Egyptian investors fear Israeli backlash

Magdy Tolba, the former head of the Egyptian clothes exports council and one of the major beneficiaries of a bilateral trade agreement with Israel has warned against the impact on Egyptian labour in the textiles sector "of things getting worse", in a reference to last week's attack on the Israeli Embassy.
The Qualifying Industrial Zone (QIZ) agreement, according to Tolba, is a cornerstone of Egypt’s economic relations. Signed by the Nazif cabinet in 2005 without parliamentary approval, the agreement permits a zero-tariff access to the American market for Egyptian clothes that use 11.7 per cent Israeli inputs.

To this day, 507 factories are operating under this agreement, employing some 100,000 workers, most of them Egyptians. Not all factories export to the USA.

According to Ministry of Trade, Egyptian exports under the QIZ programme amounted to $811 million in 2010, 60 per cent of which goes to the US market. For its part BDI Coface, the largest business information group in Israel, says the deteriorating of its relations with Israel could cost Egypt 70,000 jobs in QIZ -related factories. “Without this agreement,” Tolba told Ahram Online, “the cost of clothes exported by Egypt’s could rise by 16-38 per cent, due to imposed tariffs.”

Attorney Gil Nadell, who specialises in international trade, told an Israeli newspaper on 12 September, “Egyptians have a lot to lose if the business ties between the two countries are severed.”

“For Israel, the benefits from common trade with Egypt is just political,” says Galal El-Zorba, the Chairman of Egyptian Industrial Federation, “but for Egypt it is more than that.” He feels that maintaining trade agreements regardless of political tensions is in Egypt’s interest.

Yet Israeli exporters to Egypt too are concerned about a weakening of ties with Tel Aviv, according to Haaretz on Sunday.