Good afternoon. My grandfather made aliyah in his 80's and is buried in Petach-Tikva, near my great-grandfather. My wife and children have lived and studied in Israel for extended periods. But this trip is special. I come as an official representative of Israel's greatest friend and partner, the United States of America, and as an advocate for America's business and commercial interests. I am also looking forward to going to Gaza, Jordan, and Egypt to help strengthen their economies and their positive relations with Israel. But it also is special because I can be here with my dear friend and colleague Martin Indyk--one of the very best and brightest of America's Ambassadors. As founding executive director of the Washington Institute for Near East Policy, Martin demonstrated a unique capacity, as scholar, organizer, and administrator, to bring together scholars, journalists, and policy makers representing many countries in the region--long before it was fashionable. As Special Assistant to the President for the Middle East at the National Security Council, he helped shape the peace process and policy towards Iraq and Iran which have been so critical to Israel's progress and that of the region. As our Ambassador, during the highs and lows of the past two years, he has combined vision and a keen understanding of Israel and the region. He has also made opening markets for U.S. businesses a prime mission. This is a high priority that President Clinton has asked Ambassadors around the world, from China to Israel, to undertake. That is one of the reasons I have come to Israel and the region. It is an honor to address the Israel-American Chamber of Commerce. You have been a key institution in helping to transform the Israeli economy and in fostering the close ties that Israel and the United States share. Your work in strengthening our bilateral commercial ties has been critical to a relationship that has reaped innumerable benefits for both countries. Thanks in part to your efforts and to measures by successive Israeli governments, and the successful integration of immigrants from around the world, it is now widely accepted that Israel may soon become the equivalent of an ūAsian Tigerū for the Middle East -- if Israel and its neighbors continue on the path to peace that has opened Israel to the world and the world to Israel; if Israel continues to exercise fiscal and monetary discipline; and if Israel completes the restructuring and liberalization of its economy.

I am also honored to speak before the group that the late Commerce Secretary Brown addressed in February 1995. I have heard that at that speech, he discussed two of his favorite topics: the importance of the bilateral commercial relationship between Israel and the United States and commercial diplomacy. Ron Brown dedicated 1995 as the ūYear of U.S.-Israel Free Trade.ū He believed passionately that increasing trade opportunities for U.S. industry not only creates jobs and economic growth at home, but serves important foreign policy goals as well. And Secretary Mickey Kantor and I are building on the outstanding legacy of Ron Brown to ensure our foreign policy objectives and trade policy goals mesh and complement each other. The vision we are implementing at home has great resonance for Israel and the other countries in this region.

There are two aspects of our commercial relationships which I would like to address today: the first is the ever-expanding economic and commercial friendship between the U.S. and Israel; and the second is the absolutely critical axiom that trade and investment are the essential foundation to undergird the peace process and upon which a more prosperous, stable, and peaceful Middle East can be built. President Clinton and Secretary Kantor firmly believe, as do I, that peace and stability, while requiring military security and security against terrorism, are intrinsically tied to jobs, sustained economic growth, and stability. Military strength alone cannot secure peace for the long-term without an improved standard of living, just as economic growth alone cannot guarantee peace without the security dimension. Let me first speak about bilateral U.S.-Israeli ties before turning to the interconnectedness of the peace process and economic prosperity.

I. Bilateral U.S.-Israel Economic Relationship

The U.S.-Israeli relationship has matured to the point that the U.S. government is no longer only a provider of foreign aid, or a strategic security partner -- as important as these remain. The U.S. now also acts as a strategic business partner in helping build the Israeli economy into a stronger and healthier one at a critical time in Israeli history. We can now address each other for the first time as genuine commercial partners, separating out

our trade and commercial differences from political and diplomatic concerns as we do with other countries. We have a vibrant $12 billion trade relationship, a 12 percent increase over last year, making Israel our 18th largest partner in the world, and the second largest in the Middle East. U.S. companies have invested $3 billion here. Our Free Trade Agreement has now been implemented after a ten-year phase-in. Our economic relationships are strong -- but can be even better. One of our highest trade priorities is conclusion of the Agreement on agriculture, which will further open Israel's agricultural market to American producers.

