CAIRO, Dec 14 (AFP) - In a partnership hailed as a major boost to often chilly ties, Egypt and Israel on Tuesday signed a first joint trade accord with the United States since their historic peace treaty 25 years ago.
The deal is an "important step towards consolidating our economic relations," Egyptian Industry and Foreign Trade Minister Mohammed Rashid said, adding it would "contribute positively to regional prosperity and in achieving a just and comprehensive peace in the Middle East."
The deal -- the first between the two since their 1979 peace treaty -- provides for the establishment of joint industrial zones in Egypt from where goods will be exported to the United States duty free.
Rashid signed the accord with Israeli deputy prime minister Ehud Olmert in the presence of Egyptian Prime Minister Ahmed Nazif and US Trade Representative Robert Zoellick.
"It's a good business for us, more important for the dream in changing the atmosphere in the Middle East," Olmert said. "This is a good business for Israel, it is a good business for Egypt and a good business for the States."
Zoellick has said it is the most important economic accord between Israel and Egypt -- which had refused to go along with such a deal since it was first proposed in 1995. Negotiations began in July 2003.
"This trade initiative supports the Middle East peace process by encouraging regional economic integration," said a statement from Zoellick's office.
Relations have often been tense between Israel and Egypt, which was the first Arab country to sign a peace treaty with the Jewish state, but have taken a turn for the better in recent weeks.
Last week, Egypt, keen to revive its role of Middle East peace broker, said it could soon return an ambassador to Israel, a move that would revive full diplomatic ties after a break of four years since the Palestinian uprising began.
Under Tuesday's accord, the free zones will be set up in Greater Cairo and the Mediterranean cities of Alexandria and Port Said.
The accord allows goods from the zones to enter the United States without customs tariffs, provided 35 percent of the product results from cooperation between Israel and Egyptian companies.
The accord will boost the volume of Israeli-Egyptian trade to 70 million dollars a year from the current annual level of 44 million dollars, according to Oded Tirah, president of the Israeli Manufacturers' Association.
Cairo had resisted the US-backed deal for several years, but its hand was forced by new US textile import regulations which will come into force on January 1 that could have a dealt a knock-out blow to Egypt's key sector.
The new regulations could have cost 479 million dollars in lost Egyptian exports and the scrapping of 200,000 jobs, according to Egypt's Finance Minister Yussef Boutros-Ghali.
Egyptian businessmen's association president Gamal el-Nazer said the free-trade zones were the only means to rescue the textile sector and stimulate direct foreign investment, which reached a low of 400 million dollars in 2003.
Israel and Jordan, the only other Arab country to have a peace treaty with the Jewish state, already have a similar deal with the United States.
Zoellick's office said that since 1999, 13 so-called qualified industrial zones have been designated in Jordan and that its exports to the United States grew from 31 million dollars that year to 674 million in 2003.
"Similar benefits are expected to flow from the QIZs in Egypt."
12/14/2004 12:47 GMT - AFP