Ties between Egypt and Israel boosted by trade deal

ISRAEL’S cabinet last week approved a partial free-trade deal with Egypt. The deal represents a major step towards improving economic and political ties between the two countries and follows a similar deal between Jordan and Israel last year.

The pact is expected to produce significant partnerships between Israeli and Egyptian companies in the fields of textiles, leather and food. Trade between Israel and Egypt is worth around US$60 million a year, 40% of which is exports to Egypt from Israel.

The agreement follows the signing of a trade deal between the two nations in December to set up Qualified Industrial Zones (QIZ). These zones open up the US market to goods produced in Egypt with Israeli input, promises jobs for Egyptians and offers Israel cheap labour.

“The QIZ agreement between Israel, Egypt and the US, like the one set up with Jordan, will make an important contribution to strengthening political and commercial ties between Israel, Egypt and the US,” said Ehud Olmert, industry and trade minister for Israel.

Under the agreement, companies in seven designated zones can export to the US without duty or quota restrictions if the goods contain at least 11.7% worth of Israeli input. The seven zones include four in the Greater Cairo area, two in Alexandria and one in Port Said.

In 1996 the US Congress allowed imports from Egypt and Jordan to enter the US free of duty if the products contained a certain amount of Israeli input. US law requires that duty-free exports to the US have at least 35% value added by companies within the QIZ.

The 35% minimum can include costs in Egypt, Israel or the US, and Israel and Egypt agreed that each country must contribute at least a third, or 11.7%, to the 35% minimum-cost requirement.