```

[WPRT 108-13]
[From the U.S. Government Publishing Office]

108th Congress 
 2d Session                 COMMITTEE PRINT                        WMCP
                                                                 108-13
_______________________________________________________________________

                                     

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                               __________

                              R E P O R T

                                   ON
 
           TRADE MISSION to TUNISIA, JORDAN, OMAN, and EGYPT

                [GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                              JANUARY 2005

                               __________

 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.
                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               GERALD D. KLECZKA, Wisconsin
JIM McDERMOTT, Washington            JOHN LEWIS, Georgia
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               MICHAEL R. McNULTY, New York
JIM NUSSLE, Iowa                     WILLIAM J. JEFFERSON, Louisiana
SAM JOHNSON, Texas                   JOHN S. TANNER, Tennessee
JENNIFER DUNN, Washington            XAVIER BECERRA, California
MAC COLLINS, Georgia                 LLOYD DOGGETT, Texas
ROB PORTMAN, Ohio                    EARL POMEROY, North Dakota
PHIL ENGLISH, Pennsylvania           MAX SANDLIN, Texas
J.D. HAYWORTH, Arizona               STEPHANIE TUBBS JONES, Ohio
JERRY WELLER, Illinois
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
                    Allison H. Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel
                         LETTER OF TRANSMITTAL

                              ----------                              

        U.S. House of Representatives, Committee on Ways 
            and Means, Subcommittee on Trade,
                                   Washington, DC, January 3, 2005.
Hon. Bill Thomas,
Chairman, Committee on Ways and Means,
Longworth House Office Building, Washington, DC.
    Dear Mr. Chairman: I am pleased to transmit to you the 
enclosed congressional delegation report on the recent 
Committee mission to Tunisia, Jordan, Oman, and Egypt. This 
report contains an overview of the mission as well as summaries 
of meetings with foreign officials.
    The report describes the trade, investment, and security 
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 THE U.S. HOUSE OF REPRESENTATIVES

        HON. BILL THOMAS, Chairman, Committee on Ways and Means
 HON. NANCY L. JOHNSON, Chairman, Subcommittee on Health, Committee on 
                             Ways and Means
                        HON. MICHAEL R. McNULTY
                           HON. PHIL ENGLISH
                             HON. RON LEWIS

                      COMMITTEE ON WAYS AND MEANS
  Angela P. Ellard, Staff Director and Counsel, Subcommittee on Trade
      Stephanie Henning, Professional Staff, Subcommittee on Trade
      Stephanie Lester, Professional Staff, Subcommittee on Trade
    Mary Sue Englund, Special Assistant, Committee on Ways and Means
                                CONTENTS

                              ----------                              
                                                                   Page
Members of the Delegation........................................    IV
Outline of Trip Conclusions......................................     1
Discussion of Trip Meetings......................................     6
    Tunisia......................................................     6
    Jordan.......................................................    10
    Oman.........................................................    18
    Egypt........................................................    25
                              INTRODUCTION

    From November 4-13, 2004, a bipartisan delegation of 
Members of the Committee on Ways and Means traveled to Tunisia, 
Jordan, Oman, and Egypt. The purpose of the delegation's trip 
was to focus on trade, investment, and security issues in the 
region. The delegation in particular was cognizant of the 
recommendation of the National Commission on Terrorist Attacks 
upon the United States (the ``9/11 Commission'') that the 
United States encourage economic development in the region 
through trade agreements.
    The United States already has a trade agreement in place 
with Jordan, and the delegation sought to explore how that 
agreement has operated. Tunisia, Oman, and Egypt have 
established Trade and Investment Framework Agreements (TIFAs) 
with the United States, which provide a forum for high level 
officials from each country to meet to advance trade and 
investment issues. The delegation's goal was to explore whether 
any of these countries is a potential candidate for a free 
trade agreement with the United States. In the case of Oman, 
Ambassador Zoellick notified the Congress of his intent to 
negotiate a free trade agreement with Oman in the week 
following the delegation's visit, after consultation with 
Chairman Thomas.
    Ambassador Zoellick also notified Congress of his intent to 
negotiate a free trade agreement with the United Arab Emirates 
(U.A.E.) at that time. The delegation was planning to visit the 
U.A.E., but postponed that segment of the trip out of respect 
for the period of mourning for the President of the U.A.E., 
Sheik Zayed bin Sultan Al Nahyan, who passed away the week 
before the delegation's visit to the region.

                      OUTLINE OF CODEL CONCLUSIONS

Tunisia
     The Trade and Investment Framework Agreement with 
the United States has been a successful forum for addressing 
trade issues between the two countries. The delegation agreed 
to encourage USTR to continue the TIFA process, particularly by 
scheduling another meeting within the next few months.
     The delegation believes that accelerating through 
the TIFA process and building on the TIFA relationship through 
the negotiation of an FTA with Tunisia would augment the 
existing FTA with Morocco, forming a Northern African market 
that could provide an incentive and opportunity to draw in 
Algeria and Libya across Northern Africa.
     The delegation emphasized that while the Tunisian 
government has demonstrated a strong and serious desire to 
negotiate an FTA with the United States in addition to its 
already strong relationship with Europe, an FTA with the United 
States, unlike the Tunisian relationship with Europe, would 
require significant reforms of the economy and further 
liberalization, particularly in investment and services, to 
garner Congressional support. While Tunisia has been managing 
its economy successfully, these reforms are necessary to take 
it to the next level.
     Accordingly, the delegation encouraged Tunisia to 
undertake such reforms.
           In particular, the delegation noted that an 
        improved climate for U.S. investors would underscore 
        Tunisia's commitment to economic reform and 
        international competitiveness and would generate 
        employment, training, technology transfer, capital 
        infusion, and tax revenues. Such steps are necessary 
        given Tunisia's young population and need for 
        employment opportunities.
           U.S. companies face many obstacles in 
        establishing franchises, particularly Tunisia's case-
        by-case approval process. This lack of uniform, 
        transparent rules discourages U.S. investment and makes 
        it more difficult for an FTA to pass Congressional 
        muster because it does not meet the standards 
        established through all other U.S. FTAs.
           Intellectual property protection contributes to 
        a favorable investment climate, but U.S. companies are 
        concerned over widespread trademark counterfeiting and 
        copyright piracy.
           Other barriers caused by bureaucracy, a 
        traditional viewpoint of protecting domestic jobs, and 
        lack of transparency discourage U.S. investment.
           The delegation also observed that Tunisia's 
        Euro-centric trade policy (80 percent of its trade is 
        under its EU Association Agreement) deprives Tunisia of 
        much-needed investment opportunities with the United 
        States.
     The delegation welcomed the Prime Minister's 
commitment to open the telecommunications sector in the near 
term.
     The delegation is pleased that English is 
beginning to be taught in schools; this will help increase the 
profile of the United States and the investment opportunities 
it presents.
     The delegation offered to discuss opportunities to 
provide textile benefits to Tunisia as short term relief when 
the WTO Multifiber Agreement expires in January 2005--an 
interim step before an FTA is negotiated.
     The delegation observed the work of the Middle 
East Partnership Initiative (MEPI) in supporting political, 
economic, educational, judicial, and sociological (role of 
women) reform across the Middle East.
Jordan
     The delegation recognizes the productive and 
growing relationship the United States has with Jordan stemming 
from the FTA between the two countries.
           In particular, Jordan's exports have grown 42 
        times since 1998, with a diversification to new areas 
        outside textiles.
           Foreign direct investment in Jordan has grown 4 
        times since 1995 as firms seek a safe, competitive, 
        pro-business base in the region.
           Jordan's commitment to intellectual property 
        has stimulated investment and increased the 
        competitiveness of the local pharmaceutical industry.
           Because of the FTA, Jordan has increased its 
        economic performance and competitiveness by increasing 
        regulatory transparency, opening services sectors, 
        privatizing government-owned entities, and fostering 
        new areas of its economy such as e-commerce.
     The delegation agrees with the Jordanians that a 
MEFTA agreement is valuable because it would lead to cumulation 
of inputs among the member countries.
     The delegation agrees with Jordan that sustained 
U.S. support and technical assistance is essential to continued 
Jordanian progress.
     The delegation asked Jordan to lead by example--to 
show other countries in the region that a country with the same 
cultural and economic background can reform and develop a 
strong, productive, and mutually beneficial trading 
relationship with the United States.
     The delegation observed that a fundamental 
weakness that could undermine Jordan's ability to accelerate 
its economic development and realize its potential is the lack 
of efficient and effective shipping options. The delegation 
intends to examine how U.S. technical assistance could be 
helpful, particularly with respect to the port of Aqaba.
     With respect to the Jordanian QIZs, the delegation 
observed:
           The existing QIZs are based mostly on Asian 
        capital and employ a large segment of non-Jordanian 
        workers, although the number of Jordanian employees is 
        growing.
           The QIZ requirement that a share of Israeli 
        inputs must be used makes the Jordanian product less 
        competitive because these inputs are so expensive. As a 
        result, the delegation advised that Jordan move quickly 
        to use the FTA qualifying rule instead of the QIZ.
           Jordan should diversify production in the QIZs 
        away from textiles and should vertically integrate to 
        more value-added operations beyond mere cut and sew.
           While the QIZs have not been as productive as 
        full implementation of the FTA, the QIZs have been 
        beneficial to Jordan. In particular, they have 
        empowered Jordanian women employees, established 
        employment opportunities, gave Jordanian industry the 
        skills to make them more nimble, and provided lessons 
        in mass production and management.
     The delegation welcomed Jordan's support in the 
war on terrorism and in Iraq. A stable Iraq is critical for 
Jordan and the region.
Oman
     Oman's high-quality accession to the WTO shows a 
commitment to trade liberalization.
     The delegation strongly supports the negotiation 
of an FTA with Oman and is pleased to see the commitment and 
drive by Oman to conclude such negotiations. An FTA with Oman 
would complement an FTA with Bahrain and the United Arab 
Emirates and would encourage others in the Gulf Cooperation 
Council (Saudi Arabia, Qatar, and Kuwait to undertake reforms 
and become part of the process as well). Oman recognizes that 
trade with the United States is much more significant than its 
trading relationship with the rest of the GCC.
