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Egyptian investors fear Israeli backlash Beneficiaries of a trade agreement with Israel warn against its cancellation after attacks on Israeli Embassy in Cairo last Friday
Magdy Tolba, the former head of the Egyptian clothes exports council and one of the major beneficiaries of a bilateral trade agreement with Israel has warned against the impact on Egyptian labour in the textiles sector "of things getting worse", in a reference to last week's attack on the Israeli Embassy. The Qualifying Industrial Zone (QIZ) agreement, according to Tolba, is a cornerstone of Egypt's economic relations. Signed by the Nazif cabinet in 2005 without parliamentary approval, the agreement permits a zero-tariff access to the American market for Egyptian clothes that use 11.7 per cent Israeli inputs. To this day, 507 factories are operating under this agreement, employing some 100,000 workers, most of them Egyptians. Not all factories export to the USA. According to Ministry of Trade, Egyptian exports under the QIZ programme amounted to $811 million in 2010, 60 per cent of which goes to the US market. For its part BDI Coface, the largest business information group inIsrael,says the deteriorating of its relations with Israel could cost Egypt 70,000 jobs in QIZ -related factories. “Without this agreement,” Tolba told Ahram Online, “the cost of clothes exported by Egypt's could rise by 16-38 per cent, due to imposed tariffs.” Attorney Gil Nadell, who specialises in international trade, told an Israeli newspaper on 12 September, “Egyptians have a lot to lose if the business ties between the two countries are severed.” “For Israel, the benefits from common trade with Egypt is just political,” says Galal El-Zorba, the Chairman of Egyptian Industrial Federation, “but for Egypt it is more than that.” He feels that maintaining trade agreements regardless of political tensions is in Egypt's interest. Yet Israeli exporters to Egypt too are concerned about a weakening of ties with Tel Aviv, according to Haaretz on Sunday. A foreign ministry source was quoted by an Israeli business newspaper as saying that Israeli textile factory employees asked to be evacuated from Cairo along with diplomats following protests outside the Israeli embassy that led to an attack on its premises on Friday. Israeli employees of the Delta Jalil textile factory did leave following the attack, although the foreign ministry did not instruct them to do so. Neither country had become a major trade partner with the other after the Camp David accords of 1979, but bilateral economic relations were growing at a fast pace in recent years, be they in trade or investment – a trend that has been reversed considerably since the 25 January revolution. The volume of Israeli exports to Egypt dropped by 33 per cent in the first half of the year as relations between the two counries were strained following the ousting of Egyptian president Hosni Mubarak. According to the Egyptian International Trade point, the volumeof Egyptian exports to the Israeli market was $65 million in 2010; most of these exports included inorganic chemicals as well as organic and inorganic compounds, precious metals, fresh vegetables, grain and dairy products. The volume of Israeli exports to Egypt on the same year was $75 million including cotton, cardboard, plastics and machinery.Oil and gas are excluded from these figures and until now there are no accurate estimates for them. Israel depends on Egyptian natural gas for 20 per cent of its energy and has been affected by repeated interruption of the supply in the wake of 25 January. Egypt is reportedly preparing a request of its own from the International Centre for the Settlement of Investment Disputes, demanding to re-price the gas it sells to Israel, widely regarded as unfair inside Egypt. An Egyptian court ruled in 2010 that the government must renegotiate prices. But Israel claimed earlier that the price it pays for Egyptian gas is on a par with international levels, and that it will not engage in any price negotiations as prices had already increased about a year ago. Yet Egyptian sources say new negotiations are underway. The 20-year natural gas deal signed between Israel and Egypt in 2005 is one of the most important outcomes to emerge from the historic 1979 peace treaty. Egypt also had 225,000 Israeli tourists in 2010, according to Egyptian Tourism Authority. (Additional reporting by Dalia Farouk)
