Israel, Egypt set target of $2bn duty-free textile exports to U.S. within 3 yrs

Israel and Egypt, the two countries marked 10years of the U.S. Qualifying Economic Zone framework with a joint booth at the Magic apparel trade fair, in Las Vegas, the world’s biggest event in the international fashion industry, this week. The two countries to strengthen the relations on Wednesday has agreed 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.

In addition they has 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 purpose of this trade initiative has been to support the prosperity and stability in the Middle East by encouraging regional economic integration.

The QEZ framework, which went into effect in February 2005, is aimed at encouraging Israeli-Egyptian economic ties in order to bolster 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, head of the Economy Ministry’s Foreign Trade Administration, said that 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. 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. 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.

The immediate saving for an investor in the QIZ is the amount of the U.S. tariff on any specified good. Generally speaking, U.S. tariffs on clothing and textile goods are relatively high, which makes production of these goods in QIZs especially attractive