CAIRO: Egypt’s Ministry of Trade and Industry is engaged in negotiations to reduce the required Israeli component in products exported under the QIZ agreement, minister Rachid Mohamed Rachid said last week.
He denied speculation that details of the negotiations had been released to the American Chamber of Commerce in Egypt or to the soon-to-be-formed Egyptian American Business Council.
The new business council will form the basis of the partnership agreement signed between Egypt and the United States in May, and the outcome of QIZ terms negotiations will be dependent on the cooperation generated by the agreement in the coming months.
Signed in 2004, the QIZ agreement allows preferential access to US markets for goods produced in Egypt that contain 11.7 percent Israeli-produced components.
Egypt has long sought a cut in the required Israeli component from 11.7 percent to 8 percent, a concession made to Jordan.
To date, Egypt has managed to have the component requirement reduced to 10.5 percent, but seeks further reductions to ensure maximum benefit for local producers.
Egyptian producers have encountered difficulty obtaining quality products from Israel at reasonable prices for use in QIZ production, and argue that a reduction in the required component would serve to increase the overall volume of trade.
According to producers, Israel has not been able to keep up with rising volumes of import demand for QIZ production from Egypt, and Israeli goods are more expensive, take longer to arrive and are of lower quality than components imported from Asia.
“Importing from Israel carries a high risk, despite the benefits of the QIZ agreement, because you often end up with low quality products not suitable for export, explained Mohammed Sabah, managing director of Fashion Knit, a textile factory located on the Ismailia Road outside Cairo.
“We try to import things like tags and buttons to reach the required 11.7 percent because they are usually acceptable. I would never import fabric, because if the quality is not up to standard for export we have to pay the customs and taxes and sell the product on the local market, which is very difficult, he continued.
According to Sabah, lowering the required component would benefit Egyptian producers by increasing local production and reducing the risks associated with goods imported from Israel.
Top figures in government agree that the QIZ needs modifications to maximize benefits to Egyptian producers.
Speaking at last week’s global trade matters conference, Ambassador Gamal Bayoumi of the Ministry for International Cooperation questioned the benefit of the QIZ agreement to Egyptian workers in its current form.
“This agreement is not about politics, it’s about taking advantage of trade and I think the QIZ needs to provide more benefits to Egyptian exporters, producers and workers to be viable into the future, he said.
While negotiations regarding component reduction are still in the early stages, other changes in the agreement have been approved, most notably the expansion of QIZ zones to two new areas in Upper Egypt.
Constant revision of the agreement is necessary to maintain robust growth in the QIZ manufacturing sector, explained Ali Awni, head of the QIZ Unit at the Ministry of Trade and Industry.
Speaking at last week’s conference, Awni detailed the ministry’s plan to expand QIZ zones to Upper Egypt in order to expand opportunities for export production into new areas of the country.
Awni has spoken in the past of the need to reduce the required Israeli component, stating that any reduction would be beneficial for Egyptian exporters.
Diplomatic visits between Egypt and the United States to implement the partnership agreement are set to begin shortly. While the QIZ is not expected to be a major item on the agenda, it is expected that some concessions and incentives will be introduced during the course of negotiations.