     The window of opportunity is short, however, 
because of the expiration of TPA in July 2004 and the always 
difficult environment in Congress for trade agreements. 
Therefore, the delegation hopes that an agreement can be 
concluded by the middle of next year, by the time of the 
Smithsonian Folk Festival in Washington, D.C. featuring Oman.
     Oman has undertaken significant economic and 
political reforms in a short time, particularly in the banking 
and insurance sectors, demonstrating its capacity and 
willingness to use objective, transparent standards.
     Such objective standards are essential to 
obtaining Congressional support for an FTA because any 
departure from the standards used in U.S. FTAs will raise 
questions and opposition from Members.
           Congress will expect strong commitments on 
        investment and services, such as telecommunications.
             The delegation believes that the focal issue to be 
        addressed by Oman is labor standards, particularly the 
        right of association and the right to strike. The 
        Omanis seem to recognize this reality and expressed a 
        commitment to bring their labor laws up to 
        International Labor Organization standards, using the 
        Bahrain laws as an example.
            In addition, the delegation believes that other 
        processes must be transparent, such as the 
        ``Omanization'' policy (requiring a certain percentage 
        of employees to be Omani) and the investment policy 
        requiring approval if foreign investment in a 
        particular entity is to exceed 70 percent.
     The delegation observed that Oman is committed to 
increasing the strength of the private sector and reducing the 
influence of the public sector. In addition, Oman appears to be 
embarking on effective policies to train Omani workers and to 
improve opportunities for women. Its young population means 
that such programs are essential for economic development.
     The delegation expressed its appreciation for 
Oman's role as a partner in the war against terror and its 
action to limit terrorist financing.

Egypt

     While a multilateral agreement through the WTO is 
the delegation's primary goal, regional or bilateral FTAs, 
particularly the Middle Eastern Free Trade Agreement, are 
valuable because they provide intermediate benefits.
     The delegation is committed to expanding the U.S. 
economic relationship with Egypt, agreeing that an FTA is vital 
to shared bilateral interests and is a key element in President 
Bush's vision of a Middle East Free Trade Area.
     A key stepping stone to an FTA is a positive and 
sustained record of concrete economic reforms and steps to 
improve the bilateral economic relationship.
     The delegation approaches the prospect of a free 
trade agreement with Egypt with more doubt than with some of 
the other countries in the region because there has been hope 
before, ultimately unfounded, that Egypt was ready. This time, 
however, the delegation acknowledged a recent record of 
significant advancement that may allow moving forward if 
sustained and improved.
     Specifically, the delegation is encouraged that 
recent measures concerning customs administration, tariff 
reduction, and tax reform by Egypt's new cabinet are steps in 
the right direction, and President Mubarak seems committed to 
continuing these reforms. However, the delegation agrees with 
the Administration that action on a range of issues affecting 
U.S. companies is essential for building constituencies in 
Congress before FTA negotiations can begin. Mubarak 
acknowledged to the delegation that there is a short window for 
continued reforms before the Egyptian election next year.
     There are particular problem areas where it is 
essential for reforms to be continued:
            Egypt's authorization of copycat versions of U.S. 
        pharmaceuticals
            Egypt's unwarranted suspension of U.S. beef imports 
        without scientific basis due to BSE concerns that the 
        United States has addressed
            Egypt's unjustified ban of imports of chicken and 
        restrictions on turkey for failure to meet Halal 
        [Islamac dietary] requirements when the United States 
        has met these standards elsewhere and even in Egypt 
        with respect to other products.
     Egypt does not seem to have a sense of urgency 
about the timing to negotiate an FTA and seems instead to rely 
on its size in the region, its relationship with the United 
States, and its strategic importance. The delegation supports 
proceeding quickly in the region and would like to include 
Egypt. However, bilateral trade agreements receive favorable 
Congressional consideration only if they meet a set of 
objective standards that all FTA partners must reach, unlike 
the European model, which is based on a more mercantile 
approach. Egypt must meet those same standards, or the 
agreement will be very difficult to move through Congress for 
approval and implementation. If Egypt is unable to meet those 
standards, the MEFTA process will continue without Egypt.
     Movement by Egypt is essential in the next six 
months to one year if Egypt intends to be part of this process.
     The delegation discussed Egypt's request for 
approval for seven Qualified Industrial Zones.
            It is unfortunate that Egypt waited so long to 
        utilize the QIZ process, as the expiration of the 
        Multifiber Agreement on January 1, 2005, means that any 
        benefits might easily be overtaken by the predominance 
        of Asia.
            Egypt's best chance to receive Administration 
        approval for the QIZs is to diversify as much as 
        possible beyond textiles.
            The fact that Egyptian and Israeli capital, and not 
        Asian, will be used is positive.
            In any event, the relationship between the United 
        States and Egypt must be broader than the QIZ program.
     Allowing individuals with private sector 
experience to hold key government positions is important to 
continuing the reform process. However, to attract such 
experienced officials, it is essential to make such positions 
available without requiring personal financial sacrifice.
     The delegation expressed its appreciation for 
Egypt's support in promoting a stable Iraq. Egypt is hosting a 
major international conference to build international support 
for this effort on November 22-23, 2004. The conference will 
include representatives from the G-8 nations, the European 
Union, United Nations, Arab League, Gulf Cooperation Council, 
the Islamic Conference, and Iraq's neighboring states 
(including Syria and Iran).

                      DISCUSSION OF CODEL MEETINGS

                                TUNISIA

Country Team Briefing with Ambassador William Hudson and Deputy Chief 
        of Mission David Ballard

    Ambassador Hudson and his team gave the delegation a 
briefing on the political and economic issues facing Tunisia 
with special attention to the trade relationship between the 
United States and Tunisia. The Ambassador opened by 
highlighting the many progressive steps that Tunisia has taken. 
He noted that Tunisia has a 90 percent literacy rate and 
maintains equal rights for women, which has led to women 
comprising more than 50 percent of university students. It is a 
very tolerant society, which includes nearly 2000 Jewish 
people, and a moderate secular state that does not repress 
religion. In addition, the military is not part of the 
governing structure in Tunisia. On the other hand, there is no 
press freedom in Tunisia and the political system is closed. 
The Ambassador noted that Tunisia and the United States have a 
strong military-to-military relationship.
    Tunisia is a middle income country that was once rigidly 
controlled and is now quite liberalized, although there is 
still state control of certain strategic sectors, including 
telecommunications and energy. Agriculture and tourism are the 
primary economic sectors, but the growth potential is in small 
goods manufacturing. The primary barriers to trade include an 
extensive bureaucracy and the lack of transparency. Eighty 
percent of Tunisia's trade is with the European Union, although 
there are 58 American companies operating in Tunisia.
    Chairman Thomas asked to what extent Tunisians remained 
influenced by their French roots and whether European and 
French companies received preferential market access through 
the case-by-case approval process practiced by the Tunisian 
government. The Economic Officer agreed that a traditional pro-
European mentality continued to pervade the Tunisian government 
and that the President is very worried about job protection, 
but she noted that the country's orientation to France is 
fading and that English is being taught in the schools now at 
every level, in addition to or even in lieu of French.
    The Defense Attache briefed the delegation on Tunisia's 
military structure. Tunisia has forces of approximately 27,000 
in its army, 6,000 in its air force, and 4,000 in its navy. 
Nearly half of Tunisia's military officers have been to the 
United States for training. The military is pro-Western and has 
good relations with the United States. Tunisia's primary 
defense concerns are its borders with Algeria and Libya and its 
maritime border. The military is in the process of reorienting 
to fight terrorism, but it has been an uphill battle for the 
United States to obtain cooperation on antiterrorism issues.
    The Middle East Partnership Initiative, which was launched 
in December 2002 to support reform in the Middle East, operates 
in Tunisia. The program's focus is to develop reformers on the 
ground. Four areas of work for the program are setting 
standards, evaluating performance, training administrators, and 
using technology in the classroom. The Embassy hopes that 
Tunisia will partner with other countries in the Middle East on 
education reform and women's rights.
    Embassy staff also mentioned that there is a field school 
for American foreign service officers to learn Arabic in Tunis. 
The school used to host approximately 15 people per year. This 
year there are 22, and they hope there will be 60 in the 
future.

Wreath Laying Ceremony at the North Africa American Cemetery and 
        Memorial in Tunisia

    The delegation met with Superintendent Michael Green at the 
North Africa American Cemetery and Memorial. The cemetery site 
covers 27 acres between the Mediterranean and the Bay of Tunis. 
Resting at the cemetery are 2,841 of U.S. Military Dead, a high 
proportion of whom gave their lives in the landings in, and 
occupation of, Morocco and Algeria and in subsequent fighting 
which culminated in the liberation of Tunisia during the Second 
World War. After the end of World War II, a survey made jointly 
by representatives of the Secretary of War and the American 
Battle Monuments Commission revealed that the sites of the 
temporary cemeteries established in North Africa during the war 
had major disadvantages. As a result, the North Africa American 
Cemetery and Memorial was established in 1948 and construction 
was completed in 1960. After a briefing, the delegation 
participated in a wreath laying ceremony to honor the American 
men and women who had served their nation.

Meeting with Tunisia Minister of Foreign Affairs Habib Ben Yahia

    Foreign Minister Ben Yahia opened the meeting by noting 
that Tunisia is a country of good Muslims, who believe in 
reform. The abolition of polygamy was the most difficult reform 
undertaken. Although, Tunisia fears violence and terrorism, he 
believes that the violence is contained. He emphasized that the 
separation of mosque and state must continue to be the guiding 
force of policy. He noted that 80 percent of Tunisians are 
middle class and that the poverty rate is only 4.2 percent.
    Chairman Thomas stated that the United States cherished the 
longstanding positive relationship between the two countries. 
He noted that the reforms in Tunisia seem to run counter to the 
direction taken in other Islamic countries. He said that the 
delegation's primary mission was to explore trade issues. 
Morocco, he pointed out, has recently completed a free trade 
agreement with the United States, and the delegation is eager 
to assist Tunisia in moving to a stronger trade relationship 
with the United States. He noted that Tunisia seems to have 
some colonial holdovers in its economic system, particularly on 
the case-by-case determinations regarding franchising.
