EGYPT: More Goods on the Israeli Bandwagon to the U.S.

By Adam Morrow Reprint | | Print |

Adam Morrow

CAIRO, Nov 4 2005 (IPS) - An agreement to export Egyptian goods to the United States through Israeli quotas has been expanded.

Several new zones including the Greater Cairo region have been added to the Qualifying Industrial Zones(QIZ) agreement signed December last year. Under that agreement Egyptian products can access the U.S. market duty-free so long as they have a minimum of 11.7 percent Israeli component.

The deal allows Egyptian producers to ‘piggyback’ on the free trade agreement Israel has with the United States since the mid-1980s.

The Egyptian ministry for foreign trade and industry says the expansion “finally brings into the QIZ arrangement the majority of Egypt’s textile and readymade garments manufacturers, in addition to several industrial locations serving Egypt’s other sectors, such as leather and food processing.”

Egyptian minister for foreign trade and industry Rachid Mohamed Rachid had said last December that the agreement was in line with the policy of opening up the economy to investment, boosting growth rates, creating jobs and promoting exports.

The arrangement had a political dimension. Disapproval of Israeli policies on the Egyptian street is strong, especially in the wake of recent assassinations by Israel of militant Palestinian resistance leaders. Greater Egypt-Israel economic cooperation was expected to lead to a friendlier political relationship.

Despite the signing of a peace agreement in 1979, relations between the two countries have traditionally been chilly.

But economic advantages outweigh political considerations for producers and exporters. “In most cases, Egyptian manufacturers wanted to be a part of QIZ,” Khaled Sewelam, research manager at the American Chamber of Commerce in Egypt told IPS. “It means big business for them. Everyone is looking at the economic benefit.”

The scheme was inspired by the first QIZ arrangement with Jordan in 1996 that allowed similar duty-free exports from Jordan to the United States so long as they had a minimum of 8 percent Israeli content. Jordan’s revenues from garment exports to the United States rose from 47 million dollars in 1998 to 675 million dollars in 2003.

In hope of emulating these export-driven successes, Egypt penned its own QIZ protocol late last year, establishing seven qualified zones in the governorate of Alexandria, Port Said and in specified areas within Greater Cairo.

By mid-July, 54 companies operating within these zones were exporting mostly readymade garments and textiles to the United States. Rachid said the exports under the agreement by then were worth 62.1 million dollars.

Under the expanded facility 4,500 new companies could qualify to export to the United States under the terms of the agreement.

Many producers and exporters say Egyptian exports can find a foothold in the U.S. market in the face of fierce competition from China because of advantages derived from the QIZ scheme.

“If we hadn’t signed the QIZ protocol, China would have eaten into our share of the market,” Khaled Raafat, chairman of the Readymade Garment Exporters Association said in a statement. He predicted a doubling of Egyptian exports to the United States in 2006.

The QIZ expansion could be a precursor to Egypt’s own free trade agreement with the United States. Jordan won such an agreement in 2000, four years after it signed its QIZ arrangement with Israel.

“There are certain talks going on, where conditions are being set in advance of official negotiations,” said Sewelam. “I think U.S.-Egypt FTA (free trade agreement) talks are very close. We might see something as early as the coming January.”