Accessible Requires Authentication Published by De Gruyter August 3, 2020

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

Yehudith Kahn and Tamar Arieli


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.

Corresponding author: Yehudith Kahn, Hadassah Academic College, Management, 37 Hanevi’im St., Jerusalem, 9101001, Israel; Hadassah Academic College, Interdisciplinary School for Society and Community, Jerusalem, Israel, E-mail:


Abadi, J. 2006. “Egypt’s Policy Towards Israel: The Impact of Foreign and Domestic Constraints.” Israel Affairs 12 (1): 159–76. Search in Google Scholar

Abd Rabo, H. 2016. The QIZ: A Faustian Deal. Egypt: Daily News Egypt. (accessed January 4, 1999). Search in Google Scholar

African Economic Outlook. 2017. Entrepreneurship and Industrialization. Washington D. C.: African Development Bank, Organisation for Economic Co-operation and Development, United Nations Development Programme. Search in Google Scholar

American Chamber of Commerce in Egypt. 2017. Egypt- U.S. Business Data, Qualifying Industrial Zones, Washington, D.C. Also available at Search in Google Scholar

Arad, R., S. Hirsch, and A. Tovias. 1983. The Economics of Peacemaking: Focus on the Egyptian–Israeli situation. London: MacMillan for the Trade Policy Research Centre. Search in Google Scholar

Aran, A., and R. Ginat. 2014. “Revisiting Egyptian Foreign Policy towards Israel under Mubarak: From Cold Peace to Strategic Peace.” The Journal of Strategic Studies 37 (4): 556–83, Search in Google Scholar

Arieli, T., and N. Cohen. 2012. “Policy Entrepreneurs and Post-Conflict Cross-Border Cooperation: A Conceptual Framework and the Israeli–Jordanian Case.” Policy Sciences 46 (3): 237–56, Search in Google Scholar

Arieli, T., and Y. Kahn. 2019. “Transforming Regions of Conflict through Trade Preferential Agreements: Israel, Jordan and the QIZ Initiative.” Peace Economics, Peace Science and Public Policy 25 (3), Search in Google Scholar

Arieli, T. 2016. “Borders, Conflict and Security.” International Journal of Conflict Management 27 (4): 487–504, Search in Google Scholar

Bank of Israel. 2017. Capital Account Balance of Payment. Jerusalem: Bank of Israel. (accessed October 7, 2018). Search in Google Scholar

Barbieri, K., and J. S. Levy. 1999. “Sleeping with the Enemy: The Impact of War on Trade.” Journal of Peace Research 36 (4): 463–79, Search in Google Scholar

Bowker, R. 2010. Egypt and the Politics of Change in the Arab Middle East. London: Edward Elgar Publishing. Search in Google Scholar

Caranti, L. 2016. “Kantian Peace and Liberal Peace: Three Concerns*.” Journal of Political Philosophy 24 (4): 446–69, Search in Google Scholar

Caruso, R. 2006. “A Trade Institution as a Peaceful Institution? A Contribution to Integrative Theory.” Conflict Management and Peace Science 23 (1): 53–72, Search in Google Scholar

Cohen, N., and G. Ben-Porat. 2008. “Business Communities and Peace: The Cost-Benefit Calculations of Political Involvement.” Peace & Change 33 (3): 426–46, Search in Google Scholar

Copeland, D. C. 2015. Economic interdependence and war. Princeton, New Jersey: Princeton University. Search in Google Scholar

Dorussen, H., and H. Ward. 2010. “Trade Networks and the Kantian Peace.” Journal of Peace Research 47 (1): 29–42, Search in Google Scholar

Dowek, E. 2001. Israeli-Egyptian relations, 1980–2000. New York: Frank Cass, Routledge. Search in Google Scholar

Doyle, M. W. 2005. “Three Pillars of the Liberal Peace.” American Political Science Review 99 (03): 463–6, Search in Google Scholar

El-Fiqi, M. 2012, QIZ in Question, Al-Ahram Weekly (2012, November 22–28). Also available at Search in Google Scholar

Frederick, S., and C. Staritz. 2012. “Developments in the Global Apparel Industry after the MFA Phaseout.” In Sewing Success? Employment, Wages, and Poverty following the End of the Multi-fibre Arrangement, edited by G. Lopez-Acevedo, and R. Robertson, 41–86. Washington, DC: The World Bank. Search in Google Scholar

Gartzke, E. 2007. “The Capitalist Peace.” American Journal of Political Science 51 (1): 166–91, Search in Google Scholar

Gat, A. 2017. The Causes of War and the Spread of Peace: But Will War Rebound?. Oxford: Oxford University Press. Search in Google Scholar

