As the Middle East continues to seek new mechanisms for regional integration and economic growth, Qualified Industrial Zones (QIZs) offer a unique case study of how trade can serve as a tool for diplomacy.
Introduced over two decades ago by the US Congress, Washington created QIZs as part of a broader effort to foster peace between Israel and its neighbors, building on the 1994 peace treaty between Jordan and Israel. Today, to remain relevant and unlock new potential, QIZs should be revitalized to broaden participation, strengthen regional cooperation, attract investment, and ensure alignment with the United States’s shifting trade posture and US President Donald Trump’s “America-first” priorities.
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Linking trade and diplomacy
In 1996, the United States Congress first authorized the creation of QIZs to promote economic growth, while fostering cooperation among Israel and its neighbors in the Middle East, with historically tense relations. The arrangement allowed goods produced in designated zones in Jordan and Egypt to enter the United States duty-free, provided they include a minimum input from Israel. Input requirements derive from the US-Israel Free Trade Agreement; an 8 percent input from Israel for Jordanian QIZs and 10.5 percent input for Egyptian QIZs. The model offered dual incentives: economic growth through preferential access to the US market, and encouraging regional cooperation through shared supply chains.
Jordan was the first to participate, signing an agreement with Israel in 1996, while Egypt later joined in 2004. The results were significant. In Jordan, the garment industry thrived, creating over thirty thousand jobs by the mid-2000s, and generating opportunities for women to enter the labor force. In Egypt, more than 700 companies joined the QIZ, employing up to 400,000 workers, and indirectly supported an estimated two million additional jobs. The zones enhanced industrial collaboration between Egypt and Israel while delivering high-quality, competitively priced products to American consumers. They also represented a form of regulatory innovation for all three countries.
In October 2000, the United States and Jordan signed a Free Trade Agreement (FTA), marking the first such agreement between the United States and an Arab country. The FTA gradually eliminated tariffs on nearly all traded goods (prior to the current US administration’s implementation of global tariffs), with Jordanian exports no longer relying on the QIZ framework. In contrast, Egypt, which lacks an FTA with the United States, continues to depend on the QIZ arrangement as its primary vehicle for advantaged access to the US market, especially for its vital textile and apparel sector. Even during periods of political upheaval, the program has endured. In 2011, when the Muslim Brotherhood came to power, President Mohamed Morsi’s administration actively sought to preserve the QIZ agreement, even dispatching an envoy to Israel to ensure its continuation—recognizing the zones’ critical role in sustaining jobs and promoting stability.
Potential for QIZs 2.0
While QIZs continue to contribute to trade, their long-term relevance is increasingly constrained by both structural and political factors. Momentum has stalled in recent years partly because the model has remained heavily dependent on relatively low-margin textile production, with limited diversification into higher-value sectors. Integration of the local workforce has also been very limited; many factories continue to rely on foreign labor, particularly in Jordan, due to cost considerations, and in some cases, there is reluctance by local workers to take up low-paying, labor-intensive jobs.
At the same time, shifting US trade priorities have eroded some of the preferential edge QIZs once offered. Today, persistent regional tensions—including the ongoing war in Gaza—compound these structural weaknesses, further discouraging investment and limiting the potential for deeper economic cooperation.
Despite these challenges, QIZs remain a valuable platform for advancing regional economic integration. Recent geopolitical shifts, particularly the momentum created by the Abraham Accords, offer a timely opportunity to revitalize and modernize the framework. Initiatives like the India–Middle East–Europe Economic Corridor (IMEC) and I2U2—a partnership between Israel, India, the United Arab Emirates (UAE), and the United States focused on energy, water, food security, and technology—link markets and open new avenues for cross-border cooperation. Leveraging QIZs alongside these initiatives can strengthen supply chains, expand into emerging sectors, and increase workforce participation, enhancing economic resilience and fostering deeper regional collaboration.
In addition to this, perhaps most critically at this juncture is the current US administration’s expanded use of tariffs as both an economic and political tool. This expanded—and at times unpredictable—application of tariffs has introduced a higher degree of uncertainty for exporters worldwide. In this context, QIZs have become even more appealing.
Expanding US-aligned trade agreements
The long-term goal of a multilateral free trade zone among Egypt, Jordan, and the Abraham Accords countries remains aspirational and will take years to materialize. In the interim, more immediate and pragmatic steps are needed to sustain momentum and deliver tangible economic benefits. One of the most effective ways to accelerate regional cooperation in the near term is to build on this existing and proven model of the QIZ.
- First, launch a US-led “QIZ 2.0” pilot in high-value, non-competing sectors. This pilot should target industries that complement rather than compete with US manufacturing, such as medical devices, green technology, and food security. Zones would be structured for sector-specific, multi-country production—combining technology, raw materials, and manufacturing capabilities from different partners. This approach can create tangible economic benefits while strengthening regional cooperation under the Abraham Accords.