Over the years, the U.S. has provided billions in military and economic assistance to Israel, and those aid levels represent significant amounts of our total annual foreign aid. As in past years, we remain committed to maintaining our economic and military assistance to Israel. At the same time, we are committed to helping Israel stand on its own feet economically. That is why beginning in 1985, we began a systematic effort to work in partnership with Israel to assist in reforming its economy -- and reform was needed.

Up to that time, Israel historically possessed no significant tradition of free market economics. One major party was Socialist, the other Populist, with only a tiny free market party. But the Israeli economy evolved significantly over the past 50 years. From 1948 to 1973, Israel was in a nation building phase -- a period of remarkable growth and development in which a modern infrastructure was created and world class military technology was developed. Annual growth rates averaged 9 percent in real terms from 1960 to 1973 with single-digit inflation. Following the Yom Kippur War and the huge OPEC oil increase, Israel entered a second phase in which Israelūs military burden grew and economic growth slowed. For 12 years, Israel saw continued slow growth and double- and then triple- digit inflation. By 1985, there was a huge surge in inflation -- up to 400 percent levels, a great consumer binge, a dangerous run on foreign reserves, a budget deficit which reached 15 percent of GDP, and a net external debt to GDP ratio of 80 percent.

It was at this time that a third phase in Israel's economic history was initiated. Tough and effective fiscal reforms were instituted by the coalition government of Shimon Peres and Yitzhak Shamir. For the first time there was direct U.S. government involvement in helping shape Israelūs economy. The U.S. and Israel created the Joint Economic Development Group (JEDG), and with it, a new era in Israelūs economic history. This has been an extremely successful initiative, although it languished under the previous Administration. We have reinvigorated it under the Clinton Administration, and it celebrated its 10th anniversary last fall. It has helped Israel accomplish meaningful structural reform in the Israeli economy. The U.S. and Israel also initiated the Free Trade Agreement during this period (1985) which is fully implemented today.

With the influx of immigrants from the former Soviet Union and also from Ethiopia, Israel recognized that it would absorb large numbers of refugees; the Israeli government decided in 1990 to request U.S. government guarantees for commercial loans. The $10 billion loan guarantee program provided Israel with much needed access to capital, without increasing Israel's dependence on U.S. foreign aid. Israel successfully utilized the loan guarantee program to bolster its infrastructure -- a significant achievement of the Rabin government. Through the loan guarantee program, Israel built roads and major infrastructure projects that prepared the country for the influx of investment from abroad. Without this infrastructure, Israel would not have been able to attract or retain foreign investment.

Following the signing of the 1993 Peace Accords with the Palestinians and the 1995 peace treaty with Jordan, a new, fourth phase in Israelūs economic history began. Israel had one of the lowest per capita levels of foreign direct investment, and Israeli products were still effectively blocked from many markets in the world by the secondary and tertiary Arab boycott. The peace process has dramatically changed this. There has indeed been a genuine peace dividend for Israel. Israel was opened to the world and the world was opened to Israel. Foreign investment, including money from Asian and even U.S. companies which had previously shunned Israel, poured in, increasing from $300 million in 1993 to $2 billion in 1996. At the same time, goods from all over the world poured into Israel. Israeli exports surged to markets effectively opened up by the peace process. Total exports grew from $16.7 billion in 1989 to $29.7 billion in 1995. Exports to the Far East grew 80 percent since 1993 -- from $2.5 billion in 1993 to $3.8 billion last year.

Japan is now Israelūs second largest export market, and the growth in Israeli exports there has been astounding -- from $769 million in 1993 to $1.3 billion in 1995. Israeli exports have also grown in other markets, such as South America, where exports increased from $319 billion in 1993 to $454 million in 1995. Israel is known for world-class high technology exports, such as computer software and medical technology.

