Niveen Wahish reports on the controversy surrounding Egypt's signing of a QIZ agreement with Israel and the US On Tuesday Egypt signed an agreement, which it had long resisted, with Israel and the US allowing Qualified Industrial Zones (QIZ) to be established. Goods produced in these zones will enjoy unhampered access to the US market provided they have an 11.7 per cent Israeli input. US Trade Representative Robert Zoellick and Israeli Vice-Prime Minister Ehud Olmert arrived in Cairo to join Minister of Foreign Trade and Industry Rasheed Mohamed Rasheed, for the signing, which was also attended by Prime Minister Ahmed Nazif. The government has presented the agreement as a last ditch attempt to prevent Egypt's textile and clothing industry from losing its share of the US market. The Multi-Fibre Agreement expires at the end of December, and along with it the quota system that had shielded Egyptian producers from East Asian and Chinese competitors in the US market. The jobs of 150,000 workers were at stake according to a Ministry of Foreign Trade and Industry (MFTI) report. The duty free access that comes with the QIZ agreement should ensure Egyptian exporters enjoy a competitive edge and, claims the MFTI, could lead to the creation of 250,000 jobs, see exports to the US increase by LE4 billion over five years and attract $5 billion of foreign direct investments. The only other country to have a QIZ agreement with the US and Israel is Jordan. Jordanian exports to the US soared from $2 million in 1999 to around $600 million last year. The only alternative to the QIZ agreement would have been to establish a Free Trade Area (FTA) with the US. This would have required far lengthier negotiations and a reciprocation of benefits, which is not the case with the QIZ. Many commentators though, see the current agreement as a stepping stone towards an FTA. In Washington the agreement is viewed within the framework of the Middle East Free Trade Area (MEFTA) which President Bush wants to be fully operational by 2013. "If we help people recognise the benefits of working together as opposed to shooting one another, that is a good step (towards peace)," said Zoellick during the press conference following the signing ceremony. The agreement has provoked controversy in Egypt, and a demonstration was held at the Press Syndicate on the day of the signing. It will inevitably lead to an increase in Israeli exports to Egypt which, according to Olmert, could in the first phase rise from $30 million to $150 million annually. The agreement provides Israel with a foothold in the Arab World which is what its opponents fear most, Olmert told Reuters. Sayed Abul-Omsan, head of the Foreign Trade Policies Division at MFTI, insists that the livelihood of thousands and the need to create jobs and attract investments lies at the core of the agreement. "Global trade knows no nationalities, no beliefs," he said. Gouda Abdel-Khaleq, head of the economic committee of the left-wing Tagammu Party, is among many who have been dismayed by the agreement. "How can Egypt sign an agreement when the blood of the three soldiers [killed by Israel on the border] is still warm?" he asks. Israel, he points out, is viewed as an enemy by most Egyptians, and increasingly the US is seen in the same light. "To sit down at this critical moment and sign an agreement with these two countries displays a lack of any political sense." "This is a strategic issue that should not be subject to minority calculations. The whole agreement works to the benefit of a handful of businessmen." Indeed, in announcing the agreement presidential spokesman Maged Abdel-Fatah disclosed that it had been instigated by the private sector. Abdel-Khaleq thinks Egypt is paying too high a price for access to the US market. Egypt's textiles and garments industry, he argues, will be prey to the Israelis in the sense that Israel will monopolise a fixed portion of input. "They can exact a high price, or interrupt supplies as a means of pressure," he said. Seven industrial areas within Greater Cairo, Greater Alexandria and Suez Canal, will be granted QIZ status. Important centres of production, including Al-Mehalla and Ismailia, are not, however, included in the scheme. Workers there appear to have a different agenda to the protesters at the Press Syndicate, staging their own protest at being excluded from the agreement. The seven areas were selected, says Rasheed, on the basis of current exports to the US, and the number of QIZs could increase after 12 months. But the agreement, he stressed, represents an opportunity, not a solution and producers will need to get their act together if they are going to capitalise on the potentials offered. Although the US market accounts for 40 per cent of Egypt's textile and garment exports, valued at $904 million in 2003, the figure represents less than one per cent of the US's total imports in the sector. Even with quotas in place Egypt's exports comprised only a fraction of the allocated quota. (see p.7)
