Ahmed El-Naggar* sees no justice in the QIZ According to the Israeli trade minister, the Qualified Industrial Zones (QIZ) agreement signed by Egypt and Israel this week is a historic breakthrough for Israel, allowing it to increase its exports to Egypt after many years of resistance by Egyptian and other Arab markets to Israeli goods. As usual, the Egyptian authorities denied that an agreement had been reached, until after it had been announced by the Israelis, resulting in embarrassment for the Egyptian side, which maintained its tradition of concealing information until the very last moment. In essence, the agreement is restricted to the textiles and clothing sector, since the United States refused to include meat, poultry or processed agricultural products, despite Egypt's relative strength in these labour-intensive goods. The development follows the US announcement that a Free Trade Area (FTA) agreement with Egypt is non-negotiable at the present time. This was a clear attempt to put pressure on Egypt as the date for ending the worldwide textile exports quota system approaches. Despite Egyptian denials that there was pressure from the Americans, or that there was a link between the US delaying the free-trade agreement and the rush to reach an agreement on QIZ zones, the Americans' obstruction of an FTA was a devastatingly effective way to force Egypt to sign onto the QIZ deal. Indeed, the agreement could be seen as the latest American recipe for imposing economic normalisation between Egypt and Israel, opening Egyptian markets to Israel, and widening the scope of investments and joint projects between the two countries. On the other hand, QIZ could be read as a new blueprint for an Arab-Israeli Middle East market under American protection and control, after previous US-Israeli efforts to create such a market through economic conferences on the Middle East and North Africa ended in abject failure. The United States, meanwhile, has inked FTAs with Morocco and Bahrain. This makes the strong-arm tactics used against Egypt, as well as US insistence on delaying an FTA, something of a calculated insult to Egypt's dignity, as well as a signal that the US will use free trade as a bargaining chip to protect Israeli interests by opening large-scale economic links between Egypt and Israel. The US has used the seductive power of its enormous market to pressure Egypt into entering into economic normalisation with Israel against the will of both the Egyptian people, and official Egyptian positions that preclude any economic normalisation with Israel before a full and comprehensive political settlement for the Middle East conflict is reached. There are a number of important observations to be made about the QIZ agreement. First of all, the agreement provides a framework for preferential relations between Egypt and Israel, with Israeli materials entering QIZ zones without paying any customs duties. In other words, they are zones for free trade between Egypt and Israel, before being free trade zones with the United States. This, for the Americans and Israelis at least, is the main objective. While Egypt has yet to set up a true free-trade zone with Arab countries -- due to lists of goods excluded from free trade (lists that Egypt was the first Arab country to ask for), disputes over the regulations governing their establishment, and the lack of free trade in agricultural goods -- Israel has free trade with Egypt within the QIZ zones and is thus the partner best equipped to develop trade with Egypt and penetrate Egyptian markets. Secondly, QIZ zones will become a platform for Israeli materials within Egyptian goods to penetrate Arab markets, not to mention their penetration into the Egyptian market itself, thus circumventing the Arab embargo on Israeli goods. The zones will act as a Trojan horse, allowing Israeli goods to enter Egyptian and Arab markets under Egyptian trademarks. In short, they will act instruments of deception vis-a-vis Egyptian and Arab consumers who are unwilling to purchase Israeli goods. Thirdly, the QIZ agreement offers preferential treatment to a small group of big textile and clothing industry players from three limited zones, at the expense of those who work in the same sector in other zones, who will not enjoy the benefits of customs duties exemptions, and will remain unable to penetrate American markets. The zones, therefore, will strike at the very roots of equal opportunity for all citizens, which is especially unfair when we remember that the political and economic burden created by these agreements will be borne by all. It is worth pointing out that the zones excluded from the treaty are amongst the clothing industry's most productive, and are home to a number of small and mid-level producers who are unable to put pressure on the government. In addition, they include a number of public companies that are not favoured by the Americans. This makes QIZ zones a divisive phenomenon, acting in the interests of a small elite of businessmen from the large private and traditional capitalist sectors, and a model for injustice within the business community itself. Fourthly, the businessmen from the clothing and textiles industry who talk about their current crisis and the "escape route" represented by the QIZ agreements are currently suffering because of their own greed, and are seeking to make the whole country pay the price for their failure and incompetence. The difficulties that this sector is going through result from a refusal to be content with modest profit margins that would allow them to market themselves on a large scale both locally and abroad, as well as incompetent marketing, an obsessive focus on the American market to the exclusion of other options, weak efforts at innovation, development and modernisation within the industry, and a tendency to rely on foreign aid instead of setting aside funds to build the foundations for rapid, high-quality self-development. If the Egyptian clothing and textile industry, which in its modern form is some 175 years old (or three times older than the state of Israel), is unable to penetrate foreign markets, guarantee dominance in its own local market, or achieve what the Syrian and Tunisian textile and clothing industries have achieved (each has annual exports worth some $4 billion), it clearly suffers from serious flaws that need to be rectified, before plunging into faulty and unfair normalisation agreements with Israel and the US for the sake of a group of businessmen who have no desire to address their own problems. Fifthly, there are question marks surrounding Egypt taking refuge in an agreement upon which there is no national consensus, instead of either trying to reach a comprehensive free trade agreement with the United States without Israel's help, or aiming for closer Arab, European and African markets instead. Because of the reduced cost of transport and insuring goods and individuals, these markets are considerably cheaper to deal with. It should be noted that the Americans are especially keen on the Egyptian market, as the US's annual trade surplus with Egypt is around $2 billion, with the total value of this surplus reaching $9.946 billion between 1999 and 2003, even as the overall US trade balance suffers from an enormous deficit that by September 2003 had reached $621 billion. One could argue that the agreement is more a result of incompetent negotiation, as well as a bias towards American markets and normalisation with Israel, than reflecting a true requirement for Egypt, whose highest economic and political interests must always be prioritised over the limited interests of any one segment of the Egyptian private sector. * The writer is editor of the annual Economic Strategic Trends , published by Al-Ahram Centre for Political and Strategic Studies.
