Jordan Times
Sunday, May 30, 2004

Exports to US rise under QIZ agreement, decline under FTA

By Rami Abdelrahman

As usual, the garments and textiles sector had the biggest share of exports, reaching $208.5 million or 90 per cent of all exports to the US, according to figures released by the US-International Trade Commission.

Most of the sector's ready-made clothings were exported to the US under the Qualified Industrial Zones agreement, which accounted for $204.4 million, increasing by 74 per cent from 2003's $117.4 million record. As such, the agreement was the most beneficial among other Jordan-US trade agreements.

Exports through the Jordan-US Free Trade Agreement (FTA) declined by 60 per cent to reach $3.5 million in comparison to last year's record of $8.8 million.

According to a trade expert, garment exporters prefer the QIZ because, until 2005, it is the only way to export quota and duty free garments to the US.

Ana Maria Salameh, the FTA specialist at the American Chamber of Commerce in Jordan, said more than 90 per cent of other products under the FTA are already exported quota- and duty-free. She said the garments will have the same preference in 2005 noting that all products will be exported to the US quota- and duty-free in 2010.

“Since QIZ manufacturers already established their factories, their depreciation costs have been going down,” Salameh indicated noting that this would dismiss chances of reestablishing factories outside the QIZ.

She stressed that manufacturers can export also through the FTA at any time.

While the QIZ agreement requires that an eight per cent of the manufactured material should be an Israeli input, the FTA allows including inputs from outside Jordan or US. In other words, QIZ manufacturers can export to the US in 2005 through the FTA without Israeli input.

A foreign investor in the QIZ told The Jordan Times that the Israeli input is more expensive than Jordanian input, and would find the FTA more feasible when it comes to materials.

His remarks came during a Jordan Garments, T extiles and Accessories Exporters Association ongoing seminar to teach QIZ investors about the benefits of the FTA.

Currently, the QIZs employ 24,000 Jordanians and 6,000 foreigners, but Salameh said QIZ investors are training Jordanians to employ them later, as the Jordanian labour is cheaper though still less skilled and less productive than foreign workers.

However, the specialist admitted more efforts need to be exerted to promote the FTA which so far gives Jordan a competitive advantage since the Kingdom is one of four countries sharing an FTA with the US.

But soon, more countries are expected to implement or sign similar agreements including Morocco, Bahrain and China.

During the World Economic Forum 2004 in the Dead Sea, Jordan signed two trade memorandums of understanding in this regard, one with Singapore to encourage trilateral arrangements between the two countries and the US, and another with Israel to boost exports to the EU through a QIZ-like agreement with the Union.

The first quarter figures indicate that $7.7 million worth of products were exported to the US under no agreement. The number is 45 per cent higher than the 2003's first quarter $5.3 million

Salameh said that most of these exporters have a long-term relationship with buyers in the US and have been conducting business with them for a long time.

One of the exporters, preferring anonymity, said he does not bother to learn more about trade agreements since he is making profit already.

Analysts said this is likely because such manufacturers do not wish to go into the process of registering their trademarks and other required processes.

But the Kingdom will join a World Intellectual Property Organisation union for international registration of trademarks before the end of 2004, according to Deputy Prime Minister and Minister of Industry and Trade Mohammad Halaiqa.

The Kingdom also was able to increase its exporters under the umbrella of Generalised System of Preferences (GSP) agreement by 45 per cent, from $1,062,750 in the first quarter of 2003 to $7,740,113 in the first quarter of 2004.

Salameh indicated that jewelry and marble products, other main exports to the US, were mostly exported under the GSP agreement. Jewelry exports reached $13.1 million, while marble exports reached $100,000 during the first quarter.

According to Jordan United States Business Partnership figures, personal care expo rts reached $200,000, foodstuffs totalled $600,000 and other products amounted to $6.9 million.

Back to May 30, 2004