Egyptian industrialists have recently warned they would quit importing Israeli cotton in light of what they call "exaggerated price hikes" imposed by Israeli growers.

According to the Egyptians, the Israelis are taking advantage of their obligation to buy Israeli crops in order to enjoy U.S. customs benefits under the Qualifying Industrial Zone free trade agreement.

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Under the QIZ, the U.S. authorizes duty-free entry of goods into the U.S. for industrial products manufactured jointly by Israel and Egypt on Egyptian soil.

Under the agreement, Egypt is obligated to incorporate in the production Israeli output to a minimum of 11.7% in order to receive customs tax exemptions in the United States.

Sources at the Egyptian cotton exporters association said they were surprised to hear that textile factories are so keen on purchasing Israeli cotton. According to the sources, produce imported from Syria, Pakistan and India is offered for much lower prices than that sold by Israel.