Gazit, S. 2009. “Israel and Egypt: What Went Wrong?” Strategic Assessment 12/1. (Hebrew). Search in Google Scholar

Gerges, F. A. 1995. “Egyptian-Israeli Relations Turn Sour.” Foreign Affairs 74 (3): 69, Search in Google Scholar

Ghoneim, A. F., and T. Awad. 2010. Impact of Qualifying Industrial Zones on Egypt and Jordan: A Critical Analysis. Amman: Cairo University and University of Jordan. Search in Google Scholar

Ghoneim, A. F. 2008. “To What Extent Should Egypt go Deep in its Free Trade Area with the United States? If Any!!” The Journal of World Investment & Trade 9 (2): 163–85, Search in Google Scholar

Hassanein, H. 2017. Commercial Diplomacy in the Middle East. New York: Foreign Affairs - Snapshot. Search in Google Scholar

Hegre, H., J. R. Oneal, and B. Russett. 2010. “Trade does Promote Peace: New Simultaneous Estimates of the Reciprocal Effects of Trade and Conflict.” Journal of Peace Research 47 (6): 763–74, Search in Google Scholar

Henrikson, A. K. 2000. “Facing Across Borders: The Diplomacy of Bon Voisinage.” International Political Science Review 21 (2): 121–47, Search in Google Scholar

Hirsch, S., I. Ayal, and N. Hasha. 1999. “Arab-Israeli Potential Trade: The Role Of Input Sharing.” The International Trade Journal 13 (2): 211–48. Search in Google Scholar

IMF. 2017. “Arab Republic of Egypt: First Review under the Extended Arrangement Under the Extended Fund Facility and Requests for Waivers for Nonobservance and Applicability of Performance Criteria-Press Release.” IMF Staff Country Reports 17 (290): 1. Search in Google Scholar

Israel Central Bureau of Statistics. 2016. Press Release, Jerusalem (Hebrew): Israel Central Bureau of Statistics. (accessed October 7, 2018). Search in Google Scholar

Jadallah, D. 2016. US economic aid in Egypt: Strategies for democratisation and reform in the Middle East. London: I.B. Tauris. Search in Google Scholar

Kabil, M. 2015. Evaluating QIZs, Al-Ahram Weekly (2015, April 30–May 6). Also available at Search in Google Scholar

Kahler, M., and B. F. Walter. 2006. Territoriality and conflict in an era of globalization. Cambridge: Cambridge Univ. Press. Search in Google Scholar

Kant, I. 2011. Perpetual peace: A philosophic essay. Sharleston SC, United States: Nabu Press. Search in Google Scholar

Kardoosh, M. 2006. “The Institutional Dimension of the Success of Jordanian QIZs.” Cairo: ERF. A revised version of the paper presented at the 11th Annual Conference of the Economic Research Forum. December 14–16, 2004, Beirut, Lebanon. Search in Google Scholar

Khalilzad, Z., and I. O. Lesser. 1998. Sources of conflict in the 21st century: Regional futures and U.S. strategy. Santa Monica: Rand. Search in Google Scholar

Khani, A. B. 2013. “Egyptian–Israeli Relations, History, Progress, Challenges and Prospects in the Middle East.” Journal of Middle Eastern and Islamic Studies (in Asia) 7 (3): 93–120, Search in Google Scholar

Mansfield, E. D., and B. M. Pollins. 2001.“The Study of Interdependence and Conflict.” Journal of Conflict Resolution 45 (6): 834–59, Search in Google Scholar

Mcdonald, P. J. 2004. “Peace through Trade or Free Trade?.” Journal of Conflict Resolution 48 (4): 547–72, Search in Google Scholar

Mcdonald, P. J. 2007. “The Purse Strings of Peace.” American Journal of Political Science 51 (3): 569–82, Search in Google Scholar

Miller, B. 2000. “The International, Regional, and Domestic Sources of Regional Peace.” In Stable Peace Among Nations, edited by A. M.Kacowicz, Y.Bar-Siman-Tov, M.Elgstrom, and M.Jerneck, 55–73. Lanham: Rowman & Littlefield Publishers. Search in Google Scholar

Miller, B. 2005. “When and How Regions Become Peaceful: Potential Theoretical Pathways to Peace.” International Studies Review 7 (2): 229–67, Search in Google Scholar

Mueller, J. 1989. Retreat from doomsday: The obsolescence of major war. New York: Basic Books. Search in Google Scholar

Nugent, J., and A. Abdel Latif. 2010. “A Quiz on the Net Benefits of Trade Creation and Trade Diversion in the QIZs of Jordan and Egypt.” Economic Research Forum Working Papers 514. Search in Google Scholar

