Amir Cohen / Reuters Zim containers are stacked just outside Israel's port of Ashdod, February 23, 2012.

Trading Peace in Egypt and Israel

How QIZs Could Save the Middle East

This year marks the tenth anniversary of an Egyptian-Israeli economic partnership that has quietly pumped billions into Cairo’s vulnerable economy. The free-trade framework known as Qualifying Industrial Zones, or QIZs, is one of the few points of economic normalization to have grown out of Israel’s 1979 peace agreement with Egypt and subsequent deal with Jordan. Given the flagging Arab economies and regional instability, the success of QIZs has implications far beyond the bottom line. 

Essentially, QIZs are industrial parks through which participating countries—specifically Egypt and Jordan—can export goods under the flag of the U.S.-Israeli free-trade agreement. Egypt is now home to 15 QIZs and Jordan to 13, which together account for some $1 billion in exports a year. QIZs differ from other free-trade zones in that they are not the purview of a single country. Rather, they are jointly operated by Israel and either Egypt or Jordan, with oversight from Washington. Moreover, their products all have a single destination: the United States. 

A seamstress cuts fabric with a laser cutting machine in a factory that makes and exports Valentino men's suits in 10th of Ramadan City, Egypt February 22, 2006. This factory, like many others, is in a Qualified Industrial Zone (QIZ)

A seamstress cuts fabric with a laser cutting machine in a factory that makes and exports Valentino men's suits in 10th of Ramadan City, Egypt February 22, 2006. This factory, like many others, is in a Qualified Industrial Zone (QIZ) which was implemented last year in Egypt and has helped to attract more foreign ready-made clothes companies.

QIZs are the brainchild of Omar Salah, a Jordanian businessman—who, like 70 percent of his countrymen, is of Palestinian descent—seeking to capitalize on the optimism that followed the 1993 Israeli-Palestinian Oslo Accords and the following year’s Israeli-Jordanian peace deal. He was particularly keen to find a way to take advantage of a free-trade agreement that the United States had signed with Israel eight years prior.

Rebuffed by Jordanian officials as “naive,” Salah traveled to Washington to lobby the State Department, White House, and U.S. trade representative, whose interest finally piqued that of Salah’s own government in Amman. The QIZ agreement was signed into law by U.S. President Bill Clinton in 1996, and stipulated that at least 35 percent of the product content of QIZ exports to the United States must come from Jordan, Israel, or the Palestinian territories, whereas the rest could come from anywhere in the world (but would be funneled through the QIZs). At least 11.7 percent of the material (later reduced to 8 percent)

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