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NEW YORK (CNN) -- French diplomats at the United Nations have put forward a proposal for a new weapons monitoring regime for Iraq that would result in lifting the oil embargo imposed after its 1990 invasion of Kuwait.

And in a direct swipe at the United Nations' existing weapons inspection program for Iraq, the French proposal said "it is high time for the Security Council to recognize that no additional progress on disarmament work can be reached by an illusory resumption of unchanged previous methods."

U.N. weapons inspectors left Iraq in December before airstrikes by the United States and Britain. They have not returned, and Iraqi officials have vowed to keep them out.

U.N. Security Council

The French proposal, a copy of which was obtained by CNN, calls for implementation of a long-term monitoring system to prevent Iraq from developing weapons of mass destruction. The system would be overseen by a new independent commission.

Once that system was in place, the oil embargo would be lifted, something for which the Iraqis have long pressed.

"This embargo has no more raison d'etre," the French proposal said. "It hurts the people of Iraq and keeps them as hostages of their authorities ... This embargo has become a wrong tool to achieve the goals of the Security Council."

The French also propose that economic and financial monitoring systems be put into place to determine if Iraq is diverting its resources into weapons development, which would allow Iraq to "develop its economy and proceed with the commercial transactions related thereto... without distracting these resources for the reconstitution of weapons of mass destruction."

In Washington, State Department spokesman James Rubin said the United States had "a number of questions and concerns" about the French proposal. But he went on to say that it contained "some positive elements" dealing with "the essential task of ensuring that Iraq does not rearm and is disarmed."

A U.S. Air Force F15-E refuels during enforcement of the northern no-fly zone

U.S. says Iraqi missile fired at planes

While diplomats discussed the impasse over Iraqi weapons in New York, there was yet another military skirmish over Iraq's northern no-fly zone on Wednesday.

The latest incident occurred near the city of Mosul, where, according to U.S. officials, Iraqi forces have been threatening U.S. and British planes patrolling the northern no-fly zone in the past several days.

The Pentagon said the planes were on routine morning patrol when they were targeted by several Iraqi surface-to-air missile systems, and at least one missile was fired at the patrolling aircraft.

U.S. military spokesman Lt. Col. Jane Rinell, speaking at Incirlik Air Base in Turkey, said the U.S. planes fired precision-guided missiles which "scored direct hits" on the Iraqi air defense site.

No U.S. or British aircraft were hit and they all returned safely to base, according to American and British officials. The Iraqis insisted that one "enemy" aircraft was hit by their air defense fire.

The no-fly zones were established after the Gulf War in order to protect Kurds in the north and Shiite Muslims in the south from attacks by government forces. The zones are patrolled by Western aircraft, and Iraq has for years said the zones infringe on Iraqi sovereignty.

Wednesday's attack marked the seventh time since the end of December's airstrikes that U.S. planes have fired on Iraqi air defenses either in the northern or southern no-fly zones.

Iraq calls for Arab dialogue

Also on Wednesday, the Iraqi government called for a "balanced dialogue" with its Arab neighbors in order to solve the country's problems.

"Iraq sees the need for a balanced dialogue based on good intentions under the umbrella of the Arab nation ... to find practical solutions to the situations," said an official statement, carried by the Al-Thawra newspaper of the ruling Baath Party.

Foreign ministers of five Arab countries held talks in the Egyptian capital, Cairo, on Wednesday to forge a unified strategy on Iraq and its crisis with the West.

The session -- involving Egypt, Oman, Saudi Arabia, Syria, and Yemen -- was apparently designed to come up with a position to be taken at a meeting of foreign ministers from the 22 members of the Arab League in Cairo later this month.

The diplomats said Wednesday's talks focus on a Saudi proposal urging the lifting of U.S. trade sanctions on Iraq, along with strict measures to limit Iraq' ability to rearm itself and threaten its neighbors.

Reuters contributed to this report.