- Second, tie QIZ expansion to US supply chain security and current tariff strategy. QIZs can serve as a strategic tool to reduce US dependence on China and other high-risk suppliers, while ensuring stable, tariff-free access to key goods from trusted partners. By focusing on goods that align with US industrial strengths, the program can reinforce Trump’s “America-first” trade goals without undercutting domestic producers. Coordination with the US Department of Commerce and relevant industries will be essential to prevent unintended harm to US manufacturers and ensure the zones’ alignment with broader trade policy.
- Third, enable multi-country accumulation by adopting rules that allow components from several countries to jointly qualify under QIZ requirements. For example, a zone could connect Israel, Bahrain, and other regional partners in food technology—drawing technology from one, sourcing raw materials from another, and completing manufacturing in a third—while ensuring the final products retain duty-free access to the US market. Another example could be a QIZ between Israel and the UAE in advanced industries such as semiconductors or medical devices.
Revitalizing the QIZ framework in this way would transform what has historically been a political tool into a dynamic driver of economic integration. It would reinforce existing agreements, attract new participants to the Abraham Accords, and give the US a practical mechanism to advance both its economic and geopolitical interests in the region.
Incentivizing private sector engagement
Private sector investment is essential for any special economic zone to succeed. To remain globally competitive, QIZs must not only rival other regional zones but also meet the standards of global Free Trade Zones and Special Economic Zones. This requires attractive fiscal incentives, streamlined regulatory processes, and infrastructure reliability.
At the same time, QIZs must establish clear and enforceable labor and environmental standards that appeal to multinational corporations and brands focused on environmental, social, and governance (ESG) criteria. Making trade incentives conditional on these outcomes could also help to build public support and international legitimacy.
Strengthening and integrating regional value chains
To enhance the appeal of QIZs, especially for emerging market economies, QIZs must evolve beyond isolated trade incentives and become integral components of regional and global value chains. This includes allowing content from multiple countries to qualify for QIZ benefits. For example, using inputs from Southeast Asia, assembling in the Middle East, and exporting to the US-backed cooperation in sectors like textiles, electronics, automotive components, and processed foods would allow countries to leverage their industrial strengths and create more resilient, interconnected production networks.
Beyond economic benefits, integrating regional value chains through cross-border QIZs can foster deeper economic interdependence, which has significant geopolitical implications. Harmonizing customs procedures, regulatory standards, and infrastructure across participating countries would reduce trade barriers, lower transaction costs, and create a more seamless business environment. This, in turn, would build trust, promote cooperation, and enhance regional stability—key objectives underpinning the broader vision of the Abraham Accords.
QIZs represent a powerful yet underutilized tool in global trade and development policy. Over the past two decades, QIZs have delivered significant benefits in Egypt and Jordan, showing that economic cooperation can bridge political divides. With shifting global trade dynamics and momentum from the Abraham Accords, QIZs can be modernized to serve as catalysts for regional integration and economic transformation, extending their impact well beyond their original scope.
By adapting QIZs to support sector-specific collaboration and integrated regional value chains, policymakers can deepen economic integration and attract multinational investment. Critically, they can do so in a way that complements US trade policy objectives by reinforcing domestic manufacturing, protecting American jobs, and securing supply chains critical to national interests. This practical approach delivers immediate economic benefits and strengthens US strategic priorities, setting the stage for broader, mutually beneficial multilateral trade agreements.
With strategic alignment to US industry interests, revitalized QIZs can transition from political instruments into dynamic engines of inclusive growth, resilience, and regional stability—encouraging new partners to join the Abraham Accords and advancing a more interconnected, stable, and economically prosperous Middle East.
Amir Hayek is a nonresident senior fellow with the N7 Initiative, a partnership between the Atlantic Council and Jeffrey M. Talpins Foundation. Hayek served as the first Israeli ambassador to the United Arab Emirates from 2021 to 2024, working to strengthen diplomatic and economic ties between the two countries after formalizing relations under the Abraham Accords.
Samantha Sutton is a nonresident senior fellow with the N7 Initiative, a partnership between the Atlantic Council and Jeffrey M. Talpins Foundation, and the associate director of policy at Columbia University’s School of International and Public Affairs. Previously, she served as Director for Israeli and Palestinian Affairs at the National Security Council, as well as in positions at the U.S. Department of Defense, the U.S. Mission to the United Nations, and the U.S. Embassy in Israel.
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Image: U.S. Trade Representative Charlene Barshefsky (C) watches as Jordanian Ambassador to the U.S. Marwan Muasher (L) shakes hands with Israeli Trade Minister Natan Sharansky following a joint signing ceremony in Washington, March 15. The agreement designates a strip of land along the border between Jordan and Israel as a qualifying industrial zone. LSD/RC/ME