    Congresswoman Johnson stated that Tunisia's economic 
progress and system of universal education is impressive and 
will lead to political progress. She asked whether other 
countries in the region are interested in learning about 
Tunisia's secular model. Minister Ben Yahia said that he 
believed other north African countries have been ``positively 
contaminated'' by Tunisia; Libya is coming along, and so is 
Lebanon. He also noted that in Tunisia women can become pilots, 
whereas they are not allowed to drive in other countries. This 
treatment of women makes Tunisia more competitive, he 
concluded.
    Congressman English thanked the Foreign Minister for the 
warm and friendly relationship between the United States and 
Tunisia. He commented that as the co-chair of the Congressional 
Morocco Caucus, he found that it is difficult for countries to 
make great strides in a short time, particularly when it is a 
question of changing values. Tunisia has demonstrated 
moderation not just in its diplomacy but in its domestic 
policies, he said.
    Chairman Thomas warned that he understood the message of 
patience that Tunisia is sending in terms of its ability to 
make further economic reforms, but that the world is not 
waiting. The Multi-Fiber Agreement is expiring and Tunisia is 
overextended. He is anxious to move from the current 
relationship to a more comprehensive relationship in just a few 
years.
    Foreign Minister Ben Yahia said that Tunisia's trade 
agreement with the European Union has helped improve the 
business climate. Tunisia also has free trade agreements with 
Turkey, Egypt, Morocco, Algeria, and Jordan and is seeking to 
create a free trade zone in the Mahgreb. An FTA with the United 
States would be important to Tunisia, he said. Only U.S. oil 
companies are currently operating in Tunisia. Chinese 
competition on textiles will be terrible for Tunisia, which 
currently exports $3-4 million annually in textiles to the 
European Union. Tunisia wants to reform its textile industry to 
become competitive, but it is difficult to do in two months.
    Chairman Thomas noted that economic cooperation needs to go 
two ways and that he believed we may be making progress on 
franchising. He also said that Congress will continue to take 
an active role on trade issues with the renewal of Trade 
Promotion Authority next year. The Foreign Minister said that 
Tunisia wants to form a Tunisia Caucus on Capitol Hill and 
hoped that the delegation could help.
    Congresswoman Johnson asked how the imminent death of 
Chairman Yasser Arafat would affect the region. Foreign 
Minister Ben Yahia said the Palestinian Liberation Organization 
established its headquarters in Tunis in 1982. The peace 
process started with the support of the Tunisians, he said, but 
unfortunately, an escalation occurred. Tunisia has been 
appealing to the Palestinians to ``get their acts together.'' 
He hopes that Prime Minister Abu Mazen can keep authority in 
the Palestinian Authority to move forward the peace process. He 
believes that there is a golden opportunity for Tunisia to work 
on the Palestinians and the United States to work on the 
Israelis and that it is important to put the issue on the front 
burner. Congresswoman Johnson also asked whether Tunisia could 
support the elections in Iraq. Foreign Minister Ben Yahia noted 
that a delegation from Iraq has come to Tunisia to study the 
Tunisian Constitution.

Meeting with Tunisian Prime Minister Mohamed Ghannouchi and Minister of 
        Development and International Cooperation Mohamed Nouri Jouini

    Chairman Thomas opened the meeting by noting that the 
United States has been remiss in the economic and cultural area 
of its relationship with Tunisia. He said that the United 
States should form a closer tie. Under President Bush, the 
United States is looking more and more toward this region and 
creating better economic relations. He noted that he 
understands the historic ties between Tunisia and the European 
Union but said that the United States is a great fan of 
competition and would like to be another option to the European 
Union. The United States has already negotiated a free trade 
agreement with Morocco. An FTA with the United States would be 
a great opportunity for Tunisia. With the end of the Multi-
Fiber Agreement, the United States is looking for ways to 
provide Tunisia with short term relief before forging a more 
permanent relationship, he said.
    Prime Minister Ghannouchi noted that Tunisia has an 
association agreement with the European Union and that it wants 
to diversify and integrate more into the world economy. He 
hopes to have a meeting with the United States under the Trade 
and Investment Framework Agreement by the end of the year, and 
one of the issues for discussion will be a free trade 
agreement.
    Minister of Development and International Cooperation 
Jouini said that the United States government needs to better 
understand the Tunisian economy, which is one of the most 
developed in the region. The Tunisians are asking their friends 
in the U.S. Trade Representative's office to give them some 
time, he stated. Chairman Thomas replied that it is not a 
mystery how the United States operates with regard to free 
trade agreements. He pointed to the free trade agreement with 
Singapore as a good model in the financial services area and to 
the free trade agreement with Morocco as a good model on 
transparency, rule of law, and intellectual property rights. 
The European Union model is not a good one, he said. The United 
States is anxious to have better economic relations with 
Tunisia, and a free trade agreement can be negotiated quickly, 
which would allow Tunisia to elevate itself and move on the 
same plane as Morocco, the Chairman concluded.
    Prime Minister Ghannouchi said that Tunisia, unlike other 
countries takes a more gradual approach that takes into 
consideration certain concerns. Today trade with the United 
States is unbalanced, and he hopes to work through the Trade 
and Investment Framework Agreement to correct the imbalance. 
The best way to accomplish that is by encouraging investment. 
Reforms in Tunisia are constantly ongoing, he said, with 
changes to laws to attract investors, more guarantees, and more 
transparency. Chairman Thomas emphasized that the United States 
uses an objective ruler, not a relative one, in determining 
eligibility for a free trade agreement. He expressed 
understanding that internal investment and growth is important 
and said that some of the issues the United States has concerns 
about should not be a roadblock to deeper economic relations.
    Congresswoman Johnson commented that trade is a big 
political issue in the United States. China is absorbing steel 
and pushing up the world price. Intellectual property rights 
are a key issue, and she hopes that the issues surrounding 
intellectual property rights protection in Tunisia are 
resolved. Minister Jouini replied that concerns about 
intellectual property rights in Tunisia were based on a 
misunderstanding and a lack of information. He said that there 
is no comparison between Tunisia and other countries on 
intellectual property rights and that Tunisia's laws are up to 
the EU standard. Chairman Thomas commented that the European 
Union is not in full compliance with international norms on 
intellectual property rights. He observed that Tunisia is on 
the edge between being a developed and a developing country, 
and ``Tunisia cannot have it both ways.'' If Tunisia is moving 
towards being a developed country, it should not fall back on 
developing country flexibilities, such as those on 
pharmaceuticals. He noted that Tunisia is moving towards a 
convertible currency, which is a positive step.
    Prime Minister Ghannouchi said that the week before, 
President Ben Ali had issued a new rule to make capital markets 
more transparent. He said that Tunisia is revising itself for 
competition. Chairman Thomas noted that the French model does 
not allow the flexibility and growth necessary to create jobs.
    Chairman Thomas asked whether tourism is returning to 
Tunisia, and Minister Jouini noted that tourism is currently 8 
percent of Tunisia's gross domestic product and 18 percent of 
its exports.
    Congressmen Lewis and McNulty thanked the Prime Minister 
and expressed his appreciation for the strong relationship 
between Tunisia and the United States. Minister Jouini said 
that American companies do not have information on what is 
happening in Tunisia and that the Trade and Investment 
Framework Agreement and free trade agreement will send a signal 
to investors.
    Congresswoman Johnson commended the Prime Minister for the 
impressive growth of the middle class in Tunisia and its policy 
of universal education.
    Chairman Thomas asked about potential openings in the 
telecommunications sector. Prime Minister Ghannouchi replied 
that the sector is opening very fast. The Chairman concluded 
the agreement by emphasizing that the United States and Tunisia 
should be long term trading partners, and he will encourage 
USTR to more ahead with the TIFA process.

                                 JORDAN

Country Briefing with Charge d'Affaires David Hale, USAID Mission 
        Director Anne Aarnes, and Embassy staff

    The Charge d'Affaires David Hale and his team provided the 
delegation with a briefing on the political, economic, and 
health issues in Jordan with special attention paid to trade 
and the economic situation in Jordan. The Charge opened by 
saying that the U.S.-Jordan relationship has never been better. 
Jordan is a friend on both the war in Iraq and on terrorism. On 
Iraq in particular, the Charge noted that if Iraq is not 
stabilized it would be catastrophic for Jordan and the region.
    The Charge explained that Jordan has undergone a socio-
economic transformation in recent years. The country has 
undertaken reforms in education, judiciary, and women's rights, 
as well as modest political reform. In 1999, Jordan had a very 
high debt level--115 percent of GDP. But since that time, 
Jordan has joined the WTO and signed the U.S.-Jordan Free Trade 
Agreement as well as an Association Agreement with the European 
Union. Today Jordan's debt is 89 percent of GDP. Jordan 
graduated from an International Monetary Fund reform program 
this summer after 15 years.
    USAID Mission Director Anne Aarnes explained that Jordan is 
home to one of the largest U.S. Agency for International 
Development (USAID) programs, and there are three main areas of 
focus: water, social sector (health and education), and 
economic growth. Regarding water, Jordan is one of the ten most 
water poor countries in the world, and access to water is 
vital. USAID is trying to improve water treatment and handling 
facilities in Jordan. On health, Ms. Aarnes said that USAID is 
trying to lower infant mortality rates; Jordan's population 
growth rate is about 2-2.5 percent per year, which means that 
the population doubles every 25 years. On education, literacy 
and school enrollment in Jordan is high, but there is still a 
lack of usable skills for jobs, particularly for women who are 
often channeled into fields with little employment prospects. 
One focus of education programs is to teach entrepreneurial 
skills so that Jordan's youth can create their own jobs. 
Regarding economic growth, one successful USAID project is the 
Jordan-U.S. Business Partnership (JUSBP), which is an economic 
development program established in 1999. JUSBP provides 
financial and technical assistance to private businesses in 
Jordan to help promote trade development, quality standards 
programs, industrial training, and employment initiatives. 
JUSBP also helps companies improve their management, marketing, 
technology, production methods, quality assurance, financial 
management, and human resources capabilities.
