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QUALIFYING INDUSTRIAL ZONES (QIZ) A historic peace agreement in 1979 signed by the Egyptian President Anwar elSadat and Israeli Prime Minister Menachem Begin ended thirty years of conflicts. Peace made also diplomatic and commercial ties possible, like the establishment of QUALIFYING INDUSTRIAL ZONES through which Israel, Egypt and Jordan could export goods into the United States duty-free. • WHEN AND WHO: The 1996 West Bank and Gaza Strip Free Trade Benefits Act (P.L.104-234) amended and extended the U.S.-Israel Free Trade Area Implementation Act to permit certain products from qualifying industrial zones (QIZs) to enter the United States duty free. Jordan entered an agreement with Israel to work together and export to the United States with QIZ benefits; Egypt joined them in December of 2004. • WHY: The targets of the amendment are to build a strong economic relation between Israel and Egypt and reinforce peace in the Middle East and produce economic benefits for Jordan, Egypt, the West Bank and the Gaza Strip, allowing products jointly manufactured by Egypt, Jordan and Israel to enter duty-free into the U.S. market. • WHAT: Actually, the Egyptian QIZ established zones are 17 distributed in various regions (Greater Cairo, Alexandria, the Suez Canal Zone, the central Delta, Beni Suef and Minya). Egyptian companies working in QIZs are over 1000 and most of all produce textiles and clothing items because U.S. tariffs on this kind of products are relatively high. Other sectors producing in QIZs are: 1. Processed agricultural foods; 2. Machinery and equipment; 3. Base metals; 4. Chemicals; 5. Plastics; 6. Leather; 7. Raw materials like glassware, marble and granite. • HOW: Products can enter duty-free into the United States if material and processing costs incurred in a QIZ are total not less than 35% of the appraised value of the product. Egypt must put in at least one third of this value added (11.7%), Israel had to put the same percentage until 2007; then, the content requirement was lowered to 10.5%. • STATISTICS: QIZs had a big impact on Egyptian economy: o 35% of Egypt’s total exports to U.S.; o 53% of Egypt’s total exports of non-oil; o In 2018 à 877.9 USD millions was the total of exportations; o In 2017 à 751.7 USD millions was the total of exportations; o In 2018 à 17% increase of 2017 exportations. Most of all the companies, as we said, work with textile and clothing: o 95% of Egypt’s QIZ exports in 2018; o Chemical, minerals and fertilizers around 2% in 2018; o Processed agricultural foods, iron and steel, glass products around 3% in 2018. Egypt would like to increase the quantity of exports in 2019: o 15% increase à 1 billion USD. • OPPORTUNITIES: ¨ DUTY FREE MARKET ACCESS à Egypt can export duty free to the U.S., that represents world’s largest consumer market; ¨ SIMPLE AND FLEXIBLE REQUIREMENTS à 35% of the product’s value be manufactured in an Egyptian QIZ, with a minimum of 10,5% Israeli inputs; ¨ COMPETITIVE FACTOR COSTS à manufacturers and investors economical input costs are relative as other countries with similar market access; ¨ NO EXPORT QUOTAS à No limit of quantities; ¨ OPEN-ENDED VALIDITY OF THE PROTOCOL à Protocol hasn’t got a pre-set end date; ¨ EGYPT’S GEOGRAPHY à Central position for industry and commerce; ¨ LABOR FORCE à Large and competitively cost-effective labour force