGELA ELLARD
DON CARLSON
JANICE MAYS
DONNA THIESSEN
TIM REIF
KAREN HUMBEL
C O N T E N T S
__________
Page
Letter of Transmittal............................................ iii
Members of the Delegation........................................ v
Overview of the Mission.......................................... 1
Czech Republic............................................... 6
Egypt........................................................ 18
Morocco...................................................... 32
Attachments...................................................... 45
OVERVIEW OF THE MISSION
From April 14 through 21, 2000, a bipartisan delegation of
the Committee on Ways and Means led by Chairman Bill Archer
visited the Czech Republic, Egypt, and Morocco to conduct a
factfinding mission on trade and economic issues. The primary
purpose of the trip was to meet with government and business
officials in each of the three countries to discuss bilateral,
regional, and multilateral trade issues and opportunities.
Specifically, the delegation discussed a number of issues
surrounding the Association Agreements which each of the three
countries have negotiated, and which the Czech Republic and
Morocco have signed and implemented, with the European Union
(EU). These agreements provide European firms with duty-free
treatment for industrial goods, while maintaining tariffs
against U.S. industrial goods, in markets covered by the
agreements. Prior to departure, Chairman Archer, Congressman
Rangel, Congresswoman Dunn, and Congressman McDermott wrote to
U.S. Trade Representative Charlene Barshefsky and to Secretary
of Commerce William Daley expressing concern about the
immediate impact of this tariff differential in the civil
aircraft sector (Attachments A and B). This particular issue
was consistently raised by the delegation in meetings. All of
the countries visited by the delegation are beneficiary
countries under the U.S. Generalized System of Preferences
(GSP), and the delegation noted that the tariff differentials
created by Association Agreements with the European Union
violate the GSP requirement that U.S. firms be afforded
treatment by beneficiary countries no less favorable than what
they give to other countries. The delegation also expressed
concern that the EU Association Agreements violate the
requirements of the World Trade Organization (WTO) that free
trade agreements cover ``substantially all trade'' and be fully
implemented within 10 years.
The delegation also discussed a number of issues related to
economic reform in each of the three countries, including
privatization, rule of law, transparency in government
procurement, and intellectual property rights protection. In
Egypt, the delegation explored the possibility of a bilateral
free trade agreement, as well as regional economic integration
as an essential component of the Middle East peace process.
During its meetings in each country, the delegation discussed
the possible launching of a comprehensive round of trade
negotiations in the WTO and ways to build a consensus in this
regard among both developed and developing countries. Finally,
the delegation discussed a number of foreign policy issues,
including EU enlargement, the Middle East peace process, and
the situation in Iraq, Iran, and Sudan.
Prague, Czech Republic
The delegation first traveled to Prague, Czech Republic. On
April 16, the delegation received a briefing from U.S.
Ambassador John Shattuck and his staff focusing on political,
economic, military, and trade issues. The delegation met on
April 17 with the American Chamber of Commerce (AmCham) in
Prague to discuss the perceptions of the U.S. business
community on Czech economic reform and on the Czech Republic's
accession to the European Union. AmCham members explained that
their current goals are to promote legislative, judicial
reform, industrial, and financial reform in the Czech Republic.
Specifically, the AmCham is focused on encouraging
privatization and regulatory reform in the banking, energy, and
telecommunications sectors.
The delegation next met with Petr Kubernat, State Secretary
for Foreign Affairs, regarding the Czech Republic's accession
to the European Union. Mr. Kubernat provided the delegation
with an overview of the EU accession process. The Czech
Republic began negotiations on EU membership in 1998 and hopes
to be ready for EU accession by 2003. The Czech government is
currently harmonizing Czech laws and regulatory procedures to
bring them into compliance with EU requirements. Mr. Kubernat
asked the delegation to support the Czech Republic's decision
to join the European Union, but offered assurance that his
government also wants to be partners with the United States. In
response to a question from Congressman English on the tariff
differential issue involving civil aircraft, Mr. Kubernat
stated that the Czech government has to consult with the
European Union on any tariff changes and that the government
may be interested in seeking a multilateral solution in the
next Round of negotiations in the World Trade Organization.
The delegation also met with Oldrich Dedek, Vice Governor
of the Czech National Bank on April 17 regarding monetary
policy and bank privatization. In response to a question from
Chairman Archer regarding the ability of the Czech National
Bank to shield itself from political influence, Mr. Dedek
responded that an independent central bank is a condition of EU
membership and that the IMF has been supportive of the Bank's
independence. On bank privatization, Mr. Dedek informed the
delegation that there is a full political commitment within the
Czech government to complete this process swiftly as a
necessity to attract foreign investment capital.
The delegation's schedule on April 17 concluded with a
meeting with the Prime Minister of the Czech Republic, Milos
Zeman. Prime Minister Zeman noted that the Czech Republic has
undertaken significant economic reforms and that a high
priority of the current government is to attract long-term,
stable foreign investment. Chairman Archer responded that the
United States and the Czech Republic share a strong political
and security bond that overshadows the small areas of friction
in the bilateral relationship. In response to questions from
Congresswoman Dunn, Congressmen Portman and McDermott, and
Congresswoman Johnson on the tariff differential issue
adversely affecting Boeing and other U.S. companies arising
from the Czech Republic's accession to the European Union,
Prime Minister Zeman stated his willingness to discuss the
issue but expressed frustration with Boeing's marketing of
certain military jets with its partner Aero Vodochody.
Congressman Portman and Congresswoman Johnson explained that
under U.S. law the trade preferences extended to the Czech
Republic under the Generalized System of Preferences require
the Czech Republic to extend no less favorable treatment to
U.S. products in the Czech market than is given to the products
of other countries.
The delegation then traveled to Egypt.
Egypt
On April 18, the delegation received a briefing from U.S.
Ambassador Daniel Kurtzer and U.S. Embassy staff on the
political, trade, economic, strategic, and foreign assistance
issues in the U.S.-Egyptian bilateral relationship.
The delegation then met with Egyptian President Hosni
Mubarak. Chairman Archer commended President Mubarak for his
role as a peacemaker in the region and noted the common goals
of the United States and Egypt in launching a new round of
trade negotiations in the World Trade Organization. President
Mubarak expressed his appreciation for the close relations
between the United States and Egypt and his interest in
developing closer bilateral economic relations through the
negotiation of a free trade agreement. The President explained
that Egypt's top export to the United States is textiles, which
is viewed by the United States as a threat in the U.S. market
despite the small level of Egyptian exports. He stated that
developed countries should not restrict the ability of the
developing world to produce cheaper goods because increased
trade enables developing countries to purchase more goods
produced by the developed world. President Mubarak promised
that the level of intellectual property rights protection in
Egypt would improve. The delegation also discussed a number of
foreign policy issues in the Middle East with the President,
including the peace process, Iraq, and Iran. On the peace
process, President Mubarak observed that the big problems
remain, most significant of which is giving the Palestinians
some satisfaction in the peace agreement to build long term
stability.
Afterward, the delegation met with Dr. Ahmad Fathy Serour,
Speaker of the People's Assembly, regarding the role of the
People's Assembly in the Egyptian Government. Speaker Serour
explained that President Mubarak's party, the National
Democratic Party, enjoys a 90 percent majority in the People's
Assembly and has succeeded because it is neither on the right
or the left of the political spectrum. Legislative initiatives
are generally submitted to the People's Assembly by the
Executive Branch. At present, the People's Assembly is
expecting legislation on intellectual property rights
protection. In response to a question from Chairman Archer on
the Middle East peace process, Speaker Serour noted the
benefits of peace to the entire region, but observed that the
issues involving Syria and the Golan Heights, the withdrawal of
Israel from Lebanon, and the resettlement of Palestinian
refugees now living in Lebanon will be difficult to resolve.
The delegation also met on April 18 with Egyptian Minister
of Foreign Affairs Amre Mahmoud Moussa regarding a number of
foreign policy matters. Chairman Archer asked Minister Moussa
to share his views with the delegation on the civil war in
Sudan. Minister Moussa explained that the situation is very
complicated due to the multiple factions involved in the civil
war. The Egyptian government is urging the various leaders to
meet and to chart a common future for Sudan. Congresswoman
Johnson asked the Minister for his views on Iraq. In response,
Minister Moussa indicated that the Arab world is satisfied with
the United Nations resolutions which would lift sanctions under
certain conditions, however, he emphasized that a solution to
the problems in Iraq must be found so that the Iraqi people do
not suffer indefinitely. Minister Moussa also said in response
to a question from Congressman Houghton that Egypt views its
relations with the United States as its top priority, noting
the strength of the bilateral military and strategic
relationship. Minister Moussa indicated that Egypt would like
to pursue closer economic relations with the United States
through the negotiation of a free trade agreement.
The delegation next attended a luncheon hosted by the
American Chamber of Commerce in Egypt in the delegation's
honor. Chairman Archer addressed the attendees and explained
the jurisdiction of the Ways and Means Committee and the trade
legislation expected to be considered by the 106th Congress.
The Chairman also took questions from the audience on economic
issues, as well as U.S.-Egyptian bilateral and multilateral
relations.
The delegation concluded business in Cairo in a meeting
with Youssef Boutros Ghali, Minister of Economy and Foreign
Trade, on bilateral and multilateral trade issues. In
particular, the Minister emphasized Egypt's strong interest in
negotiating a free trade agreement with the United States to
provide the institutional framework for Egypt to implement
necessary economic reforms. He noted that Egypt has negotiated
an Association Agreement with the European Union, but has not
signed it because the European model of free trade is
different. The Minister warned, however, that American firms
will lose out in the Egyptian market if the Association
Agreement with the European Union is signed and implemented,
but no free trade agreement is reached with the United States.
The Minister indicated that a WTO consistent law on
intellectual property protection will be submitted by the
government to the People's Assembly in the near future and
pointed out improvements consistent with WTO obligations and
standards in Egyptian customs and customs valuation practices.
In response to a question from Congressman McDermott on labor
and the environment, the Minister emphasized that while these
are important matters, they have no place in trade negotiations
and noted the concern in the developing world that these issues
are really a ``back door'' effort by developed countries to
impose trade sanctions.
On April 19, 2000, the delegation then traveled to Luxor,
Egypt and was briefed by Robert K. Vincent, Director of the
American Research Center in Egypt, which has a federal grant
from the U.S. Agency for International Development (USAID) to
preserve and restore antiquities in Upper Egypt. The delegation
visited sites to observe the type of work supported by the
USAID grant.
The delegation then traveled to Morocco.
Rabat, Morocco
On April 21, 2000, the delegation was briefed in Rabat,
Morocco by U.S. Ambassador Edward Gabriel and U.S. Embassy
staff on a variety of issues in the U.S.-Morocco relationship,
as well as the historical background of the bilateral
relationship, political developments in Morocco since the death
of King Hassan II, the pace and scope of Moroccan economic
reform, Morocco's debt burden and debt relief initiatives, and
the challenges facing Morocco in the area of social
development.
The delegation next met with the Moroccan Minister of
Industry, Commerce, and Handicrafts, Alami Tazi, regarding
trade liberalization and economic reform in Morocco. Minister
Tazi asked the delegation to convey the favorable investment
climate in Morocco to U.S. investors. The Minister noted that
Morocco has suffered a severe drought which has dramatically
affected economic growth in the country. Chairman Archer,
Congresswoman Johnson and Congressman McDermott expressed
concern to the Minister about U.S. firms being disadvantaged in
the Moroccan market as a result of Morocco's Association
Agreement with the European Union. The Minister expressed his
hope that closer bilateral economic relations could be
developed between the United States and Morocco as a result of
bilateral dialogue under the U.S.-Moroccan Trade and Investment
Framework Agreement and his belief that two-way trade between
the United States and Morocco should be three or four times its
current annual level of $1 billion. On the question of the
tender that Boeing has bid on with Royal Air Maroq, Minister
Tazi stated that he was confident that the strongest supplier
would win the contract and that he would support Boeing in its
effort if the contract were a matter within his jurisdiction.
The American Chamber of Commerce in Morocco hosted a
luncheon meeting for the delegation on April 21. Chairman
Archer addressed the attendees, explaining the jurisdiction of
the Ways and Means Committee in the U.S. Congress and trade
legislation expected to be considered before the end of the
year. The Chairman also expressed the concern that U.S. firms
are being disadvantaged in the Moroccan market vis-à-vis
their European competitors and the hope that Morocco would open
itself to foreign investment to raise the standard of living
for the Moroccan people. Chairman Archer took questions from
the audience on the possibility of expanding the African Growth
and Opportunity Act to include Morocco, on the possibility of
expanding products eligible under the Generalized System of
Preferences, and on the possibility of the United States
entering into a debt-equity swap agreement with Morocco.
The delegation concluded business in Morocco on April 21 in
a meeting with Prime Minister Abderrahmane Youssoufi. The Prime
Minister shared his views with the delegation on a number of
domestic and foreign policy issues, including the Middle East
peace process, regional integration in North Africa,
democratization, Morocco's debt burden and social development,
and trade and economic issues. He also noted the challenges
presented to the entire country by the drought affecting
Morocco. The Prime Minister discussed Morocco's efforts to
attract more foreign investment to serve as a catalyst for
economic growth, including through the adoption of a
transparent government procurement process, and expressed his
support for the negotiation of a free trade agreement between
the United States and Morocco. In addition, the Prime Minister
spoke about Morocco's Association Agreement with the European
Union, which entered into force in March 2000. Chairman Archer
and Congresswoman Johnson expressed concern that this agreement
will disadvantage U.S. goods in the Moroccan market over time
as U.S. products remain subject to tariffs while European goods
will not. Congresswoman Dunn and Congressman McDermott
discussed their strong interest on behalf of The Boeing Company
in a transparent procurement process in the tender that has
been issued by Royal Air Maroq. The Prime Minister also
emphasized that Morocco is creating educational and economic
opportunities for women.
