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Egypt hopes for jobs boost as it signs trade deal with Israel and U.S.

Agreement comes under fire from egyptians who oppose normalizing ties
Pact could pave way for others in region to make peace with Jewish state


Egypt and Israel signed an agreement on Tuesday that will boost employment and might act as an impetus for other Arab countries to make peace with Israel.

The deal, revealed earlier this month in The Daily Star, is a trade pact that will enable Egypt to export goods to the United States duty-free as long as they have a minimum percentage that was made in Israel.

It establishes so-called Qualified Industrial Zones in parts of Cairo, Alexandria and Port Said, where the goods are to be assembled. U.S. trade representative Robert Zoellick hailed the accord as "the most significant agreement between Israel and Egypt in 20 years," saying it sends a signal across the Middle East.

"I can't tell you how you're going to make Middle East peace, but I can say that if we help people recognize the benefits of working together, instead of shooting one another, that's a good step," Zoellick told reporters after signing the document with Egyptian Foreign Trade Minister Rachid Mohammed Rachid and Israeli Vice Premier Ehud Olmert.

Rachid said the seven Qualified Industrial Zones (QIZs) would contribute to "a just and comprehensive peace in the region."

"In the middle of much unpleasant news emanating from the Middle East, today's event is a positive step for the future," Rachid said.

Olmert said that as Egypt leads the Arab world, "when Egypt signs an agreement with Israel, it creates a green light for other Arab countries."

Olmert said the accord would show other Middle East countries that peace with Israel brings "opportunities for trade and improvement in the quality of life."

Egyptian manufacturers of clothes and textiles - the country's No. 1 export - say the agreement could create 250,000 jobs in 2005. While Egyptian political opponents deride this figure as far-fetched, the experience of Qualified Industrial Zones in Jordan is impressive, and Olmert referred to it repeatedly Tuesday.

Jordan's QIZs have seen their exports to the United States rise to a massive $800 million a year in five years, and they have created 40,000 jobs in an economy much smaller than neighboring Egypt's.

Rachid gave no projections for job creation, but he said Egypt's exports to the United States were expected to triple in the next three years. The trade volume currently stands at $3.7 billion.

Olmert said the agreement could boost Israel's exports to America by $150 million a year. It would enable Israeli manufacturers to form partnerships with Egyptians that take advantage of the lower labor costs in Egypt. It would also encourage Israeli firms to invest in Egypt, he said.

However, Israel also has sociopolitical motives. While Egypt and Israel signed a peace deal in 1979, their relations have long been chilly. Israel wants to get away from the blackening of its name caused by the nightly TV broadcasts of Israeli soldiers shooting at Palestinians.

Israel wants it to become acceptable for Egyptians to visit Israel to seek business partners. At the moment "normalization" - contact with Israelis - is a dirty word in Egypt. Many professional unions prohibit it and expel members found to have visited Israel or be working with Israelis.

The Israeli Foreign Ministry said Israel "hopes that the movement of goods and entrepreneurs will lead to warmer relations between the peoples, giving expression to the fruits of peace."

The agreement has already come under fire from Egyptians who oppose relations with Israel. A small crowd of fewer than 30 opponents protested it outside the journalists' union in Cairo on Tuesday. One banner said: "Egyptian workers are not for sale."

But other Egyptians see trade with Israel as the way to go. Hours before the agreement was signed, garment workers in Ismailiya, the biggest "textile" city left out of the QIZs, and the Nile Delta town of Mahalla staged demonstrations as they fear the consequences of being excluded from the QIZs.

Rachid told reporters the government has promised that the factories of Ismailiya and Mahalla will be included in future QIZs. His ministry said it will provide support for firms to meet the criteria for QIZs.

The vice chairman of Egypt's Chamber of Textile Industries, Mohammed Kassim, sees the accord as throwing a life line to a sector that employs one million people and was going to be hit hard by competition from China and India when World Trade Organization quotas are lifted in January.

President Hosni Mubarak, who has taken steps to revive the peace process recently, met Olmert and Zoellick before the signing ceremony.

Presidential spokesman Maged Abdel Fattah said Mubarak did not discuss with Olmert the return of Egyptian ambassador to Israel. The ambassador was withdrawn in 2000 in protest over Israel's use of massive force in the Palestinian intifada.

Fattah said that the envoy's return was linked to "achieving progress in the peace process and, at the time when we find that his return serves the peace process, then he will be back."

Beirut,12 20 2004
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