Egypt, Israel, US sign partial free trade deal
14 December 2004
CAIRO - Egypt, Israel and the United States on Tuesday signed a partial free trade deal described as the most important economic agreement in two decades between the original Middle East peace partners.
The agreement on Qualified Industrial Zones (QIZs), which opens the US market to goods produced in Egypt with Israeli inputs, promises jobs for Egyptians while offering Israel a symbolic economic foothold in the largest Arab nation.
The Egyptian government says it is the first step towards a full free trade deal with the United States and that in the meantime it will help tide Egypt over when US quotas for imports of textiles and clothes — which favour Egyptian producers — expire in January.
It also has a political significance as part of Egyptian overtures to persuade Israel to go ahead with plans to withdraw from Gaza in coordination with the Palestinian leader who will succeed late President Yasser Arafat after January elections.
“It goes far beyond the ... business and the trade. This is another statement by two major forces in the Middle East that they are looking forward to greater cooperation,” said Israeli Trade and Industry Minister Ehud Olmert.
“Economic interests are not the only goals... It is our deep belief that the Qualified Industrial Zones protocol will contribute to a just and comprehensive peace,” added Egyptian Foreign Trade and Industry Minister Rachid Mohamed Rachid.
Rachid, Olmert and US Trade Representative Robert Zoellick signed the deal in a ceremony at the Egyptian cabinet office.
The United States has been promoting QIZs in the Middle East to help Israel break out of its economic isolation.
“This is the most important economic agreement between Egypt and Israel in two decades,” Zoellick said in a statement.
Under the agreement, similar to one between Jordan, Israel and the United States, companies in seven designated zones can export to the United States without duty or quota restrictions if the goods contain at least 11.7 percent Israeli input.
It is expected to benefit mostly textile companies but other sectors could also take advantage of the incentives.
The reaction has been mixed within Egypt, where relations with Israel remain controversial 25 years after Cairo signed a peace treaty with the Jewish state.
Companies outside the seven zones are lobbying to be included, arguing that exclusion could lead to factory closures and layoffs, the Egyptian government said on Monday.
But a small group of Egyptians opposed to economic globalisation protested in central Cairo under the slogan ”Egyptian workers are not for sale”.
The protesters said the “script” for the industrial zones was American, the management Israeli, the finance from the Gulf and only the workers Egyptian.
The new Egyptian government, which took over in July with promises of economic liberalisation, said the deal would create new jobs in Egypt, where unemployment is a major grievance.
“QIZs will be instrumental in Egypt’s efforts to encourage growth, increase exports and attract foreign direct investment. QIZs are expected to deliver tangible benefits to ordinary Egyptians in the form of job opportunities, an improved standard of living and peace,” a government statement said.
“The government believes that such international trade agreements will not only facilitate ... global integration but will act as important catalysts to domestic reform,” it added.
The seven zones include four in the Greater Cairo area, two near the Mediterranean port of Alexandria and one in the Suez Canal city of Port Said.