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United States, Egypt and Israel to Launch Historic Trade Partnership USTR Zoellick to Participate in Signing in Cairo

December 10, 2004

WASHINGTON, DC - United States Trade Representative Robert B. Zoellick will travel to Cairo, Egypt, on December 13-14, 2004, to participate in the signing of an historic trade partnership involving Egypt, Israel, and the United States. The agreement, to be signed by Egyptian Minister of Foreign Trade and Industry Rachid Mohamed Rachid and Israeli Vice Prime Minister Ehud Olmert, will create Qualified Industrial Zones (QIZs) in Egypt, allowing for duty-free export to the U.S. of certain Egyptian goods that contain Israeli inputs.

"This is the most important economic agreement between Egypt and Israel in two decades," Zoellick said. "It is a concrete, practical result of President Bush’s plan to promote closer U.S. trade ties with the Middle East so as to strengthen development, openness, and peaceful economic links between Israel and its neighbors. These industrial zones will create a daily opportunity to build business and personal relationships among Egyptians, Israelis, and Americans. Our successful experience with Jordan suggests that establishing QIZs in Egypt will significantly expand trade, promote investment, and create hope."

The QIZ program was established by the United States in 1996 to encourage economic cooperation, closer ties, and peaceful relations between Israel and its QIZ partners. Under this program the U.S. Trade Representative must work with the countries and approve the new QIZs to support development and trade.

The establishment of such zones in Egypt builds on other steps recently taken by the United States to promote economic freedom in the region. President Bush has proposed the creation of a Middle East Free Trade Area (MEFTA) by 2013. The United States currently has Free Trade Agreements (FTAs) with Israel, Jordan, and Morocco; an FTA with Bahrain that is pending Congressional approval; and will begin FTA negotiations with the United Arab Emirates and Oman early next year. The United States is working with Egypt’s new economic reform team to deepen our reciprocal trade relationship. The Egyptian QIZ can serve as a first step in what we hope will be a continuing path of deepening economic ties.

The 1996 U.S. law authorizing QIZs enables either Jordan or Egypt to export products duty free to the United States provided they contain input from Israel. The United States has been discussing with Israel and Egypt their specific QIZ request since September; until now, QIZs have been established only in Jordan. The Egypt QIZs will increase practical business contacts among Egyptians, Israelis, and Americans, serving as a catalyst for expanded trade among our countries.

This will be Ambassador Zoellick’s third trip to Egypt as U.S. Trade Representative. He traveled to Cairo in June 2002 to meet with senior Egyptian officials and U.S. and Egyptian business representatives to discuss the bilateral trade relationship. He returned to Egypt in June 2003 for an informal World Trade Organization (WTO) meeting to discuss ongoing global trade negotiations with WTO trade ministers. Ambassador Zoellick travels to Egypt directly after a trip to Africa and Europe, where he has focused on advancing the WTO negotiations and promoting bilateral trade and development initiatives.

Background on Qualified Industrial Zones (QIZs)

In 1996, Congress authorized designation of qualifying industrial zones (QIZs) between Israel and Egypt, and Israel and Jordan. The QIZs allow Egypt and Jordan to export products to the United States duty-free if the products contain inputs from Israel. The purpose of this trade initiative has been to support the prosperity and stability in the Middle East by encouraging regional economic integration.

In order for a QIZ article to gain duty-free entry, QIZ factories must add at least 35 percent to the value of the article. This 35 percent minimum content figure can include value added in Israel, Egypt, or the United States. 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.

Since 1999, the United States has designated thirteen QIZs in Jordan. The United States and Jordan negotiated a full FTA that Congress approved in 2001. Exports from Jordan to the United States grew from $31 million in 1999 to $674 million in 2003.

Jordan’s QIZs are the country’s strongest engine of job growth. Jordan estimates that more than 35,000 jobs have been created within its 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.

Background on Middle East Free Trade Area Initiative (MEFTA)

In May 2003, the President proposed a plan of graduated steps for nations in the Middle East and Mahgreb to increase trade and investment with the United States and others in the world economy. The first step is to work closely with peaceful nations that seek to become members of the WTO in order to expedite their accession. As countries in the region implement domestic reform agendas, institute the rule of law, protect property rights (including intellectual property), and create a foundation for openness and economic growth, the United States is taking a series of graduated steps, tailored to the countries’ level of development.

The United States is expanding and deepening economic ties through comprehensive Free Trade Agreements (FTAs), Trade and Investment Framework Agreements (TIFAs), and Bilateral Investment Treaties (BITs), and is working to enhance the Generalized System of Preferences (GSP) program for eligible countries. The FTA with Israel was completed in 1985. This Administration has concluded two additional FTAs, with Morocco and Bahrain; implemented a third, with Jordan; will soon initiate two more, with the United Arab Emirates and Oman; and signed nine TIFAs and two BITs with nations in the Middle East and Mahgreb that are not current U.S. FTA partners.