CZECH REPUBLIC
Country Team Briefing by Ambassador John Shattuck and U.S. Embassy
Staff
Prague, Czech Republic; Sunday, April 16, 2000
Participants: John Shattuck, U.S. Ambassador to the Czech
Republic; Steven Coffey, Deputy Chief of Mission; Renee Earl,
Public Affairs Counselor; Colonel Ray Canel, Director, Czech
Military Contracting/NATO Accession; Colonel Scott Sawyers,
Assistant Defense Attache; John Morris, Director Political and
Economic Section; Judy Garber, Economic Section; Mike Murphy
Commercial Counselor
A country team briefing was provided to the delegation at a
dinner hosted by Ambassador John Shattuck at his residence in
Prague. The Ambassador welcomed the delegation and introduced
the members of the U.S. Embassy Staff who were present.
Ambassador Shattuck explained that the Czech Republic is a
country of great importance to U.S. interests. Specifically,
the Ambassador noted three areas of significance in the
bilateral relationship: (1) security issues and NATO Accession;
(2) economic prosperity, i.e. trade and investment; and (3)
basic issues of democracy as the Czech Republic ``works its way
into the family of democratic nations.''
The Ambassador noted that the Czech Republic has strong
ties to the United States. Its nationhood is a product of the
vision of President Wilson and its founder, Tomás
Garrigue Mazaryk, who actually wrote the Constitution of
Czechoslovakia on a dining table in Pittsburgh, Pennsylvania.
In addition, today there are over 1 million Czech-Americans.
The bad news, Ambassador Shattuck added, is that the Czech
people have been occupied and repressed by outsiders for most
of their history as a nation. Except for 1918 to 1937 and since
1989, the Czech people have not been free, and even today they
live under a legacy of fascism and communism. After the 1968
rebellion was crushed by the Soviet Union, he noted,
Czechoslovakia entered a period known as ``normalization'' in
which the country attempted to adjust to its role in the Soviet
bloc. When the Velvet Revolution occurred in 1989, Ambassador
Shattuck explained, Czechoslovakia was economically better off
than most communist states, having adapted to communism, and
served as the economic engine of Eastern Europe.
Ambassador Shattuck went on to describe the Czech
Republic's transition since 1989, and indicated that the
country is still in transition today. The government did not
undertake economic reforms quickly since the country was doing
well in comparison to its neighbors in the former Soviet bloc.
Instead, he explained, they underwent a form of pseudo-
privatization, which included a system where vouchers
representing ownership shares in state enterprises were
distributed, but no fundamental management changes were
implemented. The banking system remained tied to the
government, and the legal system was not reformed. Only now, he
indicated, is the country beginning to move out of recession
and undertaking necessary economic reforms. Reform, however,
has been frustrated by the current coalition government between
Prime Minister Milos Zeman's Social Democratic Party (CSSD) and
former Prime Minister Vaclav Klaus' Civic Democratic Party
(ODS). Additionally, Ambassador Shattuck explained, President
Vaclav Havel has a weak hand to play since he has very few
executive powers. President Havel, however, remains an
important source of stability and is the longest serving of
current European leaders.
Ambassador Shattuck further explained that there are two
major forces driving the Czech Republic toward the West and
reform: (1) NATO accession; and (2) EU accession. In this
regard, the Ambassador expressed the view that the United
States should help the Czech Republic and should work toward a
U.S.-Czech partnership for security, economic prosperity and
democracy. He noted the Czech Republic, fundamentally, needs
transparency, democracy and an improved legal system. Already,
the United States is setting up a regional judicial training
institute in Prague and is providing advice on banking
privatization. The United States, he indicated, should be
prepared to share expertise with Czech government officials
``to keep them from shooting themselves in the foot'' and
creating economic disadvantages for themselves, as they are
doing with the 4.8 percent tariff differential issue in the
civil aircraft sector.
At this point, Ambassador Shattuck turned the briefing over
to Judy Garber from the Embassy's Economic Section, who
stressed that the tariff differential issue is at the top of
the U.S. agenda in the Czech Republic. In March 2000, she
explained, a delegation led by Assistant USTR for Europe and
the Mediterranean, Cathy Novelli, came to Prague and discussed
this specific issue with Czech government officials. Ms. Garber
noted that the Czech Cabinet did consider a tariff waiver
proposal, but voted it down. She indicated that copies of the
letters from Chairman Archer, Congressman Rangel, Congresswoman
Dunn, and Congressman McDermott to the Administration, which
were sent prior to the delegation's visit, were delivered to
Czech officials in mid-April.
Ms. Garber added the Czech Republic has been put on the
Special 301 ``watch list'' for deficiencies with respect to
intellectual property rights (IPR) protection. Specifically,
IPR enforcement through the legal system is lacking both in
terms of slowness and the type of penalties allowed, and the
Czech Republic has not met its TRIPs requirement in the WTO in
terms of both 50 year retroactive copyright protection
(although President Havel may sign corrective legislation soon)
and ex parte seizure. Piracy, she noted, is decreasing, and it
is clear that there are new companies in the Czech Republic
whose products can benefit from strong IPR protection. An
example of such a company is Netbeams, which was recently
bought by Sun Microsystems.
In general, Ms. Garber indicated, the Czech Republic does
have a number of advantages. Foreign investment is at record
levels, and its labor is of good quality and cheaper than many
others in Europe. Ms. Garber pointed out that the Czech
Republic is centrally located, and the government is granting
new tax holidays for investors. Among foreign investors,
Germany ranks number one, followed by the Netherlands and the
United States. In the last 12-14 months, she specified, the
Czech Republic has received more than $1 billion in foreign
investment, including $500 million in the energy sector from
such U.S. companies as El Paso Energy. Railroad privatization,
she noted, will come later, as will the bulk of the energy
sector. Ms. Garber explained that three U.S. companies are
currently involved in efforts to buy the Czech national gas
pipeline company, Transgas. Generally speaking, privatization
has been complicated by Czech Republic nationalism, even though
keeping companies in Czech hands has not produced successful
results. Part of the fear associated with increased foreign
ownership, she noted, is historical in nature and is directly
related to anti-German sentiment. It is clear, however, that
successful privatizations need both capital and strategic
partners to succeed. In terms of U.S. companies, strategic
partnerships have emerged involving Motorola, Ford Motor, and
Hayes Limeritz (a Detroit wheelmaking company involved in a new
aluminum wheel venture).
Chairman Archer expressed his appreciation to the
Ambassador for the comprehensiveness of his briefing and
indicated that members of the delegation had both general and
individual interests in specific issues related to the Czech
Republic. He asked to hear from the two military attaches
present regarding defense and NATO security issues.
The Ambassador responded by reiterating that the Czech
Republic had joined NATO one year ago and had participated in
the Kosovo campaign despite its strong ethnic Slavic ties to
Yugoslavia. He said that the new Czech forces are better
trained and lean, having been scaled down in a major way from
its prior Warsaw Pact levels. The United States has expressed a
concern about the cost of some of procurement decisions, such
as a large order of Czech manufactured L-159 planes and its
potential to drain monies needed for personnel.
Colonel Ray Canel noted that nuclear proliferation is an
issue of joint interest to the United States and the Czech
Republic. The United States expressed concern about a recent
$40 million deal involving a Czech company selling equipment
for a nuclear reactor in Iran, and as a result the Czech
government intervened to stop the deal. With regard to
counterterrorism, Colonel Canel expressed the view that the
Czech Republic is not well-equipped to deal with modern
terrorist threats and that U.S. assistance to Czech law
enforcement agencies is both ongoing and valuable.
Colonel Scott Sawyers commented that NATO accession has
gone well and that the Czech Republic has both met basic NATO
goals and developed a good five-year plan. Overall, he noted,
it is widely believed that the Czech are ``pulling their own
weight'' within NATO. Fifty percent of the Czech general
officers and top commanders have had training in western
schools, including large numbers of them in the United States.
As a group, Colonel Sawyers explained, the Czech military looks
to the United States for leadership given their historical
experience in which Europeans have let them down and the fact
that they cannot afford a military of the size they maintained
under the Warsaw Pact. NATO accession has served to give the
Czech military direction for the future.
Colonel Sawyers went on to describe the problems still
facing the Czech military. Among them are: (1) the continuing
impact of the downsizing of forces from 200,000 men ten years
ago to 50,000-60,000 today; (2) the division of resources
related to the split with Slovakia (the Czech Republic received
two-thirds of all military resources); (3) the fact that the
Czech Republic has had eight Ministers of Defense in the last
nine years; (4) the need to modernize despite having met the
NATO goal of allocating 2% of budget to defense; and (5) the
fact that the MIG-21 aircraft in the Czech air force will reach
the end of their planned lifespan in 2003.
Colonel Canel added that the upcoming decision by the Czech
Republic on procurement of fighter aircraft has come down to a
choice between the Grippen offered by BAC on behalf of a
British/Swedish group versus F-16s from the United States. In
response to a question from Chairman Archer as to what military
equipment was produced domestically, it was noted that current
main products include a T-72 tank upgrade package, TATRA
trucks, and small arms.
Congresswoman Johnson inquired about the degree to which
smaller U.S. companies are active in the Czech Republic. Steven
Coffey, Deputy Chief of Mission, stated that 317 U.S. companies
are presently active in the Czech Republic and that U.S.
investors are more diverse than those from any other country.
Congressman Houghton inquired about the delegation's
breakfast meeting with the American Chamber of Commerce on the
next day, asking whether Czech businesses would be represented.
The Ambassador replied that Czech businesses would be present,
including representatives from the banking sector and the Czech
national airline, CSA.
In response to numerous questions from delegation members,
the Ambassador briefed the delegation on the topics that might
come up at all of the scheduled meetings in Prague. Among the
issues discussed were: (1) monetary policy including the
independence of the central bank; (2) tariff differentials that
discriminate against U.S. businesses; and (3) when the Czech
Republic might join the European Union and the concern that the
country might fall out of the first tier of countries granted
EU membership.
The delegation then discussed the letters on the civil
aircraft tariff differential sent by Chairman Archer,
Congressman Rangel, Congresswoman Dunn, and Congressman
McDermott, which were presented to the Czech Government in mid-
April. In particular, the delegation raised the point that
under the Generalized System of Preferences (GSP), the Czech
Republic is required to provide tariff treatment to U.S. firms
no less favorable than the Czech Republic extends to its other
trading partners. Ultimately, the tariff differential issue
could result in the suspension of the Czech Republic's GSP
benefits. Ambassador Shattuck also informed the delegation of
the Czech Deputy Trade Minister's planned visit to Washington,
D.C. in May.
In conclusion, the Chairman again thanked the Ambassador
and his staff for the briefing and for hosting the dinner.
Breakfast Meeting with the American Chamber of Commerce in Prague and
Various Czech Government Officials
Prague, Czech Republic; Monday, April 17, 2000
Participants: Charles Randolph, Chairman of AmCham; Stacey Weston,
Executive Director of AmCham; Vladimir Dlouhy, Goldman Sachs
and former Minister of Trade and Industry; Jim Kunert,
President of Zivnostenskq Bank; Vlastimil Lorenz, Director
General of the Ministry of Trade; Jan Hanousek, Center for
Economic Research at Charles University; Paul Dvorak, Deputy
Minister of Finance; and other AmCham members
Following an introduction by Ambassador Shattuck, Charles
Randolph, Chairman of the American Chamber of Commerce (AmCham)
in Prague (Managing Partner, KPMG Peat Marwick) described the
AmCham's priorities for the coming year. In particular, he
noted that AmCham priorities are framed by three basic
principles: (1) to make the Czech Republic globally competitive
for American exports, investment, and operations; (2) to level
the playing field among businesses; and (3) to promote greater
transparency, both in terms of private sector disclosure and
reporting requirements and in terms of the public sector
legislative and regulatory processes.
Mr. Randolf noted that the Czech Republic is coming out of
two years of recession, but reported modest growth in the last
three quarters. Foreign investment in 1999 is at a record $5
billion, twice the level of previous years. Inflation is under
control and the Czech economy can count among its advantages an
educated work force and a good geographic location. The main
national task ahead, he said, is to privatize the banking
system, especially the nation's largest bank, Komercni Bank.
In light of the above principles, Mr. Randolph reported
that the spring agenda for the AmCham is threefold: (1) to
promote legislative and judicial reform; (2) to promote
industrial reform; and (3) to promote financial reform. With
respect to the legislative and judicial reform, he stated that
the goal was ``speed and accuracy.'' Illustrations of achieving
this goal include the establishment of a bankruptcy court,
training specialized judges and creating a specialized
commercial court, and strengthening the legislative process by
strengthening the legislative drafting process.
Weston Stacey, Executive Director of the AmCham, explained
that the key item in the area of industrial reform involved
reform of Konsolidacni Bank. In particular, the key challenge
is to privatize the bank and enable it to continue to provide
credit to companies in the so-called ``new economy'' (companies
with strong growth rates and good survival prospects), while
writing off bad debts owed by companies in the ``old economy''
(companies that are not making a successful adjustment from the
state-dominated economy). Mr. Stacey noted that Konsolidacni
Bank has more than 9,000 companies in its portfolio.
Two other areas of focus for the AmCham in relation to
industrial reform are energy and telecommunications policy
reform. On energy policy reform, the AmCham is seeking
privatization and greater liberalization. On telecommunications
policy reform, the AmCham is seeking greater openness to
competition. The AmCham sees the successful development of the
telecommunications sector in particular as key to the
development of the new economy.
Turning to the area of financial reform, Mr. Stacey said
the key is to institute some form of creditor protection. For
example, secured loans are often ``secured'' by property that
has been used to secure more than one loan, greatly reducing
the level of security provided to creditors. Similarly, the
bankruptcy law has not been adequately used because creditors
are not confident they can get enough of their money out if
they put companies into bankruptcy. In this area, steps such as
registration of securities are needed.
Vladimir Dlouhy, a former Minister of Trade and Industry,
currently with Goldman Sachs, made two observations. First, the
Czech Republic is making a successful transition from a
centrally planned to a market economy. The transition has been
harder because the Soviet Union concentrated heavy industry in
Czechoslovakia. However, this disadvantage has turned into an
advantage in the long run, because it meant that these
industries would make important contributions to the Czech
economy once privatized and reformed. Second, he stated that
the government's biggest mistake was not to privatize banks in
1993, after the first two waves of industry privatization. In
short, he commented that ``excesses'' were inevitable in the
transition process, and that the key is to maintain the right
balance in macroeconomic policy and privatize the banking
sector. He stated that, in his view, the transition process
from communism to a market economy will take approximately two
decades. He stated that he is confident that the Komercni bank
will be privatized by the end of 2000 or the first quarter of
2001.