The results have been stunning. Israel created half a million jobs between 1989, when the labor force was 1.6 million and 1995, when the labor force was 2 million, while absorbing almost 730,000 immigrants from the former Soviet Union over those same years. Indeed, the unemployment rate among the 1989 - 1991 immigrants is almost on par with the general unemployment rate. 1995, in particular, was a remarkable year, with single digit rates of inflation (8 percent) and unemployment (6.1 percent) for the first time in decades. Israel had one of the highest growth rates in the industrial world (7.1 percent) -- the highest of all OECD countries.

Israel has also served as an incubator for ideas that are being applied to other countries. Long before free trade was fashionable, long before NAFTA, and before the Uruguay Round, the U.S. and Israel saw the future and joined in an agreement that has eliminated all customs duties on products exported between both countries. After a ten year phase-in period, the U.S.- Israel Free Trade Agreement is fully implemented and our bilateral trade has soared from $3.4 billion in 1984 to approximately $12 billion. Similarly, the FDA harmonization project has served as a model for countries and is an issue I have been personally involved with both in Brussels as Ambassador to the European Union and today at the Commerce Department.

The concrete manifestations of Israelūs success are in the numbers. U.S. direct investment in Israel is now almost $3 billion, and more American companies than ever are considering Israel as their regional headquarters in the Middle East. Over 200 American companies have already invested in joint ventures and wholly-owned subsidiaries in Israel. The U.S. continues to be Israelūs single largest trading partner.

Opportunities are particularly strong in the energy and infrastructure sectors. For example, U.S. firms are participating in all phases of the Ben Gurion 2000 upgrade of the airport. U.S. firms (General Electric and Babcock & Wilcox) are major suppliers to the Israeli Electric Corporation for turbines and boilers. And U.S. companies are pursing the opportunities presented by the construction of highways, light rail, and port upgrade and development.

U.S.-Israeli commercial ties have also strengthened in the technology sector that will drive the world economy in the coming decades. Israel has built a technological base in electronics, computers, information, energy, and agriculture that is rapidly being recognized worldwide. American firms are increasingly looking to Israel for joint technology ventures. The American company Intel recently announced plans to build a $1.6 billion manufacturing plant in Kiryat Gat. And this is just the start. Just last week in Washington, in fact, I had the pleasure and honor of meeting with my friend Minister of Industry and Trade Natan Sharansky during the U.S.-Israel Science and Technology Commission meeting with Secretary Kantor. His voyage from a Soviet refusenik prisoner to Israeli Cabinet Minister in one short decade is a testament to his courage and determination, to the open society Israel has created, and to the vibrancy of the Zionist vision. The Science and Technology Commission, as many of you know, provides funding at a critical point in the development cycle of new, cutting edge products, leveraging additional private capital. It also brings together technical expertise and entrepreneurial vision in both of our countries, offering great potential for growth and opportunity. It is yet another example of how Israel serves as an incubator for ideas and how the U.S. and Israel, working together, are fulfilling President Clinton's vision of creating high-tech jobs in both countries for the 21st century. Its projects have included a solar thermal electrical generation project, an aquaculture project, and the showcasing of various Israeli technologies in the biotechnology realm. To date, the Commission has committed to projects totaling $48 million.

One particularly interesting initiative by the Commission which I proposed was that my agency, the International Trade Administration, assist in the Defense Commercialization Initiative. This involves the marketing of Israeli technologies in the U.S. of firms that have made the difficult transition from defense to civilian products. The ITA's marketing and matchmaking expertise will be an important part of showcasing these technologies around our country.

In addition to joint venture projects, the Science and Technology Commission sponsors a number of infrastructure projects such as the FDA Good Clinical Practices training sessions which have been well received by both the U.S. and Israeli pharmaceutical industries. The harmonization of standards -- which we have been working toward with the European Union through mutual recognition agreements -- could mean enormous profits for Israelūs pharmaceutical and medical industries.

This remarkable progress in Israelūs fourth phase resulted from the interplay of a virtuous circle of interactive policies (the virtues of macroeconomic discipline, structural reforms, and continuing the peace process) -- all of which were essential and remain essential to sustain progress in this fourth phase:

-- The peace process simultaneously opened Israelūs domestic market to foreign investors and markets abroad -- giving Israel a genuine peace dividend;

--Macro-economic discipline under the firm leadership of the Bank of Israel, restrained inflation at a time of soaring growth. This will now be complimented by welcome, more disciplined fiscal policy by the government, removing the necessity for monetary policy to bear the anti-inflation burden alone.

