That line was cut from most cds and the movie itself. Its was from the first song, Arabian Nights. I have one from a box-set about Ashman-Menken that contains it though.
A Disney animated crazy love-comedy-adventure musical full of anachronisms and the genie transforming himself in, for example, Jack Nicholson, isnt the place you go looking either for racism nor historical or cultural acuracy.
Mulan, while still funny, had far more of a serious tone to it; Aladdin seems like a gag per second gun-machine and if anything, it was heavily inspired by the Korda produced Thief of Baghdad in my view, even more than the thief and the cobbler.
But then again, Jasmine doesnt look white in a long shot to me.
To me a stereotipe is only offensive if it wants to be. There has to be meannes behind it. I dont care about ofended people; people can feel ofended by anything, right or wrong. Ofensive needs to be meant.
As a movie, crap aside, still a masterpiece though.