Israel-Egypt border.
Israel-Egypt border. Photo by Moti Milrod
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Israeli exporters to Egypt fear a further weakening of trade between the two countries in the wake of the riots that left Israel's embassy in Cairo ablaze over the weekend.

Egypt's government declared Saturday it is reinstating emergency laws following the protests, which reportedly left three dead and 1,000 injured and prompted the evacuation of Israel's ambassador to Egypt and 80 other embassy staff and dependents. (See story, Page A1)

Exporters expressed concern that trade between the two countries may now be halted.

Egypt's new regime has not managed to improve the average Egyptian's quality of life, contrary to expectations, said the exporters. Egyptians criticize the regime for this as well as for maintaining ties with Israel.

Thus, the Egyptian regime is likely to try to relieve pressure at Israel's expense, said exporters. While Egypt cannot cut ties with Israel completely without violating the peace treaty, it can definitely cool relations.

This is already evident in the export figures to Egypt for the first half of the year, which are down 33%.

Avi Hefetz, head of the Israel Export and International Cooperation Institute, said that in 2010, Egypt was Israel's 36th largest export market, while in the first half of 2011, it had tumbled to 47th.

"Yet the importance of trade with Egypt is measured in different ways. From a microeconomic perspective, Egypt is an important market for some individual Israeli companies.

"Of the 151 companies exporting to Egypt, 23 exported more than $1 million in 2010," he said.

For Egypt, too, trade with Israel goes beyond the numbers, said Hefetz. A three-way agreement with the United States lets Egypt sell on the U.S. market custom free so long as at least 10.5% of the inputs are from Israel.

"We're hoping that economic logic will win out," he said.

In 2010, Israeli exports to Egypt totaled $503 million, a 24% increase over 2009, according to exports institute data. In the first half of 2011, they were only $173 million.