    One perception in Jordan had been that USAID projects such 
as the JUSBP help only a small, elite group and not the average 
Jordanian citizen. The public affairs office at the Embassy has 
been seeking to change that perception by highlighting projects 
such as the water treatment facilities, health clinics, and a 
micro-enterprise project. The marketing strategy has helped to 
change public opinion, and USAID has recently received 
excellent press coverage.
    The Charge explained that Jordan has good labor laws, and 
employees have many rights in Jordan. Jordan adheres to all its 
commitments in international agreements regarding labor and 
environment. Many audits of labor conditions in Jordanian 
factories are conducted by the government, U.S. apparel 
purchasers, and by international organizations. The biggest 
source of enforcement of good labor practices comes from 
apparel purchasing companies (i.e., retailers) who send 
enforcement teams into factories two or three times a year.

Visit to Al-Tajamouat Qualifying Industrial Zone

    Background on QIZs: The QIZ program was created by an 
amendment in 1996 to the United States-Israel Free Trade Area 
Implementation Act of 1985 (P.L. 104-234), which granted the 
President additional proclamation authority to extend the 
United States-Israel free trade area to cover products produced 
cooperatively between Israel and Jordan or between Israel and 
Egypt. In 1997, Jordan and Israel established a Joint Committee 
to identify businesses that involve substantial economic 
cooperation between Jordan and Israel, thereby qualifying their 
products for duty-free entry into the United States. The Joint 
Committee identifies businesses that involve ``substantial 
economic cooperation'' in one of two ways: (1) the manufacturer 
on the Jordanian side of the QIZ and the Israeli manufacturer 
each contribute and maintain at least one-third (11.7 percent) 
of the minimum 35 percent content required, or (2) the 
manufacturer on the Jordanian side of the QIZ and the Israeli 
manufacturer each contribute and maintain at least 20 percent 
of the total cost (including originating materials, wages and 
salaries, design, research and development, depreciation of 
capital investment, and overhead) of production of goods 
eligible for duty-free treatment.
    Visit to Al-Tajamouat QIZ: The delegation toured the Al-
Tajamouat Qualifying Industrial Zone (QIZ), met with the 
principal in charge of operating the zone, Mr. Halim Salfiti, 
and toured the Jordan Dragon Garment Factory within the QIZ. 
Mr. Salfiti explained that the investment company that created 
Al-Tajamouat is Specialized Investment Compounds, a privately 
held Jordanian company that employs 350 full time staff. In 
addition to direct employment in QIZ factories, QIZs also 
create jobs indirectly via security, secretarial, food 
preparation, banking, medical, transportation, and water 
management needs of the QIZ.
    Mr. Salfiti said that most investment capital in QIZs is 
from Asia, but over time Jordanians have taken the skills 
they've learned working for a foreign company in a QIZ to start 
new Jordanian-owned businesses in the QIZ. Since the QIZ 
program became operational in Jordan in 1998, the benefits of 
the program have been cumulative. Initially there wasn't 
significant Jordanian investment capital or knowledge, but 
after Jordanian workers, managers, and investors started 
operating in foreign-owned QIZ factories, they gained the 
expertise necessary to later open Jordanian owned and operated 
factories.
    Mr. Salfiti said that factories in Jordanian QIZs employ 
approximately 36,000 people, 55 percent of which are Jordanian; 
the rest predominantly come from Asia. One factory manager at 
the Jordan Dragon Garment Factory noted that while factory 
owners would like to hire only Jordanian workers, foreign 
workers are necessary in QIZs because Jordanian workers don't 
have experience in producing apparel and it can be difficult at 
times to recruit and retain Jordanian workers to fill 
positions. Mr. Salfiti said the number of Jordanian employees 
is increasing over time, and Jordanian law requires that 
foreign workers be replaced with Jordanian workers after two 
years. A significant number of QIZ employees are Jordanian 
women who come from rural villages, and QIZ employment has been 
an empowering force for women, he noted.
    Mr. Salfiti said that over 90 percent of QIZ production is 
apparel and is limited to cut and sew operations which rely on 
Asian fabric. Now that the tariff benefits of the U.S.-Jordan 
Free Trade Agreement (FTA) are being phased in for apparel 
products, factories located in QIZs are beginning to shift 
their operating models to take advantage of the FTA instead of 
the QIZ. The QIZ program requires a minimum 8 percent of 
Israeli content, and often that percentage is made up with 
buttons, zippers and packaging. One factory manager noted that 
the FTA will make the factories more competitive as the 8 
percent Israeli content requirement under the QIZ is burdensome 
because Israeli inputs cost 2-3 times more than those available 
in the world market. Another way QIZ factories are trying to 
become more competitive in the apparel industry is by focusing 
on higher value garments such as tailor-made suits.
    Mr. Salfiti said that QIZs are also trying to diversify 
their production away from apparel. Some other sectors with 
increased production in QIZs are paper, ceramics, jewelry, and 
electronics. The FTA will be fully implemented in 2010, and 
QIZs are expected to be gone by then. The industrial parks 
created by the QIZs will remain but the factories will be 
operating under the benefits provided by the FTA rather than 
the QIZ program.
    Mr. Salfiti and several managers at the Jordan Dragon 
Garment Factory expressed concern about Egypt's recent push for 
QIZs. They believe Egyptian QIZs would threaten Jordan's 
comparative advantage because Egypt has low labor costs and a 
more vertically integrated textile and apparel industry. They 
said that if QIZ investment shifts from Jordan to Egypt, it 
will create instability and uncertainty in Jordan. Even today 
with speculation that Egypt will start using the QIZ program, 
investors are reluctant to make new investments in Jordan QIZs, 
particularly in the apparel sector, they noted. Mr. Salfiti and 
a manager at the Jordan Dragon Garment Factory both saw the 
potential for Egyptian QIZs as more threatening to their 
competitiveness than the end of quotas on apparel with the 
expiration of the WTO Multifiber Agreement on January 1, 2005.

Visit to Jordan Marble Company

    The delegation toured the Jordan Marble Company and met 
with Mr. Hani Zammar, Executive Director of Jordan Marble, and 
Mr. Salim Zammar, General Manager of Zammar and Sons. During 
the tour, the delegation learned how the Jordan Marble Company 
used the business development programs offered by JUSBP to 
adapt its business model, gain technical and marketing capacity 
building, and improve product quality to more effectively 
export to the U.S. and European markets. In 2003, Jordan Marble 
exported roughly 20 percent of its products to the United 
States. Jordan Marble is one of the fastest growing medium-
sized companies in the industry, and it views exports to the 
United States and Europe as its greatest area of expansion. Mr. 
Zammar noted that his company produces high quality yellow 
travertine tile, and this stone is available only in Jordan and 
Italy. Italian supplies have declined in recent years, and now 
Jordan is the leading source of this stone. Jordan Marble 
Company hopes to continue to expand its sales to the United 
States and Europe, particularly for its yellow travertine 
stone.

Meeting with Minister of Trade and Industry Ahmed Hindawi

    Minister Hindawi started the meeting by saying the QIZ 
program has benefited the Jordanian economy significantly. 
Exports, investment, and employment have increased. Minister 
Hindawi estimated that the QIZs have created 40,000 new jobs in 
Jordan. The overall Jordanian manufacturing sector employs 
approximately 160,000 workers, so QIZ employment is a 
substantial percentage of manufacturing employment. The QIZs 
also help with rural development as some QIZs are located in 
rural areas. Congresswoman Johnson said she was impressed with 
the economic progress that has resulted from the QIZ program, 
and she would like to see more outreach from Jordanian business 
leaders to attract more Jordanian workers.
    The U.S.-Jordan Free Trade Agreement has also benefited 
Jordan, and the Minister said that Jordan would like to 
accelerate the tariff reductions in the FTA. All products are 
currently scheduled to be duty free under the FTA by 2010, and 
Jordan would like to move that date up to 2005 or 2006. The 
Minister also said that Jordan would welcome the potential 
expansion of the FTA to include other countries in the region.
    Congressman English asked for the reaction of Jordan and 
its neighbors in the region to President Bush's call for a 
Middle East Free Trade Area (MEFTA). The Minister responded 
that the Jordanian government supports the MEFTA. He emphasized 
that in order for the MEFTA to be beneficial, the countries of 
the region need to be able to cumulate their production.
    The delegation expressed its desire that Jordan act as a 
role model for other countries in the region to adopt rule of 
law and transparency in its legal system. Also, it is helpful 
for Jordan's neighbors to see Jordan experiencing the positive 
benefits of the FTA.
    Chairman Thomas expressed an interest in seeing Jordan 
improve its port and transportation infrastructure, 
particularly at the port of Aqaba. The Minister said that the 
port of Aqaba had been publicly run but it has been privatized 
in the past year. As a result, Aqaba has seen significant 
improvement in its port operations. (One USAID officer 
estimated that Aqaba now operates at 90 percent of the standard 
of the port in Jaifa, and in another 3-4 months Aqaba will be 
equal with Jaifa in terms of services and facilities.)
    Congressman McNulty thanked Jordan for its response to the 
September 11 terrorist attacks on the United States.
    Chairman Thomas also expressed an interest in creating a 
stopgap measure to help countries deal with the end of the WTO 
Multifiber Agreement. Such a measure would be temporary and 
create incentives to keep apparel production in the region.

Meeting with His Majesty King Abdullah II

    Chairman Thomas opened the meeting by stating that the 
delegation has come to Jordan to observe the results and 
effectiveness of the FTA between the United States and Jordan. 
The King noted that the port of Aqaba ``has its limits,'' and 
Jordan is working with Kuwait and Iraq to improve highways. The 
Chairman stated that he would investigate whether U.S. funding 
would be available.
    With respect to geopolitical issues, the King observed that 
the region is at a crossroads concerning Iraq and the 
Palestinians. He emphasized the need to move the region forward 
through trade.
    Chairman Thomas stated that he intends to move the Bahrain 
agreement through Congress early next year, noting that the 
only reason it was not done this year was because of timing and 
the Congressional schedule. He also said that Tunisia might be 
a good candidate for an FTA if it becomes less Eurocentric. The 
King also mentioned the prospects of an FTA with Egypt and 
warned that an agreement will ``take a while'' because Egypt is 
so large.
