USTR - Fostering Trade in the Middle East: An Israel – Egypt Trade Partnership
                 
The Office of the United States Trade Representative

Fostering Trade in the Middle East: An Israel – Egypt Trade Partnership
12/14/2004


In 1996, Congress authorized the President to allow
Egypt and Jordan to export products to the United States duty-free, as long as these products contain inputs from Israel.  This trade initiative supports the Middle East peace process by encouraging regional economic integration.  This week, Egypt, Israel, and the United States reached an agreement to establish the Egyptian and Israeli trade partnership necessary to take advantage of this 1996 legislation.

Background

Under U.S. law, Egypt and Israel can establish Qualified Industrial Zones or “QIZs” and export products manufactured in these QIZs to the United States duty-free.  In order for a QIZ article to gain duty-free entry, QIZ factories must add at least 35% to the value of the article.  This 35% minimum content figure can include costs incurred in Israel, Egypt, or the United States.  By agreement between Egypt and Israel, Egypt and Israel must each contribute at least one-third (11.7%) of the 35% minimum content requirement.

QIZs must encompass portions of Egypt and Israel, though the areas do not have to be contiguous.  The United States has approved the request of Egypt and Israel to designate three QIZs -- the Greater Cairo QIZ; the Alexandria QIZ; and the Suez Canal Zone QIZ that includes an industrial area of Port Said

The President has given the United States Trade Representative (USTR) the authority to approve QIZs, and USTR has announced its approval of the Egypt-Israel QIZ plan.  Until now, QIZs have been established only in Jordan.

Benefits of QIZs

Since 1999, thirteen QIZs have been designated in Jordan.  During that period exports from Jordan to the United States grew from $31 million in 1999 to $674 million in 2003.

QIZs are Jordan’s strongest job creator.  Jordan estimates that more than 35,000 jobs have been created in the QIZs.  Investment in Jordan’s QIZs is currently at between $85-100 million and is expected to grow to $180 to $200 million.  Similar benefits are expected to flow from the QIZs in Egypt.