OECD. 2018. Economic Survey of Israel. Jerusalem: Toward a more inclusive society. (accessed October 7, 2018). Search in Google Scholar

Padoan, P. 1997. “The Political Economy of Regional Integration in the Middle East.” In The Middle East in Global Change, edited by L.Guazzone, 174–200. London: Palgrave Macmillan. Search in Google Scholar

Peres, S., and A. Naor. 1993. The New Middle East. New York: Henry Holt and Co. Search in Google Scholar

Podeh, E., and O. Winckler. 2002. The Boycott That Never Was: Egypt and the Arab System, 1979–1989. Durham: University of Durham, Centre for Middle Eastern and Islamic Studies. Working Paper. Search in Google Scholar

Polachek, S. W., J. Robst, and Y. Chang. 1999. “Liberalism and Interdependence: Extending the Trade-Conflict Model.” Journal of Peace Research 36 (4): 405–22, Search in Google Scholar

Polachek, S., C. Seiglie, and J. Xiang. 2012. “Globalization and International Conflict: Can FDI Increase Cooperation Between Nations?” In The Oxford Handbook of the Economics of Peace and Conflict, edited by M.Garfinkel, and S.Skaperdas, 733–61. New York, NY: Oxford University Press. Search in Google Scholar

Polachek, S. W. 1999. “Conflict and Trade: An Economics Approach to Political International Interactions.” Peace Economics, Peace Science and Public Policy 5 (2), Search in Google Scholar

Pollock, D. 2016. The New Normal: Todays Arab Debate Over Ties With Israel. Washington D.C.: The Washington Institute. Also available at Search in Google Scholar

Press-Barnathan, G. 2006. “The Neglected Dimension of Commercial Liberalism: Economic Cooperation and Transition to Peace.” Journal of Peace Research 43 (3): 261–78, Search in Google Scholar

Press-Barnathan, G. 2009. The Political Economy of Transitions to Peace: A Comparative Perspective. Pittsburgh: University of Pittsburgh Press. Search in Google Scholar

Refaat, A. 2006. Assessing the Impact of the QIZ Protocol on Egypt’s Textile and Clothing Industry. Egypt: Egyptian Center for Economic Studies. Search in Google Scholar

Rivlin, P. 2016. “Egypt’s Economy: The Agony Continues.” Middle East Economy 6 (7). Also available at Search in Google Scholar

Rosato, S. 2005. “Explaining the Democratic Peace.” American Political Science Review 99 (3): 467–72, Search in Google Scholar

Rutherford, B. K. 2014. Egypt after Mubarak: Liberalism, Islam, and Democracy in the Arab World. Princeton: Princeton University Press. Search in Google Scholar

Sallam, M., and O. Winter. 2017. “Egypt and Israel: Forty Years in the Desert of Cold Peace.” Strategic Assessment 20/3. Also available at Search in Google Scholar

Satloff, R. 1995. “The Jordan-Israel Peace Treaty, A Remarkable Document.” Middle East Quarterly 2 (1): 47–51. Search in Google Scholar

Shama, N. 2014. Egyptian Foreign Policy from Mubarak to Morsi: Against the National Interest. New York: Routledge. Search in Google Scholar

Stein, K. W. 1997. “Continuity and Change in Egyptian‐Israeli Relations, 1973–97.” Israel Affairs 3 (3–4): 296–320, Search in Google Scholar

United Nation, Economic Commission for Africa. 2016. Country Profile: Egypt. Addis Ababa, Ethiopia. United Nation. Search in Google Scholar

USAID. 2015. Qualified Industrial Zones in Egypt, Opportunity for Export Diversification. Washington, DC: USAID. Also available at Search in Google Scholar

Waltz, K. N. 1970. “The Myth of National Interdependence.” In The International Corporation, edited by C. P.Kindleberger, 205–23. Cambridge, MA: The MIT Press. Search in Google Scholar

World Bank. 2017. Egypt Overview. Washington, DC: World Bank. Also available at Search in Google Scholar

Yadav, V. 2007. “The Political Economy of the Egyptian-Israeli QIZ Trade Agreement,” Middle East Review of International Affairs 11/1. Search in Google Scholar

Zaki, C. 2017. “An overview of Structural Imbalances in Egypt.” Égypte/Monde Arabe 16: 99–124. Also available at Search in Google Scholar

Received: 2019-07-17
Accepted: 2020-06-03
Published Online: 2020-08-03

© 2020 Walter de Gruyter GmbH, Berlin/Boston