    Congressman McNulty expressed his gratitude for the King's 
leadership and for forging a peaceful relationship with Egypt. 
The King responded that he hopes to move the process further.
    Congresswoman Johnson commended the King's father and Queen 
Rania for their leadership and praised what the King has 
accomplished economically ``from bottom to top.'' In response 
to her comment about the work of the U.S. Agency for 
International Development, the King noted that USAID has been 
at the center of reform in Jordan and has created many 
successes.
    Congressman Lewis said that he looks forward to 
opportunities with Jordan in the future. Congressman English 
told the King that he looks to him for cues as to what the U.S. 
role should be in the region. He said that the United States 
often ``makes mistakes of the heart'' because it does not know 
how to act, and he ``looks to our Arab friends for 
leadership.'' He also asked for the King's views on the causes 
of terrorism.
    The King responded that the Israeli-Palestinian conflict 
has led to terrorism, noting that economic prosperity helps to 
reduce terrorism. He said that he is working with the United 
States to change the picture. He said that a conference will 
shortly be announced for the purpose of identifying what is 
moderate Islam, noting that those who kill innocents ``are not 
Muslim'' and that there is no such thing as ``extreme 
Muslims.''
    Chairman Thomas asked the King for his views on the role of 
women. The King responded that while Saudi Arabia has a 
``disjointed'' view on women, Jordanian women enjoy a strong 
role. He noted that the ``extremist element intimidates the 
majority'' and needs to be weeded out of government. Chairman 
Thomas noted that the QIZ program is a ``great democratizer'' 
for women. The King agreed, stating that often women are the 
major breadwinners for their families, empowering them and 
creating a positive social impact.
    The delegation concluded the meeting with an extensive 
discussion of the situation in Iraq and the future in the 
region after Arafat.

Meeting with Minister of Planning and International Cooperation Bassem 
        Awadallah

    The Minister started off the meeting by saying there are 
four primary issues of importance to him with respect to the 
U.S.-Jordan bilateral relationship: gratitude for U.S. support 
of Jordan, teaching English in Jordanian schools, taking full 
advantage of the FTA, and establishing stability in Iraq.
    The Minister emphasized that Jordan appreciates the support 
of the United States, particularly since 1999. U.S. aid to 
Jordan has been generous and has provided many benefits in 
water, health, social and economic reform, democracy building, 
and education. Jordan has focused on improving its education 
system and on teaching English to children at an earlier age. 
School curriculums previously started English classes in Grade 
5, but now Jordan begins teaching English in either 
Kindergarten or Grade 1. Teaching English earlier will help 
children use their early ability to pick up languages easier 
and provide them with a working knowledge of English to work 
and compete in a global economy later in life. Many of these 
early English programs are funded by U.S. assistance.
    The Minister also emphasized his desire that Jordan take 
full advantage of the FTA. He emphasized that the QIZ program 
has been a ``fantastic success'' but he wants to see Jordanian 
industry diversify away from apparel and also increase the 
number of Jordanian workers employed in Jordanian factories. 
The Minister also believes that one of the best ways that 
Jordan and the region can benefit from the FTA and a future 
MEFTA is to allow cumulation to help the countries in the 
region better integrate their economies.
    On Iraq, the Minister expressed his hope that the United 
States will maintain a long-term commitment to stability in the 
country, and he hopes that Iraq can one day be a meaningful 
partner in the region. To attain that goal, it is important 
that the United States and others invest in Iraq now. The 
Minister also said that Jordan hopes to serve as a helpful role 
model for economic and political reform for Iraq and others to 
follow. He noted that the success of reforms in Jordan is 
testimony to the success of U.S. policies in the region.
    Chairman Thomas stated that the U.S. budget process is not 
yet complete for this fiscal year, but he expects that 
continued U.S. assistance to Jordan will be delivered. He also 
noted that while charity for Jordan is minimally acceptable, he 
would like to see Jordan do more to help itself, and on this 
note he'd like to see a specific effort to improve the port in 
Aqaba. Chairman Thomas also expressed optimism for the MEFTA 
and integration in the region that such an agreement could 
bring. He noted the problems created by the artificial country 
boundaries drawn in the region by the British and said that the 
best way to overcome the problem is to ignore the borders by 
creating integrated economies.
    Congresswoman Johnson emphasized that the QIZs are a means 
to an end and not the end goal in itself. The Minister agreed 
and said he hopes to see diversification in both the products 
manufactured in QIZs and in the destination markets for those 
products beyond the United States, notably into the European 
market.
    At the end of the meeting, Chairman Thomas noted Jordan's 
key role as a leader in the region for economic and political 
reform. Other Arab countries are more likely to follow Jordan's 
lead as a fellow Arab nation than by following U.S. policies.

Business Panel Discussion with Members from the Jordan-U.S. Business 
        Partnership and the American Chamber of Commerce in Jordan

    The delegation participated in a business panel discussion 
of ``Economic Opportunities in Jordan'' hosted by the JUSBP and 
the American Chamber of Commerce in Jordan. The business panel 
consisted of representatives from Jordanian companies who have 
utilized the JUSBP program and are benefiting from duty-free 
access to the U.S. market through the FTA. A few notable 
successes of the FTA have been in Jordan's pharmaceuticals, 
information technology, and communications sectors, where the 
increased intellectual property protections in the FTA have 
prompted new investment in research and business development. 
In particular, the delegation heard positive testimony from the 
Chairman of Hikma Pharmaceuticals based in Jordan. Other 
companies that expressed their support and shared success 
stories included Lisan Skincare and Al Bareeq Jewelry 
Manufacturing Company.

Visit to Hussein District School--INJAZ Program (Spouse Program)

    A USAID-funded program, INJAZ teaches Jordanian students a 
variety of entrepreneurial and life skills with the goal of 
expanding opportunities for youth after they have completed 
their formal education. Modeled after the Junior Achievement 
Program in the United States, INJAZ provides young people ages 
14-24 the tools to contribute to private sector organizations 
by emphasizing critical and creative thinking and the value of 
entrepreneurship. INJAZ classes, which are now integrated in 
the public school curriculum rather than provided as an 
extracurricular activity, are led by private sector volunteers. 
Due to its success in Jordan, INJAZ is expanding to the greater 
region and will be implemented in 12 Middle East and North 
African countries.
    At the Hussein District School, the spouse delegation 
discussed INJAZ with the program's CEO, Ms. Soraya Salti, and 
observed two INJAZ classes offered to 15-16 year old female 
students: the Success Skills Course and the Entrepreneur Master 
Class. The Success Skills Course is designed to strengthen 
communication and teamwork skills and highlight the need to 
create a positive impact on others. The Entrepreneur Master 
Class, a one-day seminar, introduces students to starting their 
own businesses from initial idea generation to production and 
marketing. The delegation also heard from recent graduates of 
the program who had completed internships at McDonald's and a 
local shipping firm.

Visits to Amman Entrepreneurs and Microfinance Program (Spouse Program)

    Creating a sustainable microfinance industry in Jordan has 
been a focus of USAID's work in the country. The microfinance 
program has helped create an industry that provides poor 
entrepreneurs opportunities to participate in Jordan's economy. 
USAID has provided grants and technical assistance to four 
start-up microfinance institutions; in 2005, three of these 
four organizations are expected to ``graduate'' from USAID 
assistance. In 2003, the microfinance institutions provided 
almost 16,000 entrepreneurs with loans ranging from USD$140 to 
$22,000.
    The spouse delegation discussed the program with 
representatives from USAID and the Jordan MicroCredit Company 
(one of the microfinance institutions supported by USAID) and 
three local entrepreneurs who have received financing: a glass 
artist, a producer of traditional embroidery products, and a 
wood worker/embroidery artisan. The Jordan MicroCredit Company, 
established in 1999, has disbursed more than 13,000 loans with 
a collection rate of over 99 percent and has established a 
website as a marketing tool. The company's product portfolio 
has also grown based on client feedback and market research. 
The glass artisan, who began selling his wares from his home a 
few years ago, has expanded his business, operating from his 
own shop and exporting products to other countries. Working out 
of a home-based shop, the embroidery artisan employs 25 other 
Jordanian women to produce the handicrafts.

                                  OMAN

Meeting with Omani Minister Responsible for Foreign Affairs Yousef Bin 
        Alawi Bin Abdullah

    The Chairman began the meeting by explaining that the 
delegation hopes to move as quickly as possible to establish a 
free trade agreement in the Middle East. In particular he noted 
that he would like to conclude an agreement with Oman prior to 
the termination of Trade Promotion Authority next year. While 
acknowledging that this timetable is difficult, the Chairman 
noted that using the objective standards already established in 
prior agreements will speed congressional approval. The 
military relationship between the United States and Oman has 
been very positive, he noted, and there is no reason why the 
economic relationship should not be the same.
    The Minister responded that the timetable proposed by the 
Chairman is ambitious, but Oman will speed up and ``if any 
areas are gray, we will make them white; we will not create 
obstacles.'' Oman does not want to make a linkage between 
economic and other issues and is willing to do what it takes to 
conclude the agreement because Oman will benefit, he continued. 
Oman, he said, is encouraging other Gulf Cooperation Council 
members to act in a positive manner. The Chairman responded 
that he is excited that the Omanis have made significant 
changes in a short time.
    The Chairman then said that he believes that negotiations 
can be initiated within a week. Labor, he said will be the 
focal issue. He expressed his concern that objective, common 
standards are needed for all agreements. The Minister then 
described the labor law being within the province of employers 
and employees, not government--Oman does not regulate the 
choice of the private sector. He pointed to the new labor law 
implemented two years ago, noting that reforms are continuous. 
The Chairman emphasized that if Oman does not have the labor 
laws of other countries which have entered into FTAs, then an 
Oman agreement will be difficult to pass.
    Congressman McNulty thanked the Minister for Oman's 
outstanding and longstanding friendship. Congresswoman Johnson 
said that she appreciated the developing role of women in Omani 
society, noting its importance to the long term strength of 
Oman. She also pointed to the healthy management of 
environmental preservation and tourism. She said that she looks 
forward to passing an Oman FTA through the House, emphasizing 
the importance of an FTA with the Middle East.