--Structural reforms such as strengthening the independence of the Central Bank, the removal of restrictions on capital controls so that the shekel is now an internationally convertible currency, and progress on privatization which began to liberalize the economy and began to free up Israelūs entrepreneurial genius and encouraged U.S. and foreign investments.

None of these should be taken for granted. The Prime Minister has indicated he will implement the Oslo Accords and pursue peace negotiations with Syria and Lebanon. This is essential to maintain the positive environment for Israelūs continued and enhanced prosperity.

Notwithstanding all of these positive developments, the U.S.- Israel commercial relationship can and should be even closer and more diverse. From the perspective of U.S. trade and investment, even with full implementation of the U.S.-Israel Free Trade Area Agreement in 1995, and even with the increased efficiency and transparency of the import regime, the U.S. market share in Israel is only about 20 percent of the Israeli import market. In contrast, the European Union in 1995 had a market share of over 52 percent in Israel. Last year Israel had an $8.7 billion trade deficit with the EU and a $239 million trade surplus with the U.S.--although in the first six months of this year the U.S. has a trade surplus. We do not believe U.S. products are getting the share of the Israeli market we deserve. I note the positive trend in the trade figures just released for the first half of 1996. However, we believe there should be a significant increase in U.S. exports, in part because of the $10 billion loan guarantee. For the second year in a row the U.S. was ranked as the most competitive country in the world. Our products and services are as good as any in the world in virtually every area and the best in many. They are competitively priced and backed by excellent service. The fact that I can assert this indicates the health of our unique relationship, now so firmly grounded that we can address trade issues without concern it will weaken our ironclad, unshakable political, military, and diplomatic relations. Although Israeli markets are relatively open to foreign competition and the liberalization process has increased the efficiency and the transparency of the import regime, there are a number of initiatives Israel can undertake that would increase its share of U.S. imports and provide Israeli consumers with more choice. One way of increasing U.S. exports is further implementation of Israel's commitment under the U.S. loan guarantee to use its best efforts to substantially increase procurement of U.S. goods and services, especially in the energy sector. In addition, Israel should eliminate non-tariff barriers, restrictions, and regulations that tilt the playing field against U.S. firms.

--Israel product standards tend to favor and reflect European standards.

--Many government-owned companies continue to use non-transparent selection tender procedures that remain closed to many U.S. firms.

--We would also like to see automobile insurance reform -- removing engine size as a basis for mandatory automobile insurance and replacing it with a value-based insurance system.

--Israel's port fees should be equal on imports and exports by the end of this year.

--Although on most imports, tariffs are quite low or even non- existent, purchase taxes ranging up to about 200 percent target large categories of imported goods, particularly durables, and in practice represent a trade barrier.

--Israel is not providing national treatment to U.S. beef. Israel currently bans imports of nonkosher meat, although

nonkosher meat is produced and sold domestically. One way or the other, equal treatment should be given.

--In the service sector, notably financial services, the high degree of concentration de facto prevents foreigners from operating in Israel, even though no formal restrictions exist.

--The textile sector is also shielded from foreign competition through high ad valorem tariffs combined with additional specific import duties and standard requirements.

As another example, Israel's packaging standards disadvantage U.S. exports without necessarily benefitting Israeli consumers. Packaging and labeling requirements have not been liberalized as promised. The U.S. government and U.S. firms are looking forward to greater flexibility in packaging and labeling standards. Israelūs standard metric packages force many U.S. companies to export to Israel through European subsidiaries, rather than from factories in the U.S. The issue here, as Ambassador Indyk has pointed out, is not a requirement for metric labeling -- rather, it is the insistence on metric sizes in packaging. We hope that the wide array of standards that are in place to protect local industries and European producers can be modified to the benefit of U.S. companies and consumers.

