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.
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