    Congressman English stated that he is a pro-trade Member 
from a protectionist district, noting that it is hard for him 
to sell trade agreements to his district. He would like to be a 
``sounding board'' in moving forward with Oman, as he was with 
respect to Morocco. An FTA, he said, would be in the mutual 
interest of the United States and Oman. Congressman Lewis added 
that he is a free trader in a protectionist district as well.
    Chairman Thomas emphasized that he supports multilateral 
agreements but noted that it is difficult to complete these 
agreements because one country can block an outcome. Therefore, 
he supports working on a bilateral or regional basis in the 
meantime. With respect to the Gulf Cooperation Council, he said 
that the three countries that are ready (Oman, the United Arab 
Emirates, and Bahrain) for agreements with the United States 
should move ahead, and then the other three countries (Kuwait, 
Qatar, and Saudi Arabia) can join when they are ready. He 
emphasized that the opportunity will be there for the others to 
join when they can. The Minister noted several times in 
response that the U.S. economy is bigger than the GCC and he 
knows it is in Oman's best interest to keep that fact in mind. 
He also said that Oman does not want to repeat the mistakes 
that it made with the EU. Chairman Thomas then stressed the 
need for objective criteria to be applied in establishing free 
trade agreements. He said that he is comfortable with Oman's 
record on banking, insurance, and WTO accession. He also 
offered to provide technical assistance to improve Oman's labor 
laws, noting that such improvements are necessary to receiving 
Congressional approval for the agreement.
    The Chairman and the Minister then discussed Oman's future. 
The Chairman said that he is impressed with the Sultan's 
understanding of the future and the limitation of petroleum 
reserves. The Minister agreed, noting that Oman wants to create 
a services industry. The Chairman then noted that the 
Omanization policy of hiring Omani workers is understandable 
but creates the need for transparent standards in its 
application. The Minister responded that Oman needs to assure 
that 25 percent of workers in a venture are Omani. He also 
noted that it is increasingly difficult to obtain workers from 
India. The Chairman then noted that this labor shortage may 
provide Omani workers with some leverage with respect to worker 
rights and wages. The Minister noted that the minimum wage is 
approximately $312 per month. He also said that in accord with 
the Omani basic law, workers have the right of association and 
can pursue labor disputes in court. The Chairman responded that 
it is far clearer to use internationally recognized standards, 
noting that Members will examine how Oman measures up with 
respect to the eight International Labor Organization core 
labor standards.
    Congresswoman Johnson asked in particular about enforcement 
of ILO standards on child labor, noting that Oman has not 
ratified the ILO convention on this subject. She noted that for 
many Members whose districts have been devastated by trade with 
China, supporting free trade agreements is difficult, and 
support from Democrats is therefore essential to achieve a 
majority. She pledged her support for an agreement with Oman 
but said that it is a political challenge, noting in particular 
that the United States must make sure that it can enforce its 
trade agreements.
    The discussion then moved to how the entire Middle East 
region can be integrated. Chairman Thomas noted the particular 
problems associated with Saudi Arabia. He said that he is 
interested in including Tunisia because he hopes that it might 
lead to integration of Algeria and Libya. He noted that Egypt 
is a ``pivot'' country.
    Congresswoman Johnson inquired about USAID programs in 
Jordan, noting that she supports efforts to develop middle 
management and entrepreneurship, particularly in countries like 
Oman that have such a young population. Chairman Thomas added 
that he supports additional technical assistance in this area, 
and the Minister suggested a workshop.
    Congressman McNulty then asked the Minister for his views 
about whether the peace process can be restarted. The Minister 
said that once Arafat dies, Palestinians will have to elect a 
new President. While he said that he does not know if the 
Palestinians can agree on who the candidate should be, he 
believes the election will be peaceful. Chairman Thomas added 
that elections empower the people. In response to a question 
from Congresswoman Johnson, the Minister said that there is a 
``readiness'' to have a Palestinian state and to accept Israel.
    Congressman English then raised the topic of university 
education, noting that several universities in his district are 
seeking foreign students. The Minister said that despite having 
raised the issue four times with the United States, post 9/11 
visa restrictions make it difficult for Omani university 
students to travel to the United States, and Australia is 
becoming an increasingly attractive destination. U.S. 
Ambassador Baltimore responded that people ``think'' it takes a 
long time and is difficult to obtain a visa, but he emphasized 
that the process is ``not onerous'' and is ``much better'' than 
it used to be, taking only one month to obtain the visa.
    The delegation and the Minister then discussed how to 
attract American tourists to Oman. The Ambassador said that 
this summer, Oman will be the first Middle Eastern country to 
be featured in the yearly folk festival on the Mall in 
Washington, D.C.
    Congressman English asked what the United States ``should 
do better to put forward our case here.'' The Minister replied 
that diplomacy is very much affected by the U.S. media. He said 
that the United States ``doesn't always consult with its 
friends,'' sometimes ``embarrassing U.S. friends in the 
region.'' It is ``difficult or impossible'' for the United 
States to do better. Congressman English responded that any 
mistakes ``are mistakes of the heart'' because there is a 
strong desire by the American people for peace in the region. 
He emphasized that he is ``grateful that our friends have 
stayed with us in difficult times when we've shouldered 
responsibility for our mutual benefit.'' Congresswoman Johnson 
agreed, noting that ``we need a richer dialogue because the 
United States can't take the lead on everything.'' Some of the 
structures that have been relied upon have been unsatisfactory, 
she noted.''
    The Chairman and the Minister then concluded the meeting. 
Chairman Thomas noted that he has set forth an ambitious 
schedule for an FTA but said that it should not be an 
insurmountable challenge. He said that he is concerned that 
delay could spoil chances for such an FTA if the Bahrain 
agreement moves forward but there is a delay of several years 
for other agreements, or if ``the political winds change.'' The 
Minister agreed and pledged to try hard.

Meeting with His Majesty Sultan Qaboos bin Said, Sultan of Oman

    The delegation traveled to Sohar, one of the Sultan's 
palaces, for an audience with the Sultan. Chairman Thomas began 
the meeting by stating that he believes that there is a six-
month window to negotiate an FTA with Oman because of the 
expiration of TPA. He said that few countries have shown as 
much progress as Oman. The Sultan emphasized that Oman wants to 
be a U.S. trading partner.
    Congressman McNulty agreed with the Chairman about 
expanding the friendship between the two countries, noting the 
1833 friendship treaty that began the relationship. 
Congresswoman Johnson commended the Sultan for including women 
in the right to vote. She also congratulated the Sultan for 
moving to a health care system dependent on electronic records. 
This ``sound thinking,'' she said, allows for prevention and 
management of disease, not just treatment. Congressman English 
said that his earliest exposure to Oman was a report that he 
wrote in grade school, and he noted how much the country has 
transformed since that time. He said that he looks forward to 
negotiating a trade agreement if it is mutually beneficial. 
Congressman Lewis noted that he hopes to return to Oman.
    Chairman Thomas then returned to the timing and content of 
an FTA. He said that if the United States and Oman are going to 
move together in a timeframe that has never been done before, 
the two countries will need to use means that have been 
successful before. He pointed to Morocco labor laws and Bahrain 
standards as examples, noting that Oman's considerable reforms 
in the insurance and banking sectors demonstrate that Oman 
knows how to use and apply standards. He said that the United 
States has used a ``ruler'' in all of its agreements, and this 
ruler must be applied in an Oman agreement to have rapid, 
successful Congressional consideration. The most difficult 
political issue for the United States, he emphasized, is labor. 
The Administration is likely to send a letter to Congress 
shortly notifying it of its intent to negotiate an FTA with 
Oman. The negotiations can move rapidly, he said, but if any 
issue slows them down, it will become difficult.
    The Sultan asked if there are specific areas of concern. 
The Chairman replied that Democrats examine whether a country 
complies with the standards of the International Labor 
Organization, the most fundamental being collective bargaining, 
the right to strike, and whether the court structure is 
independent of political influence. If the Omani model moves 
away from this structure, he said, it is less familiar to 
Congress. The Chairman also pointed to the need for approval by 
the Omani government of investments with over 70 percent 
foreign investment, noting that the United States prefers 
transparent standards. With regard to Omanization, he said that 
he understands that Oman is trying to employ Omanis, but 
because decision-making is not transparent, opponents can argue 
that there is an opportunity for discrimination. The Chairman 
said that on other issues, Oman has worked ``very 
professionally'' to accede to the WTO.
    The Sultan then assured the Chairman that Oman will work on 
these issues. He told the Members that Oman wants to make 
everything transparent because it has ``nothing to hide'' and 
wants to be ``just across the board.'' He mentioned Oman's 
close relationship with India and Pakistan and then noted that 
his biggest concern is employment for Omanis. Each person is 
responsible for himself, he said, but the government is blamed 
for not creating employment opportunities and cannot employ 
everyone.
    Chairman Thomas expressed his amazement at the 
transformation in Oman in providing educational opportunities 
so that people can be employed. An FTA, he added, brings long 
term changes. Unlike the EU, the United States opens its market 
to countries that are ``shining examples.'' If other countries 
in the region want this relationship too, they will have to 
earn it because they will not be rewarded merely for having a 
strategic relationship. The way this relationship is earned is 
by meeting standards so that U.S. companies are comfortable in 
investing, the Chairman said.
    The Sultan replied that he has made the hard decision not 
to expand the government sector. Oman is providing special 
retirement opportunities for people to move to the private 
sector. Future employment in the public sector will be only as 
needed. He emphasized that access to a job should not be based 
merely on holding an education certificate but on demonstrated 
ability to carry out the job requirements. He is spending money 
on the private sector to make it strong so it can develop for 
the future. He is working hard to educate Omanis to give them 
the tools to find jobs because Omani workers have to compete 
with immigrants to show that they can do the job. Education is 
not a guarantee of a salary, he said, which must instead be 
earned.
    Chairman Thomas agreed with this philosophy, noting the 
``multiplier effect'' of private sector job creation, while the 
public sector creates only an ``arithmetic'' effect. ``We want 
to promote the private sector with you,'' he emphasized.