Finally, we look forward to further modification of Israelūs intellectual property rights regime. The lack of strong copyright enforcement of pirated audio-visual products continues to deter a significant number of U.S. companies that might otherwise consider investment in Israel, particularly in the software and pharmaceutical sectors. Enactment of the copyright, patent, trademark and cable broadcasting legislation and passage of the cable broadcast law are particularly important to tackle copyright piracy, which remains a serious concern for computer software, audiovisual products, and sound recordings. As a high- tech player in world trade, Israel is seeking greater investment and participation by foreign high-tech companies in Israel. American companies will not make cutting edge technologies available in regions where they cannot be assured that their rights as creators will be protected. It is in Israel's self interest to strengthen its protection of intellectual property, both for its own companies and to encourage more foreign investment.

Israel is also facing a serious macroeconomic problem that must be addressed. At an historic moment when it is absorbing hundreds of thousands of immigrants, Israel must pursue policies of fiscal consolidation and expansion of free market principles to reassure investors who are looking to invest further and are seeking additional signs of economic stability and growth. Let me cite a few indicators of the current troubling economic trends. Israel had an expansionary budget in 1995 and early 1996. There is a growing balance of payments deficit: although exports rose 60 percent in three years to $18 billion in 1995, imports grew even faster, creating a $10 billion merchandise trade deficit. Israel went from a trade surplus in 1992 to a $4.1 billion trade deficit in 1995. And while Israel succeeded in bringing down the inflation rate of the mid-1980's, inflation is again on the rise to double-digit levels. Macroeconomic discipline is essential to prevent the economy from overheating. It is critical that inflation not get out of control. For Israel to reach the next level of economic development, the inflation rate must be reduced over time to Western levels. It would be tragic if Israel failed to consolidate all of the hard-earned gains from the hyperinflation of 1985.

I believe Israel is about to enter its fifth phase under Prime Minister Netanyahu -- one in which fiscal discipline will be reasserted, inflation tamed, and the last vestiges of socialism ended with thorough economic restructuring and liberalization. We are optimistic and heartened by Prime Minister Netanyahuūs proposals to foster economic growth and development. The U.S. strongly supports his program of budget deficit reduction, fiscal discipline, deregulation, and privatization. We want to be Israel's economic partners in the bright new economic future we believe this program, if implemented, will achieve.

His recommended budget for the next fiscal year will help avoid an overheated economy--one which may already be cooling down--and will be a stronger partner with monetary policy in combatting inflation. It is essential that it be implemented.

This next phase should be one in which Israel serves as a role model economically for developing countries around the globe. Israel has a special opportunity to lead the way in terms of economic restructuring and discipline. One critical area in which Israel can have a worldwide impact would be to substantially improve its restrictive offer in the WTO Telecommunications negotiation. Israel's last offer provided for

no rights for additional market access beyond that granted Bezek and IBS. No economic sector is more important to the U.S. and the world. An improved offer by Israel would help stimulate other rapidly developing nations to do the same. If Bezek can compete in India and the former Soviet Union, it can stand competition here in Israel. The U.S. hopes that Israel will end Bezek's monopoly over domestic telephone service and telecom infrastructure by a WTO offer setting a date certain for the end of Bezek's exclusive rights for domestic and international services and facilities, removes an economic needs test for cellular services and commits to support the pro-competitive regulation principles under negotiation in Geneva. The U.S. offer allows for 100 percent foreign indirect investment across the full spectrum of local, domestic long distance, and international telephone services markets in the U.S.

The Prime Minister recognizes Israelūs potential to become a world economic leader and we support his plans to reduce the regulatory and bureaucratic roadblocks that have hampered economic growth in the past. Some 56 percent of Israel's GDP comes from state-owned or controlled economic enterprises. We also fully support and are excited about his plans to privatize banks and other major government-owned corporations to attract even greater infusions of investment. He has pledged to privatize 50 of the 160 government owned corporations by the end of his term. We agree with the Prime Minister that this is a crucial part of Israelūs future and a means to increase the standard of living. These measures will not only foster more direct foreign investment, but they will create jobs and directly benefit the Israeli private sector. Without doubt the Prime Minister's plans to reduce the state's role in the economy will add to Israel's economic and job growth and to its prosperity.