Jim Kunert, President of Zivnostenskq bank, stated that the
key lesson Czechs have learned since 1989 is that money plays a
key role in an economic transition. Further, it is not what
entity owns the banks (including whether it is a domestic or
foreign entity), but what the banks offer in the way of goods
and services, that is key.
Chairman Archer thanked the presenters for their comments
and introduced the Members of the delegation and explained the
role of the Ways and Means Committee. In particular, he
mentioned that under the U.S. Constitution, Congress, not the
President, is given primary authority over trade with foreign
countries.
Congresswoman Johnson expressed concern over actions by the
Czech government that discriminate against imports of U.S.
aircraft, aircraft engines, automobiles and other products. She
expressed the view that the Czech government should not
sacrifice its trade relationship with the United States to
accord these kinds of special benefits to the European Union.
Vlastimil Lorenz, Director General of the Ministry of
Trade, responded that the aircraft tariff issue is under study
and that the government is also working on the intellectual
property protection issues that U.S. negotiators have raised.
He mentioned that the Czech government has raised with the
United States the issue of increasing and restructuring the
U.S. quota on imports of cheese and that the Czech Republic
also hopes to renegotiate the textile quota.
Congressman Tanner asked how far along the government is in
creating an independent judiciary and an independent financial
regulatory authority to serve as an honest broker for
regulatory matters, an issue which foreign investors, including
U.S. investors, see as critical to the safety and soundness of
investments.
AmCham Chairman Randolph commented that reform is
proceeding unevenly. For example, 90 percent of credit unions
are considered fraudulent, so there is a long way yet to go.
Ambassador Shattuck commented that a judicial reform
package is pending before the Parliament, and the American Bar
Association's Central and Eastern Europe project is scheduled
to open a regional training institute in Prague in May, with
the support of the European Union and full support of the Czech
Ministry of Justice.
Jan Hanousek of the Center for Economic Research at Charles
University commented that often Czech government officials use
the EU convergence process as a smokescreen or excuse for not
taking steps the United States or other countries request.
Congressman Portman asked the former officials to comment
on health and pension reform. The Deputy Minister of Finance,
Paul Dvorak, stated that those areas are not in his
jurisdiction, which is limited to taxes and customs duties. On
the subject of the aircraft tariff, he expressed the view that
there might be problems under the Czech Republic's obligations
to the World Trade Organization with providing a tariff waiver
to the United States on large civil aircraft.
Former Minister of Trade and Industry Vladimir Dlouhy
stated that the United States has been a good trade partner to
the Czech Republic, starting in 1989, even before the European
Union, by extending most favored nation (MFN) benefits.
Congresswoman Dunn stated that there were no WTO problems
of which she is aware with granting the waiver -in fact, the
problem is in granting the EU preferential access without
providing that benefit on an normal trade relations (NTR)
basis. Congresswoman Dunn noted that the United States is very
serious about receiving the waiver and must receive it swiftly.
Mr. Lorenz responded that the issue was under ``deep
analysis.''
Chairman Archer then drew the meeting to a close by
emphasizing the importance of the bilateral trade relationship.
He commented that the House would have to vote this year on
whether to remain in the WTO and the outcome, while highly
likely, should not be taken as a foregone conclusion. There
were some, he commented, in both political parties who oppose
expanding trade, and supporters of this policy have to work
hard to make their case. He noted that, in this context, issues
like the aircraft tariff issue are important to enable trade
supporters to demonstrate that ``trade works'' for the United
States and U.S. workers, farmers, and businesses.
Meeting with Petr Kubernat, State Secretary for the Ministry of Foreign
Affairs
Prague, Czech Republic; April 17, 2000
Mr. Kubernat opened the meeting by explaining that he is
responsible for the negotiation of the Czech Republic's
accession to the European Union. Within the Ministry of Foreign
Affairs, he stated, there are two departments that deal with EU
accession. The first is responsible for internal coordination
within the Czech Republic. The second is responsible for
external negotiation.
At present, Mr. Kubernat noted, there are six countries
seeking EU accession, one of which is the Czech Republic. He
explained that the Czech Republic began its EU accession
negotiations in March 1998. These negotiations are conducted
bilaterally with the EU Commission. All six candidate countries
negotiate separately, not as a block.
The first stage in the accession process, Mr. Kubernat
informed the delegation, is to identify legislation that needs
to be modified in the Czech Republic in preparation for EU
accession. The Czech Republic completed this stage of this
process in 1999. The second stage involves negotiation with the
EU Commission. The Czech Republic has begun this process. The
negotiations, he stated, are being conducted in such a way that
nothing is agreed to until there is agreement on both sides on
the entire package. Both sides can go back in the negotiations
and reopen issues if either side wants.
Mr. Kubernat explained that France will assume the EU
Presidency during the second half of 2000. The Czech Republic
expects the negotiations on its accession to become clearer at
that time. The Czech government expects that some additional
demands will be made, but that it will begin to get a sense of
timing for the completion of the negotiations. Mr. Kubernat
added that the Czech Republic hopes to conclude the
negotiations this year or next and to be ready for accession by
January 2003. Once negotiations are concluded, he said, the
ratification process will begin, which is expected to take one
year. The final package must also be ratified by the European
Parliament.
In the accession process, Mr. Kubernat said the Czech
Republic must harmonize its legislation to be as close as
possible to the European Union. Passing legislation is not the
final step, though. The government is working to ensure that
the legislation is implemented properly and that the necessary
institutions exist for enforcement. He observed that the second
regulatory review conducted by the European Union on the Czech
Republic's progress in this area did not give the government a
good report. The government has taken this criticism
constructively, he said, and is looking for ways to speed up
pending legislation and to simplify procedures. The whole
process is very difficult because the government not only has
to pass legislation but also has to reform institutions that
have entrenched interests. Mr. Kubernat noted that this
situation is ``even more difficult to overcome than passing
something entirely new.''
Congressman Houghton asked Mr. Kubernat what message he
would like the delegation to take back to Congress. Mr.
Kubernat replied by saying that Czech officials had meetings
the previous week with Assistant Secretary of Commerce Patrick
Mulloy. President Havel, he said, has supported the U.S.
position on civil aircraft tariffs and has encouraged the
government to find a solution. He noted that the Ministry of
Trade and Industry is the lead department in the Czech cabinet
on this matter and that Ministry officials had told Assistant
Secretary Mulloy that they would review the issue and come up
with a recommended course of action.
Congressman Houghton followed up by asking what Mr.
Kubernat personally believed is important for the delegation to
do when it returned to Washington. Mr. Kubernat asked the
delegation to support the Czech Republic's accession to the
European Union. At the same time, he assured the delegation
that the Czech Republic also wants to be partners with the
United States in trade and economic matters. He explained that
they are reforming, not only to join the European Union, but
also ``to put their own house in order'' by developing strong
institutions. These institutions are necessary to attract
investment.
Congressman McDermott asked how the government is able to
pass legislation with a minority in the Parliament and whether
there is a consensus that transcends parties on EU accession.
Mr. Kubernat explained that there is a broad consensus among
parties to join the European Union, but it cannot be assumed
that the opposition will simple agree to the legislative
changes required. All matters related to EU accession are
discussed with the opposition prior to legislation being
considered at the Ministerial level.
Congressman McDermott then asked if changes are required in
the Czech pension system and whether the opposition is inclined
to go along with them given that they would help the current
government. Mr. Kubernat replied by saying that the legislative
changes they are considering contain nothing more than what is
required for EU accession. The government tries to find a
compromise position with the opposition on controversial issues
that enables the process to move forward.
Congressman English thanked Mr. Kubernat for his
explanation of the EU accession process and status of the Czech
Republic's negotiations. He said that the Czech Republic should
not shut the door to other bilateral relations during the
accession process. Congressman English said that the tariffs
maintained by the Czech Republic on locomotives may adversely
affect his constituents over time. He asked whether the
government is willing to work with the United States to find
ways to address tariff differentials. In addition, Congressman
English commended the Czech government for having joined NATO
and for helping to address the crisis in Kosovo.
Mr. Kubernat replied by saying that the Czech Republic
wants to preserve and increase traditional trade flows with its
trading partners. The government will review the proposals on
how to address the tariff differential issue and may seek a
multilateral solution in the next round of WTO negotiations.
Congressman English followed up by saying that EU accession
does not require the tariff differential problem that now
exists and expressing his hope that the Czech Republic would
avail itself of the option it has to waive the tariffs. Mr.
Kubernat pointed out that the Czech Republic has to consult
with the European Union on any tariff changes that it is
considering.
Chairman Archer closed the meeting by thanking Mr. Kubernat
for meeting with the delegation. Mr. Kubernat suggested that
the delegation raise the concern about the tariff differential
problem with Prime Minister Zeman later in the day.
Meeting with Oldrich Dedek, Vice Governor of the Czech National Bank,
and Various Bank Officials
Prague, Czech Republic; April 17, 2000
Participants: Oldrich Dedek, Vice Governor of the Czech National Bank;
Ales Capek, Executive Director of the Monetary Department of
the Czech National Bank; Pavel Vacek, Director of the General
Policy and Regulations Division of the Czech National Bank; and
other bank officials
Chairman Archer introduced the Members of the delegation
and expressed appreciation for the progress the Czech Republic
has made over the last 10 years. He asked whether the bank is
confident that it can maintain its independence, noting that in
the United States there are always some in Congress who
advocate limitations on the independence of the U.S. Federal
Reserve Bank.
Oldrich Dedek, Vice Governor of the Czech Central Bank,
responded that the Czech government has had something of a
track record in this area, having successfully survived the
currency turbulence of 1997, by introducing stability packages
for the economy. He noted further that one of the conditions of
EU membership is an independent Central Bank. Further, the
International Monetary Fund is also supportive of the Czech
government's efforts to maintain the bank's independence.
Congresswoman Johnson mentioned U.S. concern over
discriminatory treatment of U.S. exports in the Czech Republic
as the country transitions to full EU Membership. Mr. Dedek
stated that, in general, the Czech Republic has maintained a
liberal and open trading regime.
Congressman Portman stated that he hopes the Czech
government will complete privatization of the banking system
swiftly and that the Czech government's open and liberal
approach to trade will have an impact on the European Union,
particularly the EU's Common Agricultural Policy. Ales Capek,
Executive Director of the Monetary Department of the bank,
stated that he expects privatization of the banking sector to
be completed within one year. Mr. Dedek added that there is now
a full political commitment by the government to that
objective, which was not true at the outset. Now, he stated,
the government realizes that it needs to attract foreign
capital and banking skills to become fully competitive.
Congressman Tanner asked whether the bank participates in
regulatory supervision, such as audits, of the commercial
banks. Pavel Vacek, Director of the General Policy and
Regulations Division, stated that from its creation in 1992,
the bank has established standards for Czech banks to be
internationally competitive and consistent with international
standards and norms, including EU and Basel (Bank for
International Settlements) requirements. He stated that the
banks are now fully consistent with those standards.
Congressman Tanner asked if the bank has broad legal authority
to enforce its standards. Mr. Vacek said that it does.
Congressman Houghton recalled that officials had earlier
stated that as much as 70 percent of existing Czech companies
are in loss positions and may not recover. He asked if the bank
is prepared to take the approach, particularly with state-owned
or state-invested enterprises, to allow them to go under when
necessary so that resources could be transferred to healthy and
growing firms. Mr. Dedek stated that the bank views the economy
as a ``two speed economy.'' Mr. Vacek said that the government
is prepared to allow failing firms to go out of business.
Meeting with Prime Minister Milos Zeman
Prague, Czech Republic; April 17, 2000
The delegation met with Prime Minister Milos Zeman. The
Prime Minister opened the meeting by welcoming the delegation.
He noted that the Czech Republic has made considerable economic
progress, with inflation currently at only 2 percent. The
minority government now in power, he said, is more stable than
the ``majority of majority governments.'' He added that
capitalism does not instantaneously correct economic problems,
and he emphasized that his government is trying to attract
foreign investment, which has more than doubled recently, with
Germany and The Netherlands as the biggest investors. The basic
strategy is to attract long-term, stable investors, not just
short term investment. The government has also eliminated
tariffs in order to attract hi-tech investment.
Chairman Archer responded by stating that although there
are areas of friction between the United States and the Czech
Republic, these areas are small compared to the overall
relationship. He noted that the delegation shares the pride and
exhilaration of the Czech people since the reforms beginning in
1989. He mentioned that he has Czech roots, as his great-great
grandfather was born in Prague. The two countries, he said,
have a political and security bond as well as the same desire
for open markets, and he wants to remove any friction between
the two countries. The delegation, the Chairman noted, is
committed to free and open trade, although not all in Congress
share that commitment. He pointed to the critical votes in
Congress this year concerning permanent normal trade relations
for China and whether Congress should withdraw its approval for
continued participation in the World Trade Organization. The
U.S. business community, he said, should be excited about
investment in the Czech Republic because of the increase in
transparency and judicial enforcement. An open and transparent
Czech Republic, he concluded, is to the advantage of the United
States.
Congresswoman Dunn stated that as the Czech Republic moves
toward accession with the European Union, a tariff imbalance is
created because EU products enter duty free while U.S. products
must pay duty. She pointed to the 4.5 percent duty faced by
Boeing but not Airbus as an example. She noted that the Czech
cabinet has considered and rejected a waiver of the duty, and
she urged the Prime Minister to reconsider the decision because
forcing Boeing to pay a duty would deny it the opportunity to
win a bid in a competition in which margins are so thin, but
the end result would just benefit Airbus without benefitting
Czech Air.
