updated 12/14/2004 11:02:50 AM ET 2004-12-14T16:02:50

Egypt wants jobs. Israel wants a meaningful peace. On Tuesday, they signed an agreement that they hope will fulfill both their goals and maintain the momentum for revitalized Mideast peace negotiations.

The deal is a trade pact that will enable Egypt to export goods to America 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.

After signing the document, U.S. Trade Representative Robert Zoellick said it was "the most significant agreement between Israel and Egypt in 20 years." Zoellick signed the accord with Israeli Deputy Prime Minister Ehud Olmert and Egypt's Foreign Trade Minister Rachid Mohammed Rachid.

It could also be the most controversial. Egyptians who oppose relations with Israel have criticized it, for obvious reasons. Egyptians who support such relations have criticized it as giving Israel too much economic leverage. And Egyptians who favor it have criticized the government for leaving their own industrial areas out of the zones.

The accord was welcomed by Israel, which needs Egypt's help in Mideast peace negotiations that have been rekindled since the death of Yasser Arafat in November. Egyptian President Hosni Mubarak has been prodding Arab leaders to reengage in the process.

Egyptian manufacturers of clothes and textiles — the country's No. 1 export — say the agreement could create 250,000 jobs in 2005.

Political opponents deride this figure as far-fetched, but the Qualified Industrial Zones that were set up in Jordan 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 that is much smaller than neighboring Egypt's.

Deputy Prime Minister Olmert said Tuesday the agreement will create "thousands" of jobs in Egypt.

In an interview with Israel Radio, Olmert said the agreement could "bring to Israeli exports in the first phase about $150 million a year."

Israel's goals are also sociopolitical. While Egypt and Israel signed peace in 1979, their relations have long been chilly. Israel also 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.

U.S. Trade Representative Zoellick said Tuesday the agreement was a step toward Egypt's long-sought free trade agreement with the U.S. as well as building support for Egypt's reforming economy, which is burdened by a bloated public sector, inefficient bureaucracy, and subsidized prices.

"These are not easy steps to take," Zoellick said of Egypt's reform program.

In a statement Monday, the Israeli Foreign Ministry said the agreement will increase trade and Israel "hopes that the movement of goods and entrepreneurs will lead to warmer relations between the peoples, giving expression to the fruits of peace."

As Tikochinski put it: "The idea behind this agreement is to encourage people to people contact."

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

The vice chairman of the Chamber of Textile Industries, Mohammed Kassim, sees the accord as throwing a life line to a sector that employs 1 million people and was going to be hit hard by competition from China and India when World Trade Organization quotas are lifted in January.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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