II. Israel and the Middle East

Just as critical as fostering the foundation for prosperity within the Israeli economy is the need to foster prosperity and economic growth in the region through peace. Simply put, we cannot have one without the other. Your contributions help form the essential foundation upon which a more prosperous, stable, and peaceful Middle East can be built. As Ron Brown noted less than a year ago in Jerusalem, it is easy to forget that trade has traditionally been the rule and not the exception in the Middle East. For thousands of years, the Fertile Crescent was the hub of economic activity between Arabs and Jews to Europe, Asia, and India. As far back as the Middle Ages, Jewish and Arab traders from the Middle East went to Europe and to royal courts and monasteries with spices, perfumes, and textiles. Even during biblical times, the region was a strong exporter of agricultural goods.

The peace process has accomplished much and we have a tremendous amount at stake in its continued progress. Palestinians are governing themselves in parts of the West Bank and Gaza. Israel and Jordan are establishing cooperative relations across the full range of political, economic, and security issues. Tens of thousands of Israeli and Jordanian tourists have visited each othersū countries. Israelūs relations with the broader Arab world have also expanded. Diplomatic offices have been exchanged with Morocco, Tunisia, and Mauritania. The secondary boycott has all but withered away.

President Clinton believes that it is critical that we remain focused on preserving the achievements of peace of the past three years and maintaining the momentum necessary to make new gains. It is also critical that we maintain our commitment to building the economic foundations necessary for a lasting peace. Growing opportunity can ease the conflicts that have held back the Middle East region for the last half a century. Rising prosperity can help the Middle East move forward into a new millennium of reconciliation, cooperation and full integration with the global economy. This commitment to a prosperous peace is consistent with President Clintonūs strategic judgment that Americaūs economic and foreign policy interests are intertwined around the world. Opening markets and expanding trade and investment abroad not only creates jobs at home, it strengthens our political relationships.

It is vital not just for Israel, but for all of the countries in the Middle East, to achieve greater regional integration made possible through the peace process. Currently, intra-regional merchandise trade is limited to only 7 or 8 percent of total exports and imports, compared to intra regional rates of over 60 percent in the EU, over 30 percent in Asia and around 20 percent in the Western Hemisphere. Of course, greater regional cooperation requires a continued political commitment to peace and lasting relationships.

Greater opportunities for intra-Middle East trade will strengthen

all of the economies of the region and reinforce the peace process.

The nexus between peace and prosperity has concrete manifestations beyond reductions in military spending. It opens countries to major projects, including power generation, and water management. It leads to greater exchanges of the peoples of the region through tourism, thereby exporting understanding and mutual acceptance. The impact of Israel in the Middle East - - the largest economy of the region -- is nowhere more evident that its impact on the West Bank and Gaza. The territories are significantly dependent upon Israelūs economy for their own economic livelihood -- and are likely to remain such for the near future.

As Israel continues to grow and prosper, it is essential to the peace process and to the avoidance of violence that the Palestinians benefit as well. There are two dimensions to the Israel-Palestinian economic relationship: the issue of Palestinian workers in Israel and the ability of goods to and from the areas controlled by the Palestinian Authority to flow freely. My visit to the territories has dramatized for me the gravity of the economic plight of the Palestinians and the interest the U.S. and Israel have in improving the lives of its residents.

On the issue of closure, we recognize the importance of Israelūs security. The paramount obligation of every government in every nation -- whether Israel or the U.S. -- is the protection of its own citizens from attack, as each of our countries has painfully recognized over the past few months. It is our earnest hope that Israelūs security needs can be reconciled with the dire need of Palestinian workers to find jobs and income, at least in the short term in Israel. This is a case of the clash between the need for personnel and physical security on the part of Israelis and the imperative need for material security for Palestinians, who must see their life improving with peace. Israel needs the clear breath of security and the Palestinians to breathe economically. These must be reconciled to avoid a dangerous situation from developing in the territories controlled by the Palestinian Authority. On the basis of my meetings in Israel, I believe the Israeli government shares this conception.