The Prime Minister responded by saying that he is open to
discussing the issue with the Trade Minister. He added that he
is disappointed that Boeing does not participate in networking
and marketing to sell certain military jets with its partner
Aero Vodochody. The Czech Republic needs this support, he
emphasized, and Boeing will not cooperate. The Prime Minister
then noted that the government has improved judicial reform. It
is a mistake to avoid lawyers in favor of economists, he added,
and a government must have a strong enforcement and judicial
system. Tax evasion, he said, is the second biggest crime in
the Czech Republic.
Congressman Portman noted that GE aircraft engines used in
Boeing aircraft are made in his district in Cincinnati, Ohio.
He is supportive of the entry of the Czech Republic into the
European Union because it could bring more openness to the
European Union, especially in the area of agriculture. He noted
his appreciation of the courageous Czech efforts in Kosovo. He
concluded by saying that he supports benefits for the Czech
Republic under the U.S. Generalized System of Preferences
(GSP), but he emphasized that the GSP law requires
beneficiaries to provide benefits to the United States that are
no less favorable than to other countries.
The Prime Minister responded by saying that his government
does not require visas for Americans traveling to the Czech
Republic, but the United States does not extend reciprocal
benefits. This is discriminatory and should be balanced, he
emphasized.
U.S. Ambassador Shattuck responded by saying that the
United States would like to eliminate the visa requirement but
cannot do so now because of exploitation by Czechs who travel
to the United States as tourists and then overstay their limit,
making it impossible to move in this direction now. He then
responded to the Boeing issue by saying that the government
must take delivery of the military jets in question before
Boeing, a small minority investor (only 35 percent) which does
not control decisions, can market them. Once delivery is
accepted by the Czech Republic, he promised, Boeing will be
active.
The Prime Minister said that his government is willing to
support Boeing as well as Procter and Gamble, but Boeing's
business interest in particular must intensify. ``We hear
Boeing is doing nothing,'' he noted. The Ambassador repeated
that there is a two-step process involved, and the government
must take delivery first.
The Prime Minister noted that the average Czech salary is
one-tenth as in the United States. It is good for both
countries to support foreign investment, and the Czech Republic
needs an exchange of capital, not just goods, even aircraft.
Chairman Archer responded by saying that trade involves goods,
services, and intellectual property. He further noted that
lawyers are not an answer to legal problems, and a government
must instead depend on impartial judges and the rule of law.
One disadvantage in the United States is the number of lawyers;
with only 4 percent of the world's population, the United
States has 70 percent of the lawyers.
Congressman McDermott then observed that the Czech Republic
wants more capital but still has not privatized its banking
system. He than asked how the Czech opposition agreement works.
The Prime Minister responded to the first observation by noting
that the banking sector is in fact totally privatized, with the
last bank to be privatized by the end of the year. He noted
that he has reversed the declines in GDP and real wages, and
inflation is now at only 2 percent, while unemployment is below
10 percent. With regard to the opposition agreement, he stated
that it functions well because it works to the advantage of the
two parties in power. The agreement is a result of a cold
calculation by those parties to avoid being blackmailed by the
smaller parties, who want to be a part of the governing
coalition.
Congresswoman Johnson joined in congratulating the Prime
Minister for the economic progress achieved by the Czech
Republic. She also raised the Boeing issue, noting that if no
waiver is granted, it would amount to a violation of the non-
discrimination clause of the GSP. If GSP benefits were to be
withdrawn, many companies would be affected. Therefore, she
stated, she hopes for both short-term and long-term solutions
to the GSP problem. The Prime Minister again said that the
problem is not just with regard to civil aircraft but military
aircraft as well. The government needs offsets to revitalize
domestic industries, he said, and he supports privatization in
areas that may not be as attractive to investors. Congresswoman
Johnson responded by saying that the GSP sets the base where
offsets can occur. She reiterated her concern as to the many
products that would be affected if the Czech Republic were to
lose its GSP benefits.
The Ambassador noted that the United States is the leading
investor in the poorest region of the Czech Republic. Increased
investment depends on the investment climate, and the Boeing
situation could unfortunately slow investment. The Prime
Minister concluded the meeting by saying that the Czech
Republic is working hard to improve the business climate.
EGYPT
Country Team Briefing by Ambassador Daniel Kurtzer and Embassy Staff
Cairo, Egypt; April 18, 2000
Participants: Ambassador Daniel Kurtzer; Reno Harnish, Deputy Chief of
Mission; Richard Brown, USAID Mission Director; Richard
LeBaron, Economic and Political Minister Counselor; Bobette
Orr, Commercial Counselor; Thomas Pomeroy, Agricultural
Counselor; Marcelle Wahba, Public Affairs Counselor; Al Bigler,
Regional Security Officer; Roger Freeman, Trade Officer
Ambassador Dan Kurtzer hosted the delegation briefing. He
began by explaining that he is currently on his second tour of
duty in Egypt. He first served there in 1979. He pointed out
that the U.S. Embassy in Cairo is the largest U.S. Embassy in
the world. He observed that it is currently a good time in
U.S.-Egyptian relations, after a rocky period over issues
related to Iraq, Libya, Sudan, economic reform, and the decline
in tourism after the Luxor terrorist incident. Ambassador
Kurtzer predicted that it was a good time for the delegation to
visit with President Mubarak, whom he described as a tough
interlocutor who would strongly assert Egyptian independence.
Additionally, he commented that the nature of U.S. economic and
military programs in Egypt gives the United States a ``deep
reach'' into many aspects of Egyptian society.
Overall, Ambassador Kurtzer noted three key areas in U.S.-
Egyptian relations: (1) the peace process; (2) economic/trade
relations; and (3) military relations.
On the peace process, he expressed the view that Syria is
frustrating the effort, although it could have been anticipated
that the Syrians would reject any agreement that did not return
``every inch'' of the Golan Heights. He explained that efforts
are now shifting towards the Palestinian track. In this regard,
he noted that Egypt's contacts with both the Palestinians and
the Israelis should be helpful. While Israel complains about
the quality of its relations with Egypt, the recent agreement
on a gas pipeline between Israel and Egypt shows that progress
can be made. Ambassador Kurtzer noted that Egypt is concerned
about what will happen as Israel withdraws from Lebanon but is
especially concerned about what might happen if its withdrawal
is not complete.
Ambassador Kurtzer then commented on the status of military
relations and left economic and trade issues to be discussed by
his staff. The Ambassador observed that the bilateral military
relationship is both growing and deepening. The recent visit of
the Chairman of the Joint Chiefs of Staff, General Henry
Shelton, and Secretary of Defense William Cohen was positive.
The Ambassador estimated that the modernization of the Egyptian
military is now 50 to 60 percent complete. In particular, he
noted that the Egyptians have been very cooperative in the
areas of Suez transit and overflights of U.S. aircraft, both
during the Gulf War and since. From his perspective, the
Ambassador explained that he sees counterterrorism cooperation
as a shining example of our bilateral cooperation, although he
believes that the current high level of security within Egypt
will be difficult to maintain over the long term.
Richard Brown of the U.S. Agency for International
Development commented on U.S. foreign aid programs and
expressed the belief that they are having a significant impact
on Egypt and its economic reform program. He explained the aim
of U.S. foreign assistance is to help position Egypt in the
global economy by increasing trade and investment. He pointed
out that over 700,000 new jobs were created in Egypt last year.
Substantial work is being accomplished, he explained, in the
areas of power, telecommunications, and waste water treatment,
with the ultimate goal of relying on sustainable human
resources and a stable civil society. Mr. Brown said that U.S.
foreign aid to Egypt will be reduced by half over the next ten
years.
Richard LeBaron, Minister/Counselor of Economic and
Political Affairs, commented that the main ideology of Egypt
today is maintaining stability over the long term, despite its
essential conflict with rapid economic growth. In the current
environment, Mr. LaBaron noted, labor unions have almost no
influence, and political parties have no significant role. The
main party controls 95 percent of the People's Assembly, and
non-governmental organizations (NGOs) are in the formative
stage. The huge Egyptian bureaucracy, he explained, is a legacy
of the old socialist economy and continues to be a drag on
economic improvement. In general, he observed, there is a sense
that the benefits of global growth will eventually reach the
poorer masses. In additionally, he commented that the U.S.
Embassy is active on religious freedom issues and maintains a
dialogue with church leaders, Islamic clerics, and non-
governmental organizations.
Bobette Orr, representing the U.S. Foreign & Commercial
Service in the U.S. Embassy, added that Egypt is the second
largest market in the Middle East for U.S. products, after
Saudi Arabia. U.S. exports currently total in the $3 billion
range, with imports from Egypt equaling around $650 million. In
1998, 12 percent of U.S. investment in the Middle East was in
Egypt, with the oil sector accounting for $576 million and
about $543 million for everything else. Ms. Orr noted that the
challenges faced by U.S. firms in the Egyptian market include
complicated import procedures and precipitously announced
decrees. She indicated that her role is one both of advocacy
for U.S. companies with the government and helping them to
enter the local market. Ambassador Kurtzer interjected that it
was a constant challenge to maintain a level playing field for
U.S. companies in Egypt and that he sought to assist through
his access to ministerial level officials.
Thomas Pomeroy, representing the U.S. Department of
Agriculture, stated that agricultural exports to Egypt were $1
billion per year and that Egypt is the largest export market
for U.S. wheat in the world. He noted that the United States
has experienced 48 percent growth in the export of processed
consumer foods. Mr. Pomeroy explained that he helps to train
local officials to handle agricultural issues and believes the
processed food sector holds great potential for U.S. exporters.
Marcelle Wahba, Public Affairs Officer, indicated that he
is also on his second tour in Egypt, having first served in
Egypt eleven years ago. He noted that there has been
significant change in the economic and political climate in
Egypt, which can be seen in the belief held by many Egyptians
that they have turned the corner economically but are still
being constrained by the overriding concern on security. Mr.
Wahba expressed the belief that the government does give a lot
of attention to public opinion, despite the shortcomings of the
Egyptian political system. He listed a number of Embassy
programs that are helping in this regard: (1) providing
assistance to NGOs; (2) English language programs; (3)
international visitor programs; and (4) grants for ``people-to-
people'' programs.
Al Bigler, Regional Security Officer from the Diplomatic
Security Service, commented that he represents the largest
single office in the largest U.S. Embassy. The main goal of the
office is shutting down Egypt as a transit point for terrorism.
He indicated that the terrorist threat is high both from
internal elements in Upper Egypt and from external elements of
Islamic Jihad origin. Mr. Bigler said that he has seen ``a 100
percent improvement'' in counterterrorism cooperation in the
last three years. Three years ago there were weekly attacks on
police in Upper Egypt. Today, there are none. Ambassador
Kurtzer interjected that the threat of internal violence used
to be nationwide, but is now mainly confined to four provinces
in one region, having been successfully pushed out of the major
cities and population centers. The Ambassador noted that the
United States has given over $3 million for police training,
emphasizing a shift in focus to community policing. He
indicated that a number of Egyptian police officials have
received training in the United States.
Roger Freeman, Trade Officer from the U.S. Embassy and
Control Officer for the delegation's visit, commented on his
personal focus on trade. He indicated that Egypt currently
faces an overall $11 billion trade deficit, with $5 billion in
exports and $16 billion in imports, that causes significant
foreign exchange problems. Average Egyptian tariffs on imports
are 20 percent, he pointed out, and the United States faces
problems in the areas of customs valuations, import bans, and
product standards. With regard to intellectual property rights
protection, progress is being made, but a new Egyptian law is
needed in this area. Commerce Secretary Daley signed a Trade
and Investment Framework Agreement in June 1999. With regard to
a possible free trade agreement (FTA) between the United States
and Egypt, he indicated that a large number of practical steps
by Egypt was needed prior to the negotiation of an FTA,
particularly in the area of customs valuation and tariff
structure.
Following this presentation by Ambassador Kurtzer and U.S.
Embassy staff, the delegation raised a number of specific
issues. Congressman McDermott asked about relations between the
Islamic world and the Chinese. The Ambassador said that part of
the attraction of China is its large market and that China has
been a traditional supporter of Arab causes. As such, Chinese
leaders have always been welcome in Egypt. Overall, however,
the Ambassador indicated that he does not believe that the
Chinese have a special relationship in Egypt and hold minimal
influence.
Congressman Portman asked about the status of the Middle
East peace process. The Ambassador commented that two factors
have dominated Egypt for the last fifteen years: (1) the
continuing aftermath of its revolution; and (2) its relations
with Israel. He indicated that there is a pervasive belief that
real growth and the ability of Egypt to reach its full
potential can come only with full regional peace. He noted that
intraregional trade is extremely low.
Congresswoman Dunn asked about the role of high tech
companies in Egypt. The Ambassador said that the new Minister
of Communications and Information Technology is working hard to
get President Mubarak to focus on high tech issues. He noted
that all of the major U.S. high tech companies have a presence
in Egypt, and many contracts were signed during Mubarak's
recent U.S. visit, including one with IBM to train 15,000
workers over the next five years. Richard Brown added that the
Embassy has targeted three specific areas for export growth:
(1) agribusiness, (2) tourism, and (3) information technology.
At this point, the Ambassador left for an appointment and
turned over the discussion to his staff. Congressman Tanner
commented on the issue of internal politics in Egypt and
specifically on the positive role that President Mubarak played
in the Gulf War. He asked what direction Egypt would head
toward after President Mubarak left office. Richard LeBaron
commented that it was most likely that he would be replaced by
someone like him from the senior levels of the government and
that the issue of succession was complicated by all of Egypt's
problems. Mr. LeBaron expressed the belief that Egypt is moving
toward a time where a civilian successor may be possible.
Congressman English raised the issue of Egypt's agenda in
the World Trade Organization (WTO). The Embassy Staff replied
that Egypt shares a common agenda with the United States in the
WTO on market access and is very interested in the WTO's agenda
on agriculture and basic services, seeing the possibility for
opening a $1 billion market in the European Union for its
agricultural products.
Congresswoman Johnson raised questions about Egypt's
readiness for an FTA and also asked about women's rights in
Egypt. Roger Freeman said that Egypt faces real tensions
between its aspirations for an FTA and its own economic and
political realities. Egypt, he noted, has been negotiating an
Association Agreement with the European Union for ten years,
and, while Europe is ready to make progress, Egypt is not ready
to open up its markets. With regard to women's issues, the
Embassy Staff pointed to a new divorce law, which will benefit
those women who can afford to take advantage of it, and the
remarkable progress in the education of women with 80 percent
of Egyptian women now attending school.
