Israel, Egypt Look to Double Duty-free Textile Exports to U.S.

Two sides mark decade of cooperation in program with joint booth at Las Vegas trade fair.

Daniel Tchetchik

In another step toward tighter relations, Israel and Egypt agreed on Wednesday to double duty-free textile exports to the United States to $2 billion within three years, said Gabi Bar, head of the Middle East desk at the Economy Ministry.

The plan came as the two countries marked 10 years of the U.S. Qualifying Economic Zone framework in a meeting with senior Israelis and Egyptian officials. They also marked the anniversary with a joint booth at the Magic apparel trade fair, in Las Vegas, the world’s biggest, this week.

“In addition we agreed to explore adding other industrial sectors [to the QEZ framework] in which Israeli-Egyptian collaboration would have a competitive advantage, such as food and plastics, so that the agreement would contribute more to the Egyptian economy, to Israeli industry and peaceful relations between Israel and Egypt,” said Bar.

The QEZ program allows Egyptian textile makers to sell their products duty-free in the United States as long as Israel contributes at least 10.5% of their value.

The obstacles to further developing bilateral trade are the absence of an agreement with the Palestinians as well the generally hostile public opinion in Egypt toward Israel. In 2012, Egypt rescinded a contract supplying natural gas to Israel, which had been the biggest source of trade between the two countries.

The government of Abdul Fattah al-Sisi, which seized power in 2013 after a brief period of Muslim Brotherhood rule, has led to stepped-up security cooperation. But Cairo has hesitated to enhance commercial ties.

The QEZ framework, which went into effect in February 2005, is aimed at encouraging Israeli-Egyptian economic ties in order to buttress the two countries’ 1979 peace agreement. The United States recognizes 14 industrial zones with more than 150 textile plants in Egypt as QEZs.

The Israeli contribution last year provided about $105 million worth of inputs to the plants, including chemicals, packaging materials and zippers. They constitute three quarters of all Israeli exports to Egypt, so that doubling QEZ exports from Egypt would significantly add to Israeli-Egyptian trade as well.

Ohad Cohen, who heads the Economy Ministry’s Foreign Trade Administration, said Cairo had done little to promote the QEZs after the agreement went into effect, but in the last two years has begun to show greater interest in the program as a way of spurring the Egyptian economy.

“There’s a growing recognition in Egypt that the QEZs can serve as a growth engine,” he said, adding that the goal of doubling exports would be done through stepped-up marketing.

Most of the inputs come from plants in Israel’s north and south, where unemployment is relatively high. “The agreement helps employment in factories in [Israel’s] periphery, in places like Migdal Ha’emek, Beit Shemesh, Kiryat Malachi, Or Akiva and Yavneh,” he said. The plants employ many hundreds of workers.”

In Egypt, QEZ plants employ some 280,000 workers directly and thousands of others through sub-contractors and service providers.