    The Sultan added that he is placing special emphasis on 
self employment through small business loans, youth funding, 
and management skills training. The opportunity for young 
girls, he said, is quite substantial, and family members try to 
find jobs for the women in the family because their employment 
improves the family. Oman must ``open doors but leave things 
for the people to decide'' through indirect help and by keeping 
the government away.
    Congresswoman Johnson commended the appointment of women to 
visible positions of power. She noted that the fastest-growing 
group of small businesses in the United States is female-owned, 
and she encouraged Oman to emphasize such businesses. The 
Sultan agreed and replied that he is working on this quietly.
    Chairman Thomas said that he wants to promote the Sultan's 
image with his people by creating additional opportunities for 
them through trade with the United States. He promised to do 
everything he can to make sure that Oman will have an FTA by 
the middle of next year, but he emphasized that Oman will have 
to do its part.
    Congresswoman Johnson then inquired about the situation in 
Iraq. The Sultan replied that Iraq is ready for elections, 
noting that the United States ``has given Iraq an opportunity 
to help itself'' that should not be thrown away. It is ``very 
important for Iraq to hold these elections,'' he emphasized. 
Whether the elections should be for the whole country, he said, 
may be ``rather difficult,'' but that difficulty should not 
result in missed opportunities for the rest of the country. 
``We must help Iraq to help itself and to achieve its own 
destiny,'' he said. Chairman Thomas agreed that at some point, 
Iraq has to control its own destiny, just as Oman has.
    With regard to Arafat's imminent death, the Sultan said 
that Palestinians will have a new opportunity if they take it 
and if they avoid rivalries. He emphasized that the 
Palestinians need a leader who will lead on the basis of 
institutions, not for himself. Palestinians need someone who is 
respected and will allow the government to function. Chairman 
Thomas agreed that a leader who will lead is crucial, and 
Congresswoman Johnson pointed to the need to build an economic 
base.

Meeting with Omani Minister of Commerce and Industry Maqbool bin Ali 
        Sultan

    Minister Maqbool opened the meeting by stating that two 
meetings have been held with Ambassador Zoellick and one with 
Cathy Novelli of the U.S. Trade Representative's Office 
regarding a free trade agreement between the United States and 
Oman. He expressed that Oman is eager to move forward with an 
agreement. He noted that Ambassador Zoellick has explained the 
stages required by trade promotion authority. Minister Maqbool 
asked the delegation to discuss areas in which Oman's policies 
need reform. He noted that Oman has had a free market economy 
for a long time, since 1835, and wants more American 
investment.
    Chairman Thomas said that moving forward with a free trade 
agreement should not be too difficult. The United States has an 
objective ruler to determine eligibility for a free trade 
agreement. It is not country-specific. Countries cannot pick 
and choose the parts of the free trade agreements that they 
would like, he said, although it is acceptable to go above the 
baseline commitments established in the free trade agreement, 
such as Singapore's commitments on financial services. He noted 
that Morocco made significant changes to its labor laws and 
that Morocco's constitution provided the right to strike. He 
commented that some Democrats in Congress will not be 
interested in the cultural, political, and economic differences 
that cause Oman to maintain certain labor laws but instead will 
apply an International Labor Organization checklist. He said 
that Oman's rule which requires approval of any investments 
with greater than 70 percent foreign ownership is not 
transparent. If Oman wants to conclude an agreement by next 
July, it must work with the U.S. Trade Representative's office 
on these issues. He emphasized that he wants Oman to go through 
the process quickly, and he recommended that Oman examine the 
criteria and determine whether it could meet these tests.
    The Commerce Minister replied that he believed that Oman 
has resolved the issues regarding the 70 percent foreign 
ownership limit. Oman is not interested in limiting U.S. 
investment, he said; the rule is designed to limit smaller 
investments like barbershops. Chairman Thomas noted that it 
could still be a problem because Members of Congress will be 
concerned about possible discrimination against any investors. 
Minister Maqbool replied that the agreement would be between 
Oman and the United States, not any others, and Oman has no 
problem with any American company.
    The Commerce Minister said that he believes that Oman would 
have no trouble making commitments comparable to those of 
Bahrain on labor issues and he acknowledged that Oman benefits 
from the free trade agreement more than the United States. 
Chairman Thomas said that Oman is an important trading partner 
for the United States because of its strategic location and the 
example it could set for the region. The Commerce Minister 
commented that not all free trade agreements are the same. 
Chairman Thomas agreed but said that there is a baseline that 
must be met, especially on labor issues and the need to meet 
International Labor Organization standards. The Commerce 
Minister assured the delegation that he does not believe that 
it will be a problem to meet this baseline. Chairman Thomas 
said that he expects a letter from the President to the 
Congress announcing the intention to initiate free trade 
negotiations with Oman would be coming very soon.

Association of Early Intervention for Children with Special Needs 
        (Spouse Program)

    The Association has developed a number of programs to 
comprehensively serve children with special needs aged 0-6. 
Programs include a specialized day care center, an assessment 
unit, a home-visiting educational service, and support groups 
for parents. The Association's programs focus on developing the 
social skills, independence, and self-esteem of the children 
with the goal of integrating them into regular schools or 
minimizing their disabilities for an improved quality of life. 
The Director, Ms. Masooma al-Saleh, noted that the Association 
also strives to educate the community and increase public 
awareness and understanding of people with special needs.
    The Association is supported solely by private donations 
and is staffed by trained professionals. During an 
observational visit, the spouse delegation learned that the 
primary obstacle facing the Association at this time is the 
lack of trained personnel including physical, occupational, 
speech, and psychological therapists. The Director acknowledged 
that it has been a challenge getting students to study in these 
fields. Although the Center has a capacity of 60 children, only 
50 spaces have been filled due to the lack of trained staff. As 
part of its program, the Association provides continuous 
training for staff and volunteers to develop professional 
skills in different areas related to disability.

The National Association for Cancer Awareness (NACA) (Spouse Program)

    Initiated in 2002, NACA has become the leading advocacy 
group in Oman for cancer awareness. The spouse delegation met 
with the President of NACA, Yuthar Al-Rawahy, and discussed the 
goals and achievements of the organization.
    NACA primarily focuses on educating both the public and 
health care providers about cancer, particularly the need for 
repeated regular examinations for early diagnosis and 
prevention. The organization achieves these objectives by 
conducting seminars, visiting schools, distributing educational 
materials at a variety of sites, and organizing various 
fundraising activities. Some achievements include moving NACA's 
operations from in-home to donated office space, increasing 
participation in the annual walkathon from 600 to 1000, and 
hosting a representative from the U.S. National Cancer 
Institute at NACA's annual conference. Ms. Rawahy expressed 
NACA's appreciation of the grant from the U.S. State Department 
that funded the purchase of vital office equipment and some 
consultant services. In the near future, NACA hopes to operate 
a toll-free number and establish a mobile one-stop diagnostic 
clinic that can reach remote areas.

                                 EGYPT

Country Briefing with Ambassador David Welch

    Ambassador Welch provided the delegation with a briefing on 
the U.S.-Egypt bilateral relationship as well as on political 
and economic changes taking place in the country. The 
Ambassador started the briefing by noting that the U.S.-Egypt 
bilateral relationship is strong but the Egyptian Government 
was ``shocked'' that the Lantos Amendment, which would have 
shifted $325 million from U.S. military aid to Egypt to U.S. 
economic aid, received some support. He also noted that 
Egyptian elections will be held in 2005 and while a leadership 
change is expected, there is no obvious successor.
    Chairman Thomas said that the focus of the delegation is 
trade and that he plans to discuss the potential for 
establishing Qualifying Industrial Zones (QIZs) in Egypt and 
for launching negotiations for a U.S.-Egypt Free Trade 
Agreement. On QIZs, the Chairman noted that it is unfortunate 
that Egypt waited so long to utilize the QIZ process, as the 
expiration of the WTO Multifiber Agreement on January 1, 2005, 
means that any QIZ benefits might easily be overtaken by the 
predominance of Asia. Chairman Thomas also noted that Egypt's 
best chance to receive Administration approval for the QIZs is 
to diversify as much as possible beyond textiles.
    On a potential FTA, the Chairman said he plans to make it 
clear that the U.S. Congress has an objective ruler by which it 
measures a country's readiness for an FTA, and Egypt will be 
measured by that ruler just like all other potential FTA 
partners. In response, the Ambassador noted Egypt has 
undertaken serious reforms in recent months, and the new 
Egyptian cabinet includes reformers from the private sector who 
are pushing ahead with meaningful economic reform in the 
country. Such changes include reductions and simplifications 
for personal and corporate tax rates, as well as reforms in the 
financial sector, customs administration, and intellectual 
property rights. At the same time, the Ambassador noted that 
particular problems continue, including Egypt's authorization 
of copycat versions of U.S. pharmaceuticals, Egypt's suspension 
of U.S. beef imports without scientific basis due to BSE 
concerns, and Egypt's restrictions on imports of poultry for 
failure to meet Halal (Islamac dietary) requirements.
    The Ambassador also briefed the delegation on his 
assessment of a post-Arafat Middle East, stating that it is 
important to work with existing Palestinian leadership to 
ensure a stable transition. He said that once new Palestinian 
leadership is in place, the goal is to quickly start to work on 
a disengagement plan and move forward with the Road Map.
    On Iraq, the Ambassador said that Egypt is hosting a major 
international conference to build international support for 
Iraq on November 22-23, 2004. The conference will include 
representatives from the G-8 nations, the European Union, 
United Nations, Arab League, Gulf Cooperation Council, the 
Islamic Conference, and Iraq's neighboring states (including 
Syria and Iran). This is the first significant international 
event to discuss Iraq and build international support.

Meeting with President Hosni Mubarak

    Chairman Thomas began the meeting by introducing the 
delegation and describing the role of the Ways and Means 
Committee in trade policy. He described the purpose of the trip 
as visiting friends in the region, with a focus on economic 
progress in the region. He is trying, he said, to grow a trade 
relationship with Egypt.