Congressman Houghton asked for the advice of the Embassy
staff on the delegation's agenda for the day. The Embassy staff
jointly offered a number of points. Richard Brown commented
that the focus should be on how to bring Egypt into the world
economy with the major subgoals of creating jobs while
sustaining and preserving national resources. More
specifically, it is important to liberalize the Egyptian trade
regime so that Egyptian companies, which have been protected by
the tariff regime for many years, can become globally
competitive and the Egyptian bureaucracy can be made less
onerous. Mr. Brown cited the fact that Egypt and the Port of
Baltimore handle roughly the same amount of trade volume.
Baltimore handles this trade flow with 200 customs agents while
Egypt has 7,000. A bright spot for Egypt, he indicated, is that
it does have a favorable balance of trade in services.
Roger Freeman suggested there are important issues to be
raised in each of the day's appointments. He suggested the
overall theme of the delegation should be the possibility of an
FTA and the steps Egypt could take to move in that direction.
More specifically, Mr. Freeman said the delegation should press
for a new Egyptian IPR law, continued Egyptian participation in
pushing the peace process forward, cooperation on issues in the
WTO, resolution of bilateral issues, and the streamlining and
development of a coherent pro-trade structure within Egypt.
Congressman McDermott questioned Egypt's interest in the
WTO and Egypt's main interests in any new trade round. The
Embassy staff commented that there had been a change of Trade
Ministers in October and that the former Minister was not
active in this area. Currently, Egypt's main interest is in
implementing already existing agreements, but there is also a
big interest in agriculture and in select areas of the service
sector.
Congressman Tanner ended the discussion by raising the
problems faced in Egypt by both Coca Cola and U.S.
pharmaceutical firms. The Embassy staff commented that
negotiations to date on the discriminatory tax issue faced by
Coca Cola have been unsatisfactory. With regard to
pharmaceuticals, the Embassy staff expressed the view that
Egypt has an entrenched state industry that will frustrate
progress toward stronger IPR protection in that industry.
Meeting with President Hosni Mubarak
Cairo, Egypt; April 18, 2000
The delegation met with President Mubarak. Chairman Archer
complimented the President for his longstanding role as
peacemaker in the region. After describing the role of the Ways
and Means Committee in the U.S. Congress, he noted the common
desire of the United States and Egypt to see a new WTO round,
in which the developing nations would play a significant role.
He also recognized the common goals of Egypt and the United
States for the round. ``We have common understandings,'' he
said, ``not frictions.''
Congressman Houghton asked the President how the United
States can help increase Egyptian exports. The President
responded by saying that he is appreciative of the good
relations between the United States and Egypt, noting that he
has raised the possibility of negotiating a free trade area
(FTA) with the United States, even with President Clinton. Such
an agreement, he said, would give Egypt more room to export
U.S. goods. He stated that the main Egyptian export to the
United States is textiles, which, he said, are somehow viewed
as a threat by the United States, and he wondered how that
could be given the small volume of Egyptian textile exports.
Congressman Portman responded by saying that the Trade
Investment Framework Agreement (TIFA) is a good first step
towards negotiating an FTA. He noted that the textile interests
in the United States are very strong not because of economic
impact but because of politics. The President responded that
the best solution would be for the textile interests to get
together and negotiate because Egyptian textile exports are
such a small percentage of U.S. trade.
Congresswoman Johnson congratulated the President on his
leadership in women's education efforts. The President noted
that women have had equal rights since 1919, and there are no
restrictions on education for women. Congresswoman Johnson
noted that the new divorce law is a step in the right
direction. She also said that she is interested in the
possibility of an FTA, and she mentioned the need for
intellectual property protection to attract hi-tech investment.
The President promised that intellectual property rights will
improve.
Congressman McDermott spoke next, noting that peace was
needed to have trade. Recognizing the President's role as
brokering peace in the region, he asked what the United States
should do to stabilize the region. The President answered that
he is working hard to achieve stability, but big problems
remain. The foremost need is to contain Palestine and to give
the Palestinians some satisfaction in order to ``remove the
hate.'' This issue, he said, could explode at any time.
Chairman Archer asked if the Palestinian issue can be resolved
without resolving the Jerusalem question. The President
responded that the Jerusalem question is ``smoldering.''
Showing the delegation a map of the region, he said that his
solution is to provide access to the holy places, marking them
with an international flag, but the Israeli government has
rejected that solution.
Congresswoman Dunn then invited the President to visit
Seattle, which has a large hi-tech industry. She asked the
President about his recent visit to Washington, D.C. The
President responded that he had a good visit, in which he met
with President Clinton, Vice President Gore, Secretary of State
Albright, Secretary of Defense Cohen, Congressional leaders,
and business representatives.
Congressman English then complimented the President on his
trade leadership, especially in restarting the WTO, noting that
the WTO must offer something to the developing world. The
President agreed, emphasizing that if trade is free, goods are
cheaper, which in turn creates more trade. Otherwise factories
close, creating unemployment and reducing the opportunity for
the developing world to import from the United States. He told
the delegation that the developed world should not prevent
developing countries from producing certain goods more cheaply
because free trade provides them the chance to then purchase
U.S. goods.
Congressman Tanner then asked the President for his views
on Iraq.
Chairman Archer asked the President for his view on Iran.
Iran is becoming more moderate, the President said. He
emphasized strongly that he would ``open'' with Iran, but only
on the condition that former President Sadat's murderer is
punished. Relations are improving, and he urged the United
States to make contact with Iran, as Egypt does. Chairman
Archer responded that the United States has taken a modest step
in removing the embargo on pistachios and other products from
Iran. The President offered that the United States should not
be upset by Hussein's ``tough statements'' and should instead
ignore them.
Congresswoman Johnson asked about the Israel/Syria peace
process. The President responded that the problem is in
dividing the land, noting that Syria will never concede the
land to Israel to control the border. He stated, however, that
the land issue should not be of such great importance. Using a
map as a guide, he pointed to the difference of only ten meters
between the 1967 border and the current border, but Israel
wants 500 meters. Because Syria must ``save face,'' the 1967
border should be used, and the rest of the area should be free.
The real problem, he noted, is that Syria wants a better
agreement than the Israel/Egypt agreement.
Chairman Archer concluded the meeting by telling the
President that with his leadership, he is confident that all of
these issues will be resolved.
Meeting with Dr. Ahmad Fathy Serour, Speaker of the People's Assembly
Cairo, Egypt; April 18, 2000
Ambassador Kurtzer opened the meeting by introducing the
Members of the delegation and explaining the jurisdiction and
role of the Ways and Means Committee in the U.S. Congress.
Speaker Serour stated that he had visited the U.S. Congress
twice and explained that the Egyptian system is different. In
the United States, he noted, there is a separation of powers
between the legislative and executive branches of government.
In Egypt, the People's Assembly is semi-parliamentary and semi-
Presidential. The ruling party, the National Democratic Party,
to which President Mubarak belongs, enjoys a 90 percent
majority in the People's Assembly.
Speaker Serour informed the delegation that the People's
Assembly is now in the process of studying the government's
budget. In general, the members of the People's Assembly are
more open to supporting the requests of the current cabinet
than the one in place last year. The Speaker indicated that he
expects the People's Assembly to consider some economic bills
as well before adjourning for parliamentary elections later
this year. He pointed out that the United States and Egypt are
following up on bilateral trade issues in the Trade Council
under the Trade and Investment Framework Agreement and the
importance of this dialogue.
Speaker Serour asked Chairman Archer about his thoughts on
the correction underway in the U.S. stock market. Chairman
Archer responded by noting that the correction is long overdue.
Alan Greenspan, Chairman of the Federal Reserve, has warned
that the market is too high. Chairman Archer observed that the
market rebounded the previous day and that the fundamental
indicators in the U.S. market remain sound. There are normal
``ups and downs'' in a free market economy.
Congressman Houghton commented that all of the economic
forecasts have ``materialized.'' The United States is going
through a transition to a high-tech service economy. No one
knows how to value the stocks in this sector.
Chairman Archer asked the Speaker about his views on the
Middle East peace process. He replied by saying that he
supports this process, which will have advantages for the
entire region. Speaker Serour noted that there are two steps
involved in the peace process. First, the withdrawal of Israel
from Lebanon and second, the issue involving Syria and the
Golan Heights. Speaker Serour observed that the issue with
Syria will be more difficult to resolve. He noted that a
Palestinian state was called for in 1947, and if one is
declared it will affect demographics in the region by the
resettlement of Palestinian refugees now living in Lebanon.
Overall, peace will be good for the region. The King of Jordan
supports the process. The Israeli people must also be convinced
of the benefits of the peace process.
Congressman McDermott asked the Speaker to explain how
differences of opinion are managed within the Egyptian
political system. Speaker Serour replied that before 1952 Egypt
was ruled by the party supported by wealthy Egyptians. After
1952, President Nassar coordinated a grassroots effort among
the people to build a common consensus about the future. At
that time, he said, the United States did not support President
Nassar, which led him to develop close relations with the
Soviet Union, contrary to the inclination of the Egyptian
people. In 1980, he added, Egypt legalized opposition parties,
but they remain weak and do not hold key positions in the
government. Islamic extremists have aligned themselves with the
Labor Party on the left while a nationalist party exists on the
right. The Speaker noted that these parties try to build
support from a philosophy based simply on destroying the
government rather than promoting good ideas.
Congressman McDermott followed up by asking how the
government prevents a revolution by Islamic fundamentalists.
Speaker Serour replied by saying that the government has
arrested people who advocate the violent overthrow of the
government and has tried to help people differentiate between
extremist groups like Muslim Brothers and the real meaning of
Islam. Speaker Serour went on to say that he tries to give
opposition parties an opportunity to voice their views and
noted that the National Democratic Party succeeds because it is
neither on the right or the left of the political spectrum.
Chairman Archer stated that the delegation learned a lot
about Egypt in a short time, particularly Egypt's interest in
attracting more foreign investment. He went on to say that
there are many Americans who would like to invest in Egypt but
cannot because barriers still exist in the areas of customs
valuation, intellectual property rights protection, and market
security. Chairman Archer asked Speaker Serour about the role
that the People's Assembly plays in trying to address these
issues.
The Speaker noted that the People's Assembly is awaiting
the transmission of a new intellectual property law and that
Egypt will comply with its obligations under the WTO customs
valuation agreement on the schedule that has been established
for developing countries. The government is also preparing a
law that will address the market security concerns of
investors.
Congresswoman Dunn explained the high-tech specialization
of her constituents and asked the Speaker about the process
under which the new intellectual property rights law will be
considered. Speaker Serour noted the legislative differences
between the United States and Egyptian processes and observed
that the executive is not separate from the legislature as it
is in the United States. Once a bill is proposed by the
executive, it is usually enacted by the People's Assembly.
Congressman Portman asked Speaker Serour about his views on
the possible free trade agreement (FTA) between the United
States and Egypt. The Speaker replied that an FTA with the
United States enjoys broad support in Egypt. He noted that the
United States is considering negotiations with other trading
partners and that the Egyptians hope that the United States
will consider one with Egypt as well.
Chairman Archer thanked the Speaker for his time and for
his willingness to exchange views with the delegation.
Meeting with Minister of Foreign Affairs Amre Mahmoud Moussa
Cairo, Egypt; April 18, 2000
Foreign Minister Moussa welcomed the delegation and the
opportunity to discuss a variety of issues of concern to the
United States and Egypt, including the Middle East peace
process.
Chairman Archer explained that the delegation had met with
President Mubarak earlier but did not have an opportunity to
discuss the problems in Sudan. He asked the Foreign Minister to
share his views with the delegation.
Foreign Minister Moussa replied that the problems in Sudan
are of great concern to Egypt, but they are extremely
complicated with many different dimensions that affect the
future of the region. Sudan, he explained, is an African-Arab
country with both Moslems and Christians. Sudan has suffered
continuous conflict between the north and the south, but the
Sudanese also have conflicts within each region. No one person
in Sudan, he noted, can say that he speaks for the north and no
one person can speak for the south. Minister Moussa informed
the delegation that Egypt began discussions with the Sudanese
on all sides a few years ago on the premise that the war must
stop and that a dialogue must begin in order to guarantee a
future for the Sudanese people. He emphasized that the Egyptian
government has urged all of the various leaders to meet and to
chart a common future for Sudan and has offered to help in this
process.
The Foreign Minister explained that he spoke to Ambassador
Thomas R. Pickering, Under Secretary of State for Political
Affairs, last summer and to Assistant Secretary of State for
Africa Susan Rice in October about the problems in Sudan. Also
in October, he raised the issue with Secretary Albright, and
they made progress in developing a common policy toward Sudan.
The Foreign Minister noted that if the goal is a unified Sudan,
the government in Khartoum must offer something to all of the
Sudanese people, including basic human rights.
In December 1999, Minister Moussa said the leader of the
extremists in Sudan was marginalized in favor of the
establishment. He explained that the Sudanese government has
said that it will move away from extremism. Time will show what
course is followed. He noted that the opposition has demanded a
new constitution based on respect for all of Sudan's
minorities. The Egyptian government, he stated, has renewed the
call for a meeting to negotiate a solution and is seeking to
form a coalition within Sudan interested in building a new
future in peace. In this process, the Foreign Minister noted
that the Egyptian government remains in constant communication
with the United States and the French government. He expressed
hope that a meeting of the various faction leaders will occur
in the next few months. In order to succeed, however, it will
be critical for everyone to put the past aside and to focus on
the future.
Congresswoman Johnson inquired about the Foreign Minister's
views on Saddam Hussein and the effort to keep him from
developing weapons of mass destruction. Minister Moussa noted
that policy toward Iraq is also a matter of concern to Egypt.
The question is what happens after the Middle East peace
process is complete. Once there is peace between the Arabs and
Israel, he stated, people will focus more on other problems in
the region.
