The Qualified Industrial Zones (QIZ) Agreement of 2004 may be interpreted as revitalizing a bilateral trade relationship that had been dwindling since the second intifada, while also providing a new channel for Egyptian exports targeted toward the U.S. market. Egypt and Israel on Dec. 14, 2004, agreed on a rare trade/industrial co-operation deal. The two states and the U.S. signed a protocol to set up 7 Qualified Industrial Zones (QIZ), where goods would gain free access to U.S. markets provided that 35 percent of their input comes from co-operation between Egyptian and Israeli companies – these constitute an advanced step towards a free trade pact between the U.S. and Egypt. The QIZs agreement comes amid a remarkable change of mood between Egypt and Israel. The trade protocol with the U.S. stipulates that 11.7 percent of the content of the goods exported from the zones should originate in Israel. Egypt expects the deal to throw a lifeline to its textile industry, which faces a big drop in exports to its crucial U.S. market in January after the expiry of the import quota system. The Egyptian state media have been trumpeting the expected positive impact on exports and employment in a bid to prepare public opinion for economic co-operation with Israel. Egypt, among other middle East countries, should accommodate with the new world system. “Today the world is unipolar and is ruled by the market economy.†The agreement basically allows for Egyptian textile products to enter U.S. markets free of customs and duties, thus giving them a competitive edge, on condition that 11.7 percent of the goods are manufactured in Israel. Three zones have been chosen – Greater Cairo, Alexandria, and the Suez Canal zone. It is a political agreement. The Egyptian government justifies it because of its retarded economic position and to solve its economic crisis. The Egyptian textile industry will benefit in both the short and long runs. There is no way that this protocol has pushed Egypt to form new trade relations with Israel. It is creating mutual interests between countries in the region and will create stability and end the threat of war. Two hundred and thirty-one factories employing nearly 162 thousand laborers will benefit from this protocol. The program saved the Egyptian textile industry from intensive competition. Although Egypt had to be prodded into reviving its trade ties with Israel by a combination of domestic interest-group pressure, global economic threats and market access incentives, the Egyptian government quickly came to see the agreement as a political and economic “stepping stone” to a bilateral preferential trade agreement (PTA) with the United States. Strengthening social and political relations with Israel was never an important objective. For the Israeli government, which already had a bilateral PTA with the United States, the objective from the agreement was more political than economic. Politically, the public signing of the agreement permitted Israel to begin removing the Arab “taboo” of doing business with Israel. At the time, the agreement was part of a broader attempt to break out of its political and economic isolation in the region. Of course, Israel also gained from a small boost in its exports to Egypt. For over half a century, the Egyptian regime has portrayed Israel to the Egyptians as merely “the devil.†Many speculated that this rhetoric has been intentionally implanted into the minds of Egyptians as a means to divert built of frustrations against the government towards the Israel people. Currently a wave of political moves are being made to warm relations with Israel, as mentioned. Could these steps be sign of reform within Egypt? BM The beliefs and statements of all Bikya Masr blogumnists are their own and do not necessarily reflect our editorial views.