    President Mubarak described his views on a post-Arafat 
world, noting that the governing authority will form a 
committee, and he hopes that it will come up with one decision 
and will give hope to the people. Chairman Thomas agreed that 
he hopes the Palestinians will come to agreement and if joint 
leadership is named, the leaders can work together, and if a 
single leader is named, he can truly lead. The President said 
that he is ``confident'' that the Palestinians can reach 
agreement.
    Congressman McNulty praised the President as a ``great 
visionary leader,'' commending him for ``risking his life for 
peace.'' He said that he is confident that they will make 
progress on political and trade issues.
    Congresswoman Johnson mentioned that after her visit to 
Egypt in 1999, she introduced a resolution to encourage the 
Administration to negotiate an FTA with Egypt because Egypt was 
negotiating with Europe. She said that she is discouraged that 
more progress has not been made and that she is looking forward 
to working with the President. She emphasized that she needs to 
tell her constituents that any agreement would represent 
``fair'' trade, so she will be looking at intellectual property 
enforcement and an end to the BSE beef ban. She added that 
peace and stability need to be bolstered by an economic 
relationship between the United States and Egypt. The President 
noted the economic reforms that he has already undertaken on 
banking, customs, and taxation, acknowledging that there is 
work still to do. ``It is moving,'' he said, ``but it will take 
time.'' Chairman Thomas said that the President's commitment to 
continue reforms is important. The President agreed, stating 
that the government cannot be afraid to move forward because 
some say that there should be another way. Congressman Lewis 
thanked the President for his leadership and associated himself 
with the remarks of Congresswoman Johnson.
    President Mubarak mentioned that earlier in the year, the 
business community said that it was ready to stand for free 
trade. The QIZ program, he said, is a good step forward. 
Chairman Thomas responded that his ``heart is heavy'' on the 
QIZ issue because the greatest opportunity for movement in the 
QIZs is textiles, but the window is narrow because of the 
expiration of the WTO Multifiber Agreement in January 2005. He 
said that it would have been better had the QIZs been 
considered a few years ago. President Mubarak said that at 
least the request now is a step. Chairman Thomas agreed.
    Congressman English stated that the strategic relationship 
with Egypt is central to progress in the Middle East. He would 
like to see a more strategic partnership between the United 
States and Egypt in the WTO, he added, because the WTO 
represents an opportunity to help the developing world. He 
welcomed the opportunity to act together to move the European 
Union in the negotiations and achieve success.
    Chairman Thomas stated that trade brings countries 
together. He said that he hoped that Egypt would have the 
political courage to ``say no to protectionism,'' noting that 
the United States has such protectionist forces too. The QIZ, 
he said, is a first step, and he hopes that after that point 
there will be consistent progress together, noting that such 
progress has been a concern in the past.
    The Chairman praised the President for ``an impossible job 
that you've done well,'' stating that he wants to take this 
leadership focus and move it to trade. The President said that 
customs and tax reform have never been made before, and the 
Chairman responded that the United States is anxious to move 
forward and see these changes realized.
    The Chairman concluded by saying that he needs to convince 
his Congressional colleagues about the trade relationship with 
Egypt and will continue to work to do so; ``treading water'' 
can be difficult. What has been done is remarkable, he said, 
and he hopes to see continued progress.

Meeting with Egyptian Prime Minister Ahmed Nazif, Minister of Trade and 
        Industry Rachid Mohamed Rachid, Minister of Finance Dr. Youssef 
        Boutros Ghali, Minister of State for International Cooperation 
        Fayza Abul Naga, and Minister of Investment Development Dr. 
        Mahmoud Mohamed Safwat Mohei-Eddin

    Chairman Thomas started the meeting by introducing the 
delegation, describing the role of Congress, and in particular 
the role of the Ways and Means Committee, in setting U.S. trade 
policy, and emphasizing that the delegation's primary focus is 
trade. The Chairman emphasized that he would like to see an 
expanding trade relationship with Egypt.
    The Prime Minister said it is important that the United 
States and Egypt always have a good relationship, and he 
emphasized the recent reforms that have taken place in Egypt. 
He said the new Egyptian Cabinet has a specific mandate to 
accelerate economic, social, and political reforms, and the new 
Ministers are pushing forward with major structural changes. 
The Prime Minister said that these reforms are ``seen 
positively'' by both the Egyptian ``man on the street'' and 
internationally. He said he recognizes that it is important 
that the new Cabinet establish credibility, and he noted that 
the reforms have introduced more confidence between the 
Egyptian government and society. The Prime Minister also said 
that the Egyptian Parliament was to convene that week, and he 
expected new legislation to be introduced to reduce and reform 
personal and corporate tax rates, which will encourage 
increased trade and investment in Egypt.
    The Prime Minister noted the importance of the United 
States as a trading partner to Egypt; the United States is 
Egypt's number one export market, and second largest source of 
imports into Egypt. He said Egypt wants to conclude a Free 
Trade Agreement (FTA) with the United States and also establish 
QIZs. He said that Egypt is a strong ally of the United States 
and the country ``needs reassurance'' that the United States is 
backing Egypt's reform program.
    Chairman Thomas discussed U.S. trade policy toward the 
region and stated his support for a Middle East Free Trade 
Area. He noted that the United States already has FTAs with 
Morocco and Jordan, and a U.S.-Bahrain FTA is ready for 
Congress to implement. The Chairman said he would like to see 
these FTAs expanded and linked to include all countries along 
the Mediterranean. The Chairman also mentioned the positive 
prospects for FTA talks to be launched with Oman and the United 
Arab Emirates.
    The Chairman also emphasized that the United States remains 
committed to multinational trade liberalization through the 
World Trade Organization, but because each WTO member country 
is entitled to a veto, the process is slow, so the United 
States is also seeking bilateral and regional trade agreements 
in the meantime with countries that are ready. He emphasized 
that an important element in such agreements is that they be 
uniform, particularly in areas such as financial services, 
transparency, and agriculture non-tariff barriers to trade, 
because exceptions in these areas make it difficult to conclude 
an agreement. Also, unequal FTAs would make it difficult to 
integrate various FTAs in the region in the future to create 
larger regional and ultimately multinational agreements. The 
Chairman emphasized that all U.S. FTAs and FTA partners need to 
meet objective standards and this is why it is so important 
that Egypt undertake much needed economic reforms without 
delay. The Chairman said that Egypt's recent steps are a 
positive signal, but Egypt will need to show a positive and 
sustained record of concrete economic reforms before it will be 
ready for an FTA. The Prime Minister responded that U.S. 
skepticism regarding Egypt's reforms are ``rightfully in 
place'' but the recent reforms are not just promises, they are 
concrete actions and time will prove it.
    The Prime Minister then said that Egypt does not have the 
luxury of time to wait, and Egypt is trying to show that it is 
``two steps ahead.'' He said that Egypt is serious about 
reform, and President Mubarak has issued a mandate for both 
short term and long term reform goals. Minister Boutros Ghali 
interjected his opinion that nothing will happen on the MEFTA 
until there is an FTA with Egypt because Egypt ``is the center 
of gravity.'' He said the countries with which the United 
States has been negotiating FTAs are too small to be 
significant. Instead, Minister Boutros Ghali believes the only 
way to attract other large countries in the region such as 
Saudi Arabia is to conclude an FTA with Egypt. Chairman Thomas 
reiterated that when Egypt meets the objective criteria by 
which all potential FTA partners are judged, FTA negotiations 
with Egypt can begin.
    On QIZs, Chairman Thomas noted that the QIZ program has 
been available to Egypt for a long time, and unfortunately the 
opportunity to maximize the benefits of QIZs for apparel is 
diminished with the impending end of the WTO Multifiber 
Agreement in January 2005. Nevertheless, the U.S. 
Administration and Congress are consulting on QIZs for Egypt. 
Chairman Thomas noted that one positive aspect of Egyptian QIZs 
compared to Jordanian QIZs is that it appears likely that 
Egyptian investment capital and Egyptian inputs would be used 
in Egyptian QIZs. Conversely, Jordanian QIZs have historically 
relied on both foreign investment capital as well as foreign 
fabric in apparel production.

Delegation Panel Discussion with Members of the American Chamber of 
        Commerce in Egypt

    The delegation participated in panel discussion with 
members of the American Chamber of Commerce in Egypt on the 
topic ``U.S.-Egypt Partners for Growth.'' The business 
community was particularly interested in the prospects for 
establishing QIZs in Egypt and negotiations for a potential 
U.S.-Egypt Free Trade Agreement.
    Chairman Thomas started the panel by explaining that the 
delegation is traveling through the region to focus on trade 
and investment and to encourage economic development. He said 
that the inclusion of private sector leaders such as Minister 
Rachid in the new Egyptian Cabinet is a positive sign of reform 
in Egypt and can bode well for a potential U.S.-Egypt FTA in 
the future. The Chairman said he views Egypt as having 
tremendous potential for economic progress, and he cited 
several reform measures by the new government that will help 
improve economic conditions. He said that Egypt is pivotal to 
long term Middle East policy, but at the same time the United 
States uses an objective yardstick to measure whether a country 
is ready to negotiate an FTA with the United States.
    Members of the business community asked questions on timing 
for the establishment of QIZs. Chairman Thomas responded by 
saying that unfortunately Egypt has a sad history of lost 
opportunities, noting that only now is Egypt expressing an 
interest in participating in the QIZ program, which was 
established in 1996. Congressman McNulty noted that the failure 
to obtain an agreement on QIZs resulted from Egypt's reluctance 
to engage economically with Israel.
    The delegation was asked what came to mind when people in 
the United States, and Washington, D.C. in particular, thought 
of Egypt. The response from the delegation overwhelmingly 
pointed to Egypt's strong and steady leadership from the late 
President Sadat, who pioneered peace in the region, to 
President Mubarak, who continues to work for a larger regional 
peace.
    Congresswoman Johnson addressed some economic and trade 
issues associated with U.S.-Egypt bilateral relations and the 
Middle East region. On the question of reform and a Middle East 
Free Trade Area (MEFTA), Congresswoman Johnson observed that 
Egypt is the country by which all others in the region are 
judged and judge themselves.
    At the end of the event, the President of the American 
Chamber of Commerce in Egypt, Dr. Taher Helmy, thanked the 
delegation and presented them with honorary memberships to 
AmCham Egypt.

                                  
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