Minister Moussa pointed out that there has been a shift in
views in the Arab world toward the sanctions against Iraq,
which have been in place for nearly 10 years. The weapons
inspections were successful up to a certain point, he noted,
but now only the people of Iraq are suffering. The Foreign
Minister explained that the mood in the Arab world is that
Saddam Hussein's rearmament must be prevented, but there is an
awareness that he does not currently pose a threat to his
neighbors. He indicated that the Arab world is satisfied with
the shift in UN Security Council positions which will lead to a
lifting of the sanctions under certain conditions, but he noted
that it is clear that Saddam Hussein's regime is immune from
the pain of sanctions. The Foreign Minister stressed the need
for a solution which will not subject the Iraqi people to
suffering permanently. This, he believes, will only frustrate
and alienate an entire generation.
Congressman McDermott noted that the Foreign Minister had
previously served as Ambassador to India and asked him to share
his views on the conflict between India and Pakistan. Minister
Moussa responded by saying that the Chief Executive of Pakistan
had just concluded an official visit to Egypt. The relationship
between India and Pakistan, he observed, is not solely a
bilateral problem but has a large Chinese influence. In his
view, India sees China as its major challenge to being a
superpower in the world. Pakistan, he noted, becomes
increasingly more concerned that India is trying to impose
hegemony in the region and has developed nuclear weapons to
give it a sense of security. The Foreign Minister believes that
there is a complete lack of confidence between the Indians and
Pakistanis ``that makes the Arab-Israeli conflict pale in
comparison.'' Each side is diametrically opposed to what the
other wants. At present, he explained, the Egyptian government
is trying to seek a dialogue rather than an outright solution
to the problem.
Congressman Houghton noted that there are many positive
aspects to the U.S.-Egyptian relationship and asked the Foreign
Minister if there is any single bilateral issue of concern to
Egypt. Minister Moussa explained that Egypt views relations
with the United States as a top priority. He observed that
there are strong military-to-military contacts between the
United States and Egypt and that U.S. foreign assistance has
been instrumental in Egypt's success. The Foreign Minister said
that the Egyptian government is aware that U.S. foreign aid
will end over time and would like to prepare for that by
negotiating a free trade agreement. He noted that the $2
billion in annual U.S. foreign assistance to Egypt has produced
a $3 billion trade surplus for the United States. ``Now the
relationship needs to move from aid to trade,'' he stated.
Minister Moussa indicated that one obstacle to closer bilateral
relations is that the United States always insists that Israel
be included in every aspect. The United States, he said, needs
to disassociate Israel from issues when appropriate. In his
view, Israel does not belong in every discussion between the
United States and Egypt. ``We need a strong bilateral
relationship that can stand on its own,'' he stated.
Congressman Portman asked the Foreign Minister about his
views on the gas pipeline which will send Egyptian natural gas
to Israel. The Foreign Minister noted that foreign companies
have contributed to the project and that this is not a
government-to-government issue. He indicated that the Egyptian
government does not intend to oppose it and that the obstacles
have been on the Israeli side.
Chairman Archer thanked the Foreign Minister for his time
and for sharing his views with the delegation.
Lunch meeting with the American Chamber of Commerce in Egypt
Cairo, Egypt; April 18, 2000
Mohammed Ozalp, Vice President of the AmCham and Head of
the Misr International Bank, introduced and welcomed Chairman
Archer and the delegation on behalf of the AmCham.
Chairman Archer opened by reaffirming the strong bonds of
friendship between the United States and Egypt in political,
cultural, and economic terms. He added that coming to Egypt was
the fulfillment of a childhood dream for him.
Chairman Archer then explained the key responsibilities of
the Committee on Ways and Means: raising revenue, social
security, medicare, social welfare programs, and complete
jurisdiction over foreign trade. He added that in the coming
months, Congress would be considering key legislative issues on
the trade agenda: the value of the continued participation of
the United States in the WTO (in the form of a resolution
relating to Congress' continued approval of the WTO
agreements), whether to accord permanent normal trade relations
to China, and passage of legislation granting key preferential
trade benefits to Africa and extending additional benefits to
Caribbean Basin Initiative countries. Chairman Archer expressed
his hope that the Africa bill would pass in a relatively short
period of time. He emphasized that Egypt should watch this
legislation closely both for what it might foretell about
legislative prospects and challenges for an eventual U.S.-Egypt
free trade agreement and because it provides an indication of
the difficulty of passing trade legislation in the U.S.
Congress at this time.
Chairman Archer added that Egypt and the United States
agree on many issues with respect to international trade, such
as the importance of commencing a comprehensive round of trade
negotiations in the World Trade Organization. He concluded by
pointing out that all countries that have reduced protectionist
policies have increased the standard of living of their people,
while countries that increase protection have reduced the
standard of living of their people.
Mr. Jayant Ganatra then posed several questions to Chairman
Archer on behalf of the AmCham. The first question was what
single step could Egypt take to continue to attract the
information technology industry to Egypt. Chairman Archer
responded that Egypt needed to take the necessary steps to
create a friendly environment for the industry. He mentioned
certainty for investors, improving Egypt's customs regime,
improving Egypt's financial services commitments to the WTO,
and dealing with other anomalies in Egypt's trade regime such
as reducing or eliminating the soft drink tax on Coca-Cola and
Pepsi.
Mr. Ganatra then posed a question related to the value of
the WTO to developing countries and the question of labor and
environmental issues and trade. Chairman Archer responded that
labor and environmental issues are legitimate concerns, but
these concerns should be addressed outside the WTO. He added
that it is important to expand trade ``for trade's sake'' and
noted that multinational corporations would, if given the
opportunity, come to developing countries and create jobs for
local populations. He added that foreign investment should be
seen as a positive element in an economy. Chairman Archer
pointed out that the United States is the world's largest
borrower nation, and U.S. borrowing has strengthened economic
growth, productivity and employment.
The next question concerned whether Chairman Archer
believed the NASDAQ would return to its previous level quickly.
He responded that he had learned long ago not to predict the
course of the stock market. He added that he did not believe
the sell-off per se should be a cause for concern because it is
not ``real life'' anyway if a company's stock valuation rises
from $5 per share to $100 per share in only a year's time. He
added that it is important to keep things in perspective,
recalling that the market was substantially higher today than
it was a year ago.
The final question concerned what legislation he hoped
would pass before his term as Chairman ended at the end of the
year. Chairman Archer responded that he would like to save
Social Security for all time, institute health care reform for
the next 50 years, and enact structural tax reform to make the
system work more effectively for the American people. He stated
that with the White House opposed to his proposals in each of
these areas, it is unlikely that these reforms would be made,
but he expressed his hope that they would be made in the
future.
Meeting with Minister of Economy and Foreign Trade Youssef Boutros
Ghali
Cairo, Egypt; April 18, 2000
Chairman Archer met privately with the Minister before the
delegation meeting, discussing the potential for a Free Trade
Agreement (FTA) between the United States and Egypt as well as
prospects for a new WTO round.
During the delegation meeting, Congresswoman Johnson noted
that there are a number of obstacles to developing business in
Egypt, making it harder to attract foreign investment. She
stated her hope that the new intellectual property law is
passed by the parliament soon and that customs problems are
corrected. The Minister responded that Egypt is setting up
institutions to tackle these problems. The average tariff is
down to 15 percent, with the maximum rate between 40 and 45
percent. Hi-tech is being addressed and promoted. Egypt has
tackled the big problems, he said, and there are only little
problems left. Fundamentally, Egypt has a deep-seated belief
that the market economy is the ``way to go'' because free trade
provides the framework of deadlines to accomplish goals. Egypt
needs to set up an institutional infrastructure to take the
small steps to make an FTA easier to accomplish, and Egypt's
desire to initiate a dialogue with the United States provides
this framework. Although Egypt values strongly its strategic
relationship with the United States, the European Union is
``way ahead'' because it has already negotiated an FTA with
Egypt. Egypt, the Minister said, is now reluctant to sign the
agreement because the EU concept of free trade is different. If
Egypt enters into an FTA with the European Union, he warned,
the United States will lose the Egyptian market because it
cannot compete. The Minister emphasized that Egypt does not
have the same type of strategic relationship with the European
Union as it does with the United States, implying that the
United States could quickly make progress on an FTA if it so
desired. The Minister continued that the United States and
Egypt must initiate a dialogue before there can be compromise
and a successful negotiation.
The Minister also stated that a new intellectual property
law consistent with the WTO Agreement on Trade-Related
Intellectual Property (TRIPs) will be submitted to Parliament
in December or January, although this is a short parliamentary
year because of elections. The law will contain a patent
mailbox, patent exclusivity, and market exclusivity, the key
elements identified by the U.S. Trade Representative. He also
pointed to improvements in customs and customs valuation. He
concluded by saying that as believers in free trade, Egyptians
do not need the ``carrot'' of an FTA to make improvements.
However, an FTA would provide a better framework instead of a
piecemeal approach.
Congressman McDermott then asked the Minister to explain
the appropriate way to deal with labor and environment issues
in the WTO. The Minister responded that these issues will not
go away, but they, particularly labor, have no place in trade
negotiations. Although environmental issues are closer to trade
as are issues relating to genetically modified organisms, labor
``has nothing to do with trade and vitiates the trading
process.'' He emphasized that Egypt is against child labor and
prison labor and similar issues, but societal issues are more
subtle than trade matters. The International Labor Organization
is the more appropriate forum in which to negotiate agreements
on labor. ``Hand waving'' is acceptable, the Minister said, but
``nothing of substance'' should be included in the WTO
agreements. The issue is one of perception, he added, because
the developing world does not trust the developed world, seeing
the labor discussion as a ``back door'' to trade sanctions.
Labor issues can be subtle, he noted, citing the example of a
case in which a child works in a developing country in order to
save his family from starvation. ``Whose definition of civil
society would we use,'' he asked, wondering if his example
would be taken into account.
Congressman McDermott agreed that while labor is further
away from trade, it cannot be rejected. Congressman McDermott
added that environmental issues can be used as trade barriers
and then he asked the Minister whether the European Union's
precautionary principle was acceptable to Egypt. The Minister
responded that he does not know how the European Union would
use it because there are no objective criteria. ``We can't have
secret societies,'' he noted, citing the need for transparency.
Those who seek to link trade with the environment should
develop objective criteria, he concluded.
The Minister then spoke about the structure of the WTO,
noting that it is the only organization with a one-country/one-
vote structure, which should be preserved. However, the WTO
cannot ``negotiate each comma,'' so members should rethink and
stratify the negotiation process, he said. The current process
is not viable, and until it is fixed, there cannot be a new
round.
Congressman Portman noted his frustration with the EU's
agricultural policy. He agreed with the Minister that the WTO
must be restructured and he suggested that the new round be set
to deal with the shortcomings of the WTO, including
transparency and dispute settlement. He encouraged Egypt to
take the lead in this regard.
The Minister concluded the meeting by noting that Tunisia,
Morocco, Jordan, and Egypt are discussing a free trade
agreement, with the next meeting set for mid-May or early June.
Briefing by Robert K. Vincent, Jr, Director, Egyptian Antiquities
Project Direct, American Research Center in Egypt
Luxor, Egypt; April 19, 2000
Under a U.S. federal grant provided by the U.S. Agency for
International Development (USAID), the American Research Center
in Egypt (ARCE) carries out Egyptian antiquities preservation
and restoration projects in Upper Egypt (Attachment C). Robert
``Chip'' Vincent provided the delegation with a briefing on
ARCE's work in the vicinity of Luxor, Egypt, particularly with
respect to the Tomb of Sety I in the Valley of the Kings and
the Temple of Luxor. The delegation also visited sites to
observe the type of work being conducted by ARCE under the
USAID grant. Mr. Vincent explained that the most severe threat
to the antiquities in the region remains flash flooding. To
mitigate this threat, he said, ARCE has developed a series of
recommendations, which it has presented to the Egyptian Supreme
Council of Antiquities, on flood protection measures. In the
tomb of Sety I, he added, ARCE has conducted a thorough study
of the tomb's present condition to evaluate its structural
stability and the conservation needs of the wall paintings and
to propose a suitable site presentation plan. At the Temple of
Luxor, Mr. Vincent pointed out that ARCE is conducting a
conservation project on certain stone fragments which were
underground and have been exposed to the ground water table.
MOROCCO
Country Team Briefing with Ambassador Edward Gabriel and Embassy Staff
Rabat, Morocco; April 21, 2000
Ambassador Edward M. Gabriel opened the briefing by
welcoming the delegation and providing the historical context
for the U.S.-Morocco relationship. He recalled that King Hassan
II had been a good friend of the United States and that his
son, King Mohammed VI, has continued that tradition since he
assumed the throne upon the death of his father in July 1999.
This friendship has deep historical roots as Morocco was the
first country to recognize the U.S. flag in 1777. Ambassador
Gabriel stated that the bilateral relationship is enjoying a
``renaissance,'' and that King Hassan had noted before his
death that ``not since the days of Kennedy has the [U.S.-
Morocco] relationship been so good.''
In this context, Ambassador Gabriel stated that visits by
Congressional delegations and other official visits are crucial
to reinforce and advance the relationship. He noted that such
visits are important not only for the bilateral relationship
but also to advance U.S. regional diplomacy, in particular the
North African strategic element and Morocco in relation to sub-
Saharan Africa.
Ambassador Gabriel then turned to the economic dimensions
of the relationship, stating that 50 percent of Morocco's
government budget is spent on public sector wages and
entitlements, while 33 percent is spent on debt service,
leaving very little discretionary spending for infrastructure
investment and social improvement programs. As a consequence,
Morocco is heavily dependent on the private sector and private
sector investment. He stated that the debt overhang is the
result of policies pursued from the mid-1950s through the
1980s.
On the positive side, Morocco's current policies leave it
in a good position to invest more strongly if the debt burden
can be eased. He indicated that there are two particular
initiatives in this area that the United States should
consider. The first is debt-equity swaps, an approach that a
number of European countries, including Austria, France, Italy,
and Spain, are using. Under this approach, debt relief is
provided in exchange for private sector investment in Morocco.
