The United States has a number of trade preference programs which offer unilateral/non-reciprocal duty-free treatment for certain products from designated countries meeting specific eligibility requirements. The motivation for these programs can be political and/or economic. The QIZ program, attached to the U.S.-Israel Free Trade Agreement (USIFTA), is one such program. It was designed to strengthen the Middle East peace process while stimulating the economies of Jordan and Egypt. The current ongoing wave of upheaval in the Middle East and North Africa that started in late 2011 raises the potential for simultaneous political and economic transitions. The QIZ program is one tool available to Congress for assisting on both counts. This report briefly examines the evolution and economic effects of the QIZ program for Jordan and Egypt during the past 15 years and identifies some related issues for Congress. It does not address the current turmoil in Egypt. For a discussion of this issue, see CRS Report RL33003, Egypt: Background and U.S. Relations , by [author name scrubbed]. The Qualifying Industrial Zone (QIZ) program was created by the 1996 West Bank and Gaza Strip Free Trade Benefits Act, which amended the 1985 U.S.-Israel Free Trade Agreement (USIFTA). Under this law, certain goods may enter the United States duty-free if they are (a) wholly produced in the West Bank and/or the Gaza Strip; or (b) co-produced by Israel and Jordan or Israel and Egypt in export processing zones called QIZs and meet specific content requirements. Congress had two main motives for this legislation: To help broaden political support for the Middle East peace process and end the Arab economic boycott of Israel. Jordan (in 1979) and Egypt (in 1994) were the only two Arab countries in the Middle East-North Africa (MENA) region that had signed peace treaties with Israel. (See Map, Figure 1 .) To produce tangible economic benefits for Jordan, Egypt, the West Bank, and the Gaza Strip by "stimulating their economies and increasing employment." The QIZ program had a third, more concrete economic objective. As the reported brainchild of regional businesses in the Middle East, it was proposed as a way for joint production (between Israel and other countries) to be as lucrative as—or more lucrative than—that carried out by individual parties. Leading up to congressional passage of the QIZ program, the primary focus was to provide benefits to selected countries to help promote the Arab-Israeli peace process. The events of September 11, 2001, expanded the U.S. focus on the Middle East, both geographically and politically. This led to broader and more comprehensive U.S.-Middle East trade initiatives to assist the region. The first initiative, in 2003, under the Bush Administration, called for a Middle East Free Trade Areas (MEFTA), within 10 years, by 2013, and resulted in the negotiation of U.S. free trade agreements with Morocco, Bahrain, and Oman. The second initiative was the Middle-East/North Africa Trade and Investment Partnership Initiative (MENA-TIP), announced by President Barack Obama in 2011. It focused on helping countries in their efforts to undertake reforms that could lead to trade liberalization and transitions to democracy. In his speech announcing the initiative, President Obama noted that, excluding oil, the MENA region of over 400 million people exports roughly the same value of goods as Switzerland. For an oil-dominated region, building up non-oil export capacity takes time. Most MENA countries are outside the QIZ program and do not have free trade agreements with the United States. For many of these countries, the Generalized System of Preferences (GSP) program is their only trade preference option. However, for MENA countries, the GSP program is more limited than the QIZ program in the following ways: The GSP program generally excludes from duty-free eligibility most of the high-tariff products exported tariff-free under the QIZ program; GSP does not authorize eligible MENA countries to co-produce with other countries in order to meet the 35% QIZ content requirement; and U.S. content is not permitted to count for any of the 35% content requirement under GSP, whereas it can contribute 15% under the QIZ program. In March, 2013, the USTR announced a QIZ expansion for Egypt, to include new zones in Beni Suef and Minya, upstream on the Nile River, and to declare all present and future producers in the zones eligible for QIZ tariff benefits. This raises the number of QIZs to six in Egypt. Some of the 13 QIZs in Jordan are not currently involved in QIZ export, but still produce for export to the United States (see Figure 1 notes). The QIZ program extends U.S. tariff-free benefits to the West Bank and Gaza Strip, and to certain goods co-produced by Israel and Jordan, or Israel and Egypt in export processing zones that meet country of origin and local content requirements. (See Text Box 1 for the definition of QIZs.) Production requirements mandate that the product must be grown, produced, or manufactured in, or a "new and different" article imported directly from, the West Bank, Gaza Strip, or a QIZ. Country input share requirements stem from the USIFTA, which requires that the sum of the cost or value of the materials or the total costs of production must be not less than 35% of the appraised value of the product at the time it enters the United States. Of this 35%, U.S. components may contribute up to approximately 15%, and inputs from Israel and Jordan, or Israel and Egypt, must total roughly 20% (see Text Box 2). Under the QIZ law, once Jordan and/or Egypt decided to take advantage of the program, the parties met to determine (a) where QIZs would be located; and (b) how the approximate 20% minimum input requirement would be split up between Jordanian and Israeli or Egyptian and Israeli producers. For goods produced by Jordan and Israel, these shares were Jordan 11.7%, Israel 8% (7% for high tech products); and for goods produced by Egypt and Israel, they were 10.5% each. (See Text Box 2 .) The slight variations from the 10% each in the country sub-shares were adopted with the approval of the USTR. After Congress passed the QIZ amendment to USIFTA in 1996, Jordan, which had previously engaged in little international trade, embraced the program, opening its first QIZ in 1997. The program grew rapidly, giving a huge boost to Jordan's economy, until the U.S.-Jordan free trade agreement was well into effect. When Jordan joined the QIZ program, Jordan and Israel agreed to, and the United States approved, 13 zone locations in Jordan with coordinated plants in Israel along their joint border (see Map, Figure 1 ). The U.S. Trade Representative (USTR) officially designated the Jordan zones as QIZs. Soon after the zones were established, investment flooded into Jordan from abroad. It came particularly from Asian investors looking to gain a competitive edge for their apparel exports to the United States. They saw the QIZ program as a way to compete more effectively against other low-cost foreign producers by benefitting from duty-free access to the U.S. market. Roughly 62% of foreign investment in Jordan's QIZs came from India (22%) and other Asian countries (40%). Other investment came from Jordan (17%) and the United States (3%). These four countries accounted for 82% of total investment in Jordan's QIZs. Between 1996 and 2006, Jordan's QIZ exports and total exports to the United States grew exponentially. Jordan's position as a source of imports for the United