To create jobs within the territories themselves, it is essential that the conditions be created which will encourage investors to invest in Gaza and the West Bank. According to the World Bank/IMF estimates, every 10,000 additional workers that are allowed into Israel would add $25 million per year in direct and indirect revenue to the Palestinian treasury, making the Palestinian economy more stable. The deficit is now running at $127 million, thereby putting pressure on the donor program. There are many prerequisites for a positive investment climate -- clear commercial and investment rules, a consistent tax regime, transparent governmental bodies, and, of course, an absence of terrorist activity. But it is also essential that there be a certainty which does not now exist that goods produced in Gaza or the West Bank can be efficiently and predictably exported via Israel or shipped to Israel and that material and imports can be efficiently received through Israel and from Egypt and Jordan.

The U.S. is doing its part. We are large contributors to the international donor fund. Projects are coming to Gaza which are bringing hope and jobs to the Palestinians such as the Hatfield Oil Refinery and the Delma power project. Moreover, the Administration strongly supports the extension of duty free access for all Palestinians goods. This measure has passed the House and will hopefully pass the Senate by the end of the term.

We also strongly support industrial zones in the West Bank and Gaza.

We have seen the fruits of the peace process with Egypt and Jordan. The proposed Egypt-Israel gas pipeline is one of the most important regional economic projects of the decade. In addition to providing Israel with natural gas and Egypt with a hard currency source, this pipeline will forge a tangible economic link between Israel and Egypt. The project involves hundreds of millions of dollars and will serve as a critical power source into the next century. We hope the Israeli portion will be privately financed and developed. The private sector can construct it more efficiently, more quickly, and more safely than can government.

Jordan has taken risks for peace but has yet to fully realize a peace dividend. We believe it is coming. Jordan has made impressive strides in economic reform, has an IMF program, and supports the development of regional economic institutions like the Middle East Development Bank. Jordan is the headquarters of the important REDWEG--Regional Economic Development Working Group. In Jordan, we are anticipating further plans for the joint development of the Jordan Rift Valley, for which the World

Bank has developed a master plan laying out the specifics. We are also aware of developments within the private sector -- for example, an Israeli and an American company which are jointly pursuing power projects in Jordan. The Trilateral Industrial Development Initiative, funded by the U.S. Government, Jordan and Israel, will promote further private sector cooperation. And, of course, tourism between both countries provides economic and cultural benefits.

Let me briefly describe a few other commercial developments and projects that will thrive in a stable, peaceful environment.

The Department of Commerce has been deeply involved in fostering economic growth and in supporting the peace process through the creation and implementation of regional commercial and trade programs. The objective of these programs is to create a strong economic and commercial foundation to fortify the peace agreements. Secretary Brown participated in several of these fora, including the Taba Trade Ministers program, the Middle East-North Africa (MENA) Economic Summits, and the creation of the MENA Regional Business Council.

-- In February 1995, Secretary Brown met with his counterparts from Egypt, Israel, and the Palestinian Authority and launched the Taba Trade Leaders Program to discuss trade barriers between themselves and with the U.S. In the Taba Declaration, for the first time the trade ministers provided broad-based support for the peace process, including agreement to support all efforts to end the boycott of Israel. They also agreed to conduct a Market Access Study to actively eliminate the obstacles to trade and to promote a Middle East Information Highway (the PeaceNet) using the Internet. Since the ministersū last meeting in October, a series of meetings have been held in the region and in Washington to implement the 14 Market Access Study recommendations. In January, the directors of the export institutions of all four countries and the Palestinian Authority began to meet in Tel Aviv; in February the commercial attaches met in Washington; and in March the directors of standards institutions met in Cairo. We are committed to continuing this excellent program. Working groups will continue to meet. The TABA process needs to be re-energized and Secretary Kantor and I are dedicated to do so. We want to encourage the core parties to have a ministerial level meeting at the Cairo Summit in November.