The European Union's pursuit of this approach has been good for
Morocco, but harmful for the United States, because EU
companies can obtain price advantages of as much as 5-6 percent
over U.S. companies by participating in these swaps. A second
approach worth exploring is providing debt relief in exchange
for Morocco's adoption of U.S. policies in areas like trade.
Ambassador Gabriel then explained that King Hassan II has
instituted a modernization program for Morocco that he
described as a ``three-legged stool.'' The first leg involves a
political experiment, which Ambassador Gabriel termed
successful so far. In this area, King Hassan invited Prime
Minister Abderrahmane Youssoufi, a former political dissident,
to form a government in 1998 and to permit greater democracy
and attention to human rights issues.
The second leg involves macroeconomic reform. In this area,
Morocco's track record has been good with inflation under one
percent and the budget deficit under three percent.
It is the third leg of the stool, social development, which
presents Morocco with its greatest challenge. In key areas such
as infant mortality, maternal mortality, the gap between rich
and poor, and access to infrastructure, substantial
improvements are needed. Even in these areas, however,
Ambassador Gabriel emphasized that King Mohammed VI has been
working to address these issues, in line with U.S. policies,
more strongly than past leadership.
Richard Johnson, Counselor for Economic Affairs at the U.S.
Embassy, then offered a more detailed briefing on macroeconomic
issues. He termed Morocco a ``middle-income country,'' with per
capita GDP at approximately $1,300. He echoed Ambassador
Gabriel's comments that Morocco had followed the wrong policies
in the decades following independence, from the 1950s to the
early 1980s. In the first wave of economic reform in the mid-
1980s, Morocco reduced its budget deficits and tariffs to
promote competition, and its growth through most of the 1990s
has averaged approximately three percent.
Mr. Johnson said that Morocco is now in need of a second
wave of economic reform. He indicated that its targets should
include doubling growth to approximately six percent and
strengthening the social safety net. To accomplish this goal,
the United States has urged Morocco to take four steps: (1)
restructure the government budget away from entitlements and
wages toward infrastructure and social investment; (2) promote
greater transparency, rule of law and anti-corruption efforts;
(3) continue trade and tariff liberalization; and (4) improve
literacy with educational investment and reform (the general
illiteracy rate is estimated to be 50 percent, with illiteracy
among women in rural areas at 90 percent). In the last area, he
stated, a key reform is to focus strategies and investment on
primary and secondary schooling rather than on post-secondary
education.
Mr. Johnson noted further that due to the drought which
Morocco has experienced over the last two years, the country's
GDP growth was reduced to zero in 1999 and is likely to remain
at that level for 2000. On the positive side, Mr. Johnson
stated that Morocco enjoys good relations in the Arab world,
including among the Gulf States, several of which have taken
steps to ease Morocco's debt burden.
In closing, Mr. Johnson stated that the United States needs
to provide ``deliverables'' to Morocco to encourage it to
continue to pursue the right set of policies. Two of those
deliverables are debt relief and food aid (due to the drought).
In regard to U.S. aid, the country budget is $10 million, a
small figure but one the Embassy is working to push as far as
it can. Examples of projects the United States is supporting
with foreign aid are: (1) a project to simplify and improve the
investment climate for U.S. companies; and (2) a project to
promote adherence to the rule of law by strengthening the
judicial system and transparency.
Chairman Archer asked what kind of debt relief efforts Mr.
Johnson suggests that the United States participate in. Mr.
Johnson replied that there are bilateral efforts such as those
undertaken by the Gulf States. In addition, there are steps
that could be taken through the Paris Club, which has provided
the framework for the debt-equity swaps noted earlier.
Congressman Portman asked Mr. Johnson for specific examples
where European countries have used debt-equity swaps to gain an
advantage for local producers. Mr. Johnson replied that the
issue has been raised in a utility privatization project
involving Enron and EMS Energy.
Congressman Portman asked if Mr. Johnson could clarify how
the debt-equity swaps work. Mr. Johnson explained that a
European company obtains the approval of the Moroccan
government to pursue the approach in the context of a specific
commercial transaction. The company then approaches a European
government, which ``auctions'' a portion of the country's debt.
Mr. Johnson stated, however, that the ``auction'' usually
amounts to a ``sweetheart deal'' whereby the company is able to
buy the debt at approximately 50 percent of its value and sell
it to the foreign government in local currency at approximately
56-60 percent of its value. Mr. Johnson added that with a lack
of transparency, it is difficult to know in what instances this
approach has been used.
Congresswoman Johnson then asked how the U.S. Agency for
International Development (USAID) projects are improving rule
of law in Morocco. Mr. Johnson responded that USAID and the
Embassy are working with the Ministry of Justice to reform
judicial, civil, and commercial mechanisms. In particular,
USAID is helping Morocco to set up a system of commercial
courts and expects to spend several million dollars over the
next several years to complete this project. The project
entails training judges for the courts and sharing modern
management techniques with the Ministry of Justice.
Congressman English asked whether Morocco's government
procurement law is as good as it is reported to be. Mr. Johnson
responded that Morocco passed a law in 1998 that requires most
government procurement to be made by public tenders. In 1999,
Morocco issued a tender for its second cellular license and
earned $1.1 billion, whereas an earlier attempted tender that
was not public or transparent resulted in bids of only $400
million. This experience has given Moroccan officials a strong
incentive to pursue public, transparent tenders.
Kathleen Kriger, the Embassy's Commercial Counselor, then
described several advocacy projects that she and Embassy staff
are pursuing. The most significant and politically high profile
case is the competition between Boeing and Airbus to renew
Royal Air Maroc's (RAM's) fleet. The tender, expected in May
2000, is estimated to be worth between $1 billion and $1.5
billion. Ms. Kriger noted that RAM has had an all-Boeing fleet
for more than 30 years, and that Boeing has enjoyed a close
relationship with RAM. Continuation of the all-Boeing fleet
would provide substantial cost advantages for RAM. Moreover,
the second highest-ranking Boeing official in the region,
Senior Vice President for Sales, Seddik Belyamani, is the
highest ranking Moroccan-American in U.S. business.
Nonetheless, Ms. Kriger indicated that Airbus is going all-out
for the sale. Some press accounts have even tied Airbus to a
campaign linking Boeing (erroneously) with the Polisario
movement in the Western Sahara.
Other projects that the commercial office is supporting
include a GE project to sell turbines to a combined cycle power
project, several other power projects involving Enron and CMS
Corporation, and a landfill project.
Meeting with The Honorable Alami Tazi, Minister of Industry, Commerce
and Handicrafts
Rabat, Morocco; April 21, 2000
Minister Tazi welcomed the delegation to Morocco and
explained that he has been member of the Moroccan legislature
for the past 30 years. He noted that the United States and
Morocco have enjoyed very close relations for many years. King
Mohammed VI, he explained, has brought a new climate to Morocco
of freedom and solidarity that has borne political, economic,
and social fruit among the Moroccan people. The Minister
indicated that the year 2000 has been one of severe drought in
Morocco which will affect Moroccan economic growth, especially
in terms of wheat production. The new climate ushered in by
King Mohammed, he said, will require Morocco to work harder to
address the problems caused by the drought.
At present, Minister Tazi explained that Morocco is
focusing its attention on trade liberalization and economic
reform. He asked the delegation to convey to U.S. investors
that their capital is welcome in Morocco and that they will
find a favorable investment climate. The Moroccan Ambassador to
the United States, he noted, will have a very positive impact
in this regard in the United States and Ambassador Gabriel will
continue to work very hard on this as well.
Chairman Archer thanked Minister Tazi for meeting with the
delegation and explained that delegation's purpose in
celebrating and reinforcing the longstanding and close
bilateral relations between the United States and Morocco. The
Chairman observed that the world is changing and countries must
move into a new environment. He further stated that ``[i]n the
21st century, trade will replace frictions and wars of the
past.'' Just as General Shelton visited Morocco to discuss
closer strategic and military alliances between our countries,
Chairman Archer noted that ways must be found to continue to
strengthen the U.S.-Morocco economic partnership. As the United
States makes an effort to expand trade and investment relations
with Morocco, the Chairman expressed hope that Morocco will
``open the door to investors'' to help raise the standard of
living for the Moroccan people. In this regard, he explained
that transparency in government procurement, rule of law, and a
reduction in bureaucratic red tape is critical.
Chairman Archer noted that Ambassador Gabriel will always
be available to the Moroccan government to assist in any way
possible. He added that the Ambassador recognizes how important
rainfall is to the Moroccan agricultural sector and how
devastating the current drought is on the Moroccan economy.
Chairman Archer explained that the Ambassador is working to get
the U.S. government to provide additional wheat in this time of
great need.
Chairman Archer stressed the importance of U.S. firms
having equal treatment to their European competitors in the
Moroccan market.
Congresswoman Johnson thanked Minister Tazi for his warm
hospitality and congratulated him for the Moroccan government's
focus on education reform, especially efforts to open the
educational opportunities available to women. Congresswoman
Johnson noted that in the United States federal law opened the
door to education for women for the benefit of the entire
country. She also expressed concern that U.S. firms do not face
a level playing field in Morocco vis-à-vis their EU
competitors and explained that her district in Connecticut is a
large Boeing supplier and home to GE Capital, both of which are
interested in expanding their relations with Morocco.
Minister Tazi said that he and Ambassador Gabriel enjoy a
close personal friendship and noted that the foundation of
U.S.-Moroccan relations is solid. The two countries need only
to strengthen the trade projects already underway and to
continue the bilateral dialogue under the U.S.-Moroccan Trade
and Investment Framework Agreement. Minister Tazi explained
that Morocco is seeking a climate that will be most suitable
for U.S. investors. At present, two-way trade between the
United States and Morocco is only valued at $1 billion per
year. Of this amount, U.S. exports to Morocco comprise 75
percent. Minister Tazi expressed his belief that two-way trade
between the United States and Morocco should total $3 to $4
billion per year. He noted that Morocco's present volume of
trade with France is equal to $3.7 billion per year.
Minister Tazi stated his confidence that Ambassador
Gabriel's efforts to strengthen the bilateral relationship will
reap great benefits. He noted that Morocco currently has three
industrial parks and that the government has plans to meet with
CMS Energy to discuss a possible industrial park in Tangiers.
These industrial parks will be home to a number of companies,
primarily U.S. firms.
Minister Tazi noted that women are now serving in the
government, in the legislature and in all levels of community
and social development. He observed that an association of
Moroccan women entrepreneurs exists which specializes in
textiles and garment manufacturing. Minister Tazi indicated
that his own chief of staff is female. He expressed hope that
there will be an opportunity to bring together U.S. women
entrepreneurs with their Moroccan counterparts.
Congresswoman Dunn thanked the Minister and explained that
she represents the Seattle, Washington area, which is home to
Boeing. She underscored the importance of the treatment of U.S.
firms in Morocco. She noted that Boeing and Royal Air Maroc
have enjoyed an extremely close relationship for 30 years and
that Boeing's Senior Vice President for Sales, Seddik
Belyamani, is the most senior U.S. businessman of Moroccan
descent. Congresswoman Dunn said that Boeing knows it must
continue to compete with Airbus and is extremely interested in
the tender for new aircraft that Royal Air Maroc has issued.
She expressed hope that Boeing could continue to serve Royal
Air Maroc through its modernization period.
Congressman McDermott pointed out that two Members of the
delegation represent Boeing, which is an indication of how
seriously Americans view the bilateral relationship with
Morocco. He observed that Arab relations with their friends are
strong and are not easily broken. Congressman McDermott
expressed hope that Boeing will win the contract with Royal Air
Maroc, but noted that it is most important that the contract be
decided on merits. If there is transparency in the process, he
said, Boeing is convinced that it can win.
Minister Tazi thanked Congresswoman Dunn and Congressman
McDermott for their comments and pointed out that the Moroccan
delegation at the WTO Ministerial in Seattle visited Boeing's
facilities and was welcomed by Mr. Belyamani. He observed that
Seattle is a thriving city, due to the presence of Boeing and
Microsoft. Minister Tazi said that he encourages Boeing in
every way possible and noted that he would support the Royal
Air Maroc contract being awarded to Boeing if it were a matter
in his jurisdiction. The airline has called for an
international tender because it involves a large number of
aircraft. Once all bids are received, Minister Tazi said he was
confident that the strongest supplier will be chosen. Recently,
he pointed out, Boeing delivered three aircraft to Royal Air
Maroc.
Congressman English expressed his interest in the Moroccan
procurement process and complimented Minister Tazi on the
passage of the new law and implementation of a transparent
procurement process. He noted that Morocco has been on the
cutting edge in the WTO in this regard. Mr. English expressed
his support for the combined gas power generating plant that
CMS Energy has been involved with in Northern Morocco.
Minister Tazi said that Moroccans are very happy to see any
contracts signed between the U.S. and Moroccan private sectors.
He noted that the CMS power plant is operating well under a
strong U.S. team and that it is the first of its kind, having
been completely put together by the private sector.
Congressman Portman thanked the Minister for the
opportunity to discuss U.S.-Moroccan relations, especially in
the area of trade and economics. He explained that the General
Electric Aircraft Engine Division is headquartered in his
district, which has a great interest in maintaining close
relations with Morocco. He noted that there is a concern that
the Moroccan Association Agreement with the European Union may
disadvantage non-European firms, including American firms. He
expressed hope that a solution can be found to develop a model
for trade liberalization for the benefit of all countries. In
addition, Congressman Portman pointed out that there is more
that the United States can do to help Morocco with debt relief
and other forms of assistance, but he noted the importance of
keeping in mind the successful model for economic growth based
on free markets that has been proven around the world.
Minister Tazi responded that Morocco will certainly seek to
proceed with economic reform and to increase trade with the
United States. He noted that the Association Agreement with the
European Union entered into force in March 2000 and will
eliminate tariffs on industrial products between Europe and
Morocco over the next 12 years. Minister Tazi indicated that
U.S.-Moroccan relations are strongly supported by King Mohammed
VI and President Clinton, which will facilitate finding
immediate solutions to any problems. The advocacy of the U.S.
and Moroccan Ambassadors, as well as the bilateral dialogue
under the Trade and Investment Framework Agreement, will also
help. Recently, he noted, there were talks at the World
Economic Forum in Davos, Switzerland between the United States,
Mauritania, Morocco, and Tunisia about establishing a dialogue
between the United States and the Maghreb region. He indicated
that there will be another high level meeting between the
United States and Morocco in June.
