Post Conflict Normalization through Trade Preferential Agreements: Egypt, Israel and the Qualified Industrial Zones

Abstract

Trade and economic cooperation are often promoted through policy to facilitate post-conflict normalization. The Qualified Industrial Zone (QIZ) model of duty and quota-free industrial regions is a policy tool initiated by the United States as a brokerage in promoting peace between Israel and its Arab neighbors. Indeed, a vast literature aims to evaluate the economic and political potential of trade liberalization. Yet the mechanisms of trade policy implementation in a post-conflict environment, its timing and underlying political motives, are critical but rather neglected factors, which design the prospects of trade incentives. We therefore question the effectiveness of the QIZ as a tool addressing post-conflict dynamics and ask whether its impact on Israel–Egyptian relations reflects the value of this policy or the circumstances of its implementation. Using mixed methods, this study presents and evaluates the implementation of the QIZ in Egypt since 2004 and its results, both economic and political, fine tuning the broader debate to focus on circumstances of implementation. This case study demonstrates the results of trade opportunity implementation as a reaction to threat rather than mobilization to realize post-conflict rapprochement or even to reap economic opportunity. Notwithstanding the forces of globalization, Egypt’s pre and post-revolutionary internal political economy and delicate relations with Israel serve as the context for understanding the QIZ. This context facilitates contradicting political interpretations, with the QIZ simultaneously celebrated as an economic success, criticized as an Egyptian escape route from structural reforms, and accused as embodying a U.S.–Egyptian elite conspiracy, to coerce Egyptian economic normalization with Israel.