--Every year since 1994, over 1,000 business and 1,000 government leaders from around the region and around the world gather to discuss business opportunities in the Middle East and North Africa as a whole. The first MENA Summit took place in Casablanca in 1994, and the second was in Amman last year. Casablanca was successful at showing that the Middle East is open for business. Amman showed that the region was actually doing business. At least 10 major industrial projects in the region were either initiated, advanced or signed at the Amman Summit, worth billions of dollars, and countless business contacts were made or strengthened at or after the event. The American Business Center alone had 1,000 visits from businesspeople and government leaders (including Chairman Arafat), and arranged more than 250 such meetings between U.S. business people and their counterparts from the Middle East. Such contacts can lay the groundwork for economic expansion in the region for years to come.

--The Cairo Summit--the third--November 12 to 14--will take the regional economic process a step further, showcasing what has been done, creating genuine matchmaking, and leading to a full normalization of commercial relations. The U.S. attaches great importance to a successful Cairo Summit. We will be working hard to assure a large and diverse U.S. delegation. We will have an Internet Home Page at the Commerce Department to permit Israeli and Middle Eastern businesses to contact each other and U.S. firms before the Summit begins. There will be an American tour of our U.S. Ambassadors from the Middle East to encourage U.S. business participation. The Israel-American Chamber of Commerce can play a critical role in assuring a strong turnout of Israeli firms at the Cairo Summit. During the Gore-Mubarak Partnership meetings this past week in Washington, Egyptian President Mubarak pledged his government's and his personal interest in a successful Summit. A top priority must be the development of real project opportunities. We would like the Cairo Summit to showcase reforms, which will encourage more foreign investment in the region, particularly the impressive ones instituted by the Egyptian government since the beginning of the year.

--The Middle East North Africa Regional Business Council was agreed to at the Casablanca Summit in 1994. It offers the only forum where private companies can network and serve as a voice to the public sector. Representatives from a wide

range of countries have met regularly to discuss its precise duties and organization. I can tell you from my own experience with the Trans Atlantic Business Dialogue between the U.S. and the European Union and the Business Development Councils which Commerce has fostered with key countries around the globe that business councils provide a unique forum for private industry to speak directly to government to remove impediments to trade.

--Several months ago, the Knesset passed a law allowing up to 10 percent of Israelūs electricity consumption to come from imports, paving the way for Israel to participate eventually in a Middle East electricity grid.

As the secondary and tertiary boycott of Israel wanes, foreign firms can now establish headquarters in Israel as a platform for the region and the world with much less fear of being excluded from other markets in the Arab world. This has opened up new commercial opportunities in Europe and Latin America. Perhaps the greatest impact, however, will be felt with Israelūs trade in Asia, the fastest growing area of the world. While trade with Asia constitutes only 10 percent of Israelūs overall trade, this percentage has grown considerably and will continue to do so. This commercial opening to the rest of the world represents a major achievement.

We view these regional economic initiatives not as isolated events but as linking the countries of the region into a partnership for prosperity and peace, each reinforcing the other. The political and economic futures of Israel and the other countries of the Middle East are inextricably linked. The success of the peace process over the last three years has created new economic opportunities in the region. Business, in turn, has strengthened the peace process by seizing those opportunities and must continue to do so. Business also has a stake in urging governments to remove the economic obstacles that stand in the way of growth and opportunity -- such as excessive regulation and inefficient public investment. Just as the peace process must move forward, we must continue our efforts to create an economic environment that fosters growth and opportunity.

It is clear that Israel is positioned to become a leader in the commercial environment of the 21st century. Israel must seize the opportunity to deepen the already far-reaching economic reforms it has undertaken in recent years, and Prime Minister Netanyahuūs commitment to privatization and deregulation will solidify these reforms. This course will help sustain the remarkable economic growth Israel has enjoyed from the peace process. As the economies of the region become more open and integrated, economic growth in Israel can present even greater opportunities for growth in the region, which in turn will foster peace and stability. The challenge we and you face is clear: We must ensure that our efforts on both the diplomatic and economic fronts are sustained and that our shared goal of peace and prosperity continues to be advanced into the 21st century.