Ambassador Gabriel noted that the U.S. Embassy has already
identified more than $2 billion worth of projects in which U.S.
firms can compete in Morocco.
Chairman Archer closed by thanking Minister Tazi for his
time. He noted that every country has its biases and thinks in
terms of its own interests. More than any other country, he
said, the United States has tried to give of itself in terms of
the Peace Corps and foreign aid. He observed that the United
States has not generally asked for much in return. Chairman
Archer explained that the United States believes that it is in
its own interest to see other countries grow and develop. He
noted that Americans believe strongly in competition in terms
of raising standards of living and understand the natural
connection between Morocco and Europe. However, he expressed
the belief that if Morocco finds itself captive to Europe,
Moroccans will not get the very best deals in their trade and
business relationships. Chairman Archer said that the United
States enjoys a competitive edge in high-tech sectors and in
terms of economic performance and emphasized that it would be
mutually beneficial to both Morocco and the United States to
have a stronger trade relationship. He noted that Americans
want to invest in Morocco and that Morocco is to be
complimented for the progress it has made.
Minister Tazi expressed his hope that Morocco's friends
will be so evermore and noted that Morocco is proud to have
been the first country to recognize American independence.
Geography has placed Morocco next door to Europe, he said, but
there is no reason that Morocco would forget its longstanding
relationship with the United States. He indicated that Morocco
can have many trading partners.
Ambassador Gabriel expressed his personal thanks to
Minister Tazi and his staff. He noted that Minister Tazi has
been a great friend to the United States and that no one in the
Moroccan government has sought more to make sure that ``the
window across the Atlantic is as big as the window across the
Mediterranean.''
Lunch Meeting with the American Chamber of Commerce in Morocco
Rabat, Morocco; April 21, 2000
Ambassador Gabriel thanked the American Chamber of Commerce
for its leadership in hosting the delegation and noted that
there has been a great increase in the number of high level
U.S. government visits to Morocco within the last two years.
These visits have led to improvements in every aspect of
relations with Morocco, the oldest ally of the United States.
The Ambassador noted that the delegation has aggressively
advanced trade relations with Morocco. He introduced the
Members of the delegation and asked Chairman Archer to make a
few remarks.
Chairman Archer began by explaining the jurisdiction of the
Ways and Means Committee in the U.S. Congress over tax policy,
health care, Social Security, welfare, and trade policy. He
noted that, as the world enters the 21st century, it is moving
away from government-to-government relations and is replacing
them with business to business relations. In the future, he
said, the big issue will be how to attract foreign investment
to raise standards of living rather than dependence on foreign
aid.
Chairman Archer continued by pointing out that trade is
becoming the lifeblood of the relations of countries with each
other. In the United States, he noted, there is a battle over
the issue of free trade versus protectionism. The Chairman
pointed out that all of the Members of the delegation strongly
believe in free and open trade, and that the delegation is in
Morocco to build on the strength of the existing bilateral
relationship. He said that Ambassador Gabriel has done an
excellent job of representing U.S. interests in Morocco and is
dedicated to trade and economic relations. The Chairman
expressed hope that Morocco will ``open all of its doors and
windows'' for U.S. investors to build Morocco with the Moroccan
people because it is only through investment that workers can
have a better life. If Morocco builds an investment-friendly
environment, he said, investors will come to Morocco with
technology and expertise.
Chairman Archer expressed the concern that U.S. firms may
face a potential imbalance as a result of Morocco's Association
Agreement with the European Union. He expressed hope that the
United States and Morocco can work together to be certain that
there is a level playing field that is transparent. The
Chairman observed that American firms will accept the
competition that this environment will bring. If Americans
cannot prove that a U.S. product or service is better than the
competition, he noted, then the deal should go to someone else,
but American firms should not lose because of non-transparent
activities. Chairman Archer stated his belief that if Morocco
is a captive market, ``it is not to the benefit of those who
are captured.''
Chairman Archer added that 2000 is a year in which the
United States will consider a number of important trade issues.
Among other things, he noted, Congress will consider whether
the United States will remain a member of the WTO and will vote
on granting permanent normal trade relations to China. While
China is a long way from Morocco, the Chairman pointed out that
this vote will send an important signal to the world about the
commitment of the United States to the multilateral trading
system. Chairman Archer expressed his firm belief that the
United States must continue to engage the world.
Chairman Archer closed by thanking the American Chamber of
Commerce for hosting the delegation and said that while the
delegation would leave Morocco, Ambassador Gabriel will remain
as a strong voice for U.S. business interests in Morocco.
Chairman Archer expressed his willingness to take questions
from those in attendance.
Laurence DeWitt, Director General of Jorf Lasfar Energy
Company and Board Member of the American Chamber of Commerce,
asked Chairman Archer about the chances of Morocco becoming
part of the African Growth and Opportunity Act pending in
Congress. Chairman Archer responded by saying that the Africa
bill has been the subject of great conflict with the Senate
over the past six months. Both sides want to build a market in
sub-Saharan Africa, he explained, but there are still vestiges
of protectionism in the U.S. Senate, particularly in the area
of textiles, that are difficult to overcome. The Chairman
expressed hope that the bill will serve as a foundation which
can be extended to North Africa, which already serves as a
gateway to sub-Saharan Africa. Chairman Archer expressed his
interest in the United States negotiating free trade agreements
with Morocco, Egypt, and Tunisia, but he noted that it would be
fraught with controversy on the textile issue. He stated that
these initiatives will have greater chances for negotiation and
implementation once the quotas on textiles are eliminated in
the WTO in 2005.
Julianne Furman, Executive Director of the United States-
Morocco Council on Trade and Investment, asked Chairman Archer
about the possibility of expanding the list of products, other
than textiles, that are eligible for GSP treatment. Chairman
Archer responded by saying that this idea can be discussed and
may hold potential for expanding U.S.-Moroccan bilateral trade
relations.
Karim Chraibi, Business Development Manager for CMS Energy,
asked Chairman Archer whether there is a chance that the United
States will sign a debt-equity swap agreement with Morocco as
France has done. Chairman Archer asked Congressman Portman to
respond. Congressman Portman noted that there are limitations
under U.S. law on what the United States can do on debt relief,
but he noted that the Department of Treasury is working on a
vehicle within existing law to enable U.S. companies to
purchase the debt of foreign governments. He also indicated
that Ambassador Gabriel is working in this area.
Chairman Archer concluded by thanking the American Chamber
of Commerce again for hosting the delegation.
Meeting with Prime Minister Abderrahmane Youssoufi
Rabat, Morocco; April 21, 2000
The Prime Minister opened the meeting by emphasizing the
friendship between the United States and Morocco and their
longstanding alliance. He noted that the volume of trade
between the two countries has increased significantly and a
number of investment projects are being discussed. The Moroccan
debt, he said, is a handicap, and he thanked the United States
for supporting the increase in the debt ceiling by the Paris
Club. The late King, he said, was an initiator of the peace
process, and the new King is continuing this work. The Minister
said that he hopes to see a declaration of an independent state
of Palestine this year and that peace between Israel and
Lebanon has accelerated, noting his belief that President
Clinton is working to achieve this goal before he leaves
office. He also pointed to the Eizenstat Initiative meeting
held in Washington this week, noting that he would like to
develop an FTA among these countries (Egypt, Algeria, Tunisia,
and Morocco). Morocco is the most stable government in the
region, he emphasized, and Moroccan policies are favorable to
democratic values. The new King, he added, has displayed good
political qualities and acumen and symbolizes the stability of
the state and its propensity to develop democratic values and
constitutional principles. ``We're determined to work to assure
that this region is one in which democratic values prevail,''
he declared, citing Morocco's support for peace on the African
continent, in Europe, and in the Middle East, as well as its
participation in peacekeeping forces in Bosnia and Kosovo.
The Prime Minister recognized the problems in Moroccan
society, such as poverty pockets, unemployment, and the
important social deficit in education and health. However,
Morocco is addressing these problems, he said, and is
developing a policy to attract more national and international
investment, which in turn will create stronger growth. Morocco
has implemented legislative reforms, just as recently as last
month. He pointed to the drought as a major catastrophe, noting
the need to insure adequate food and water for rural areas. He
thanked the United States for grants of wheat and for
intervening with the Paris Club to raise the debt ceiling. He
then discussed Morocco's debt burden, noting his optimism that
additional U.S. investment will help absorb the debt, although
recognizing that ``problems in the House of Representatives''
may make it difficult. He noted that he supports the
negotiation of a free trade agreement with the United States.
Chairman Archer responded, noting how warmly his delegation
has been welcomed in Morocco. He noted that the delegation
believes that the U.S.-Moroccan relationship is important and
wants to strengthen it further. He congratulated the Prime
Minister for the stability of the government and for its great
help to the world as an intermediary in the Middle East peace
process. He noted that the global economy is in a transition in
which government aid is declining and private investment is
creating more and better jobs. The Chairman said that the
delegation wants to be an agent to increase opportunities for
trade and investment to build on the infrastructure left by
prior leaders. The delegation believes this is important, he
added, because such a strategy is advantageous to the United
States as well as to the long term interests of the world. He
mentioned his great concern about the drought and how
devastating it has been for the Moroccan economy. He noted that
the United States Ambassador will make a strong request for
additional wheat shipments to Morocco.
Chairman Archer also pointed to the long-term importance of
a level playing field for U.S. companies to invest and do
business in Morocco, giving them an even chance with EU
companies. He emphasized that he wishes to work with Morocco to
maintain such a level playing field, and after the delegation
has left Morocco, the U.S. Ambassador will speak for the
delegation in this regard. The Chairman stated unequivocally
that ``the ways of the past won't serve Morocco well in the
future,'' and Morocco must seek to increase investment through
better transparency and rule of law. The Chairman concluded by
inviting the Prime Minister to the United States.
Congresswoman Johnson noted the extraordinary achievements
of Morocco in the arts and in helping the poor and illiterate.
She also said that she is pleased to see how the United States
and Morocco work together on U.S. aid funding. She also noted
her appreciation of the importance of debt relief and
increasing the number of products eligible for preferential
treatment under the Generalized System of Preferences. She
concluded by pointing to her biggest concern about the long-
term: that differential tariff rates could develop because of
Morocco's association agreement with the EU.
The Prime Minister thanked the delegation for its sympathy
concerning the drought and the proposal for additional
shipments of wheat. As to the investment climate, he noted that
Morocco is ``determined'' to enforce transparency requirements,
noting that Morocco has already put in place laws guaranteeing
transparency, including a public tender system. The next
problem to deal with, he said, is licensing, and he is seeking
to assure transparency in this regard as well.
The Prime Minister then spoke about the EU association
agreement that Morocco ratified on March 1, 2000, noting that
the United States should not have major concerns. The ultimate
goal, he said, is to conclude a free trade agreement between
Europe and North Africa. He stated that he hopes that Eizenstat
Initiative, which he appreciates as a counterweight to create a
normal flow of trade with the United States, will materialize
soon. He noted, however, that Algeria's reluctance will make
that difficult. The Prime Minister then went on to speak of his
government's relationship with Algeria, noting that the first
thing he did when he took office was to reopen that border,
which had been closed since 1994. Morocco has supported a gas
pipeline from Europe to Algeria, which Algeria opposed. The
Prime Minister has been promoting the North African region as a
tremendous market, and he emphasized his eagerness to develop a
better trade relationship with the United States. He then added
that he hopes that the United States will use its influence to
change Algeria's behavior.
The Prime Minister stated that his government is strongly
interested in women's issues and has proposed an integration
plan for women to improve education, health, and socio-economic
issues, as well as an effort to improve family issues. The
national debate on these issues, he cautioned, creates
``storms'' because some are suspicious and feel threatened.
However, he emphasized that the government is ``keen'' on
fighting for gender equality.
Congresswoman Dunn stated that she was pleased with his
comments about the government's policies on women. On behalf of
her constituent Microsoft, she congratulated the Prime Minister
on Morocco's compliance with the WTO Trade-Related Intellectual
Property Agreement (TRIPs). With respect to Boeing, another
constituent, she emphasized how important it is to do business
with Morocco, and she mentioned specifically that Boeing is
competing to continue being the government's aircraft supplier.
Congressman McDermott also noted how serious the Boeing
issue is and commended the Prime Minister for his commitment to
transparency. He stated his belief that Boeing will win the
bidding if the procedure is transparent. He expressed
confidence that the Moroccan government will take care of the
Enron project as well. He concluded by saying the two
governments have been friends for a long time.
The Prime Minister noted that Morocco has been a loyal
customer of Boeing, having purchased Boeing aircraft only. The
French, however, have the right to try to sell Airbus aircraft.
Boeing is extremely popular, he emphasized. Congresswoman Dunn
responded by saying that all she asks is that Morocco maintains
its commitment to transparency. The Prime Minister responded by
saying that while in government, that has been his priority.
Chairman Archer emphasized that in general competition in
investment will lead to better terms for Morocco. He mentioned
the specific case of Enron, a constituent, which joined with a
local company to bid on a wastewater and power generation plant
in northern Morocco using state of the art technology, asking
the Prime Minister to give fair consideration to the bid. He
noted that it would send a strong signal to have Fortune 500
companies invest in the north of Morocco, where it is most
needed. He also mentioned a pending General Electric project
and noted his support for ventures by other U.S. companies,
including CMS, AES, and Seawest. He also noted that in the
insurance sector, it would be helpful to Morocco if foreigners
were permitted to own majority ownership stake because more
competition creates better products.
The United States Ambassador then spoke, noting that the
United States will work hard on food aid and debt relief ideas.
He stated that he is glad to hear that both the delegation and
the Prime Minister are interested in a free trade agreement,
and he noted the need to ``speed up U.S. leadership'' on this
issue. He then praised the Prime Minister for his leadership
role in the government during a difficult time. The Prime
Minister concluded by praising the Ambassador as a great friend
and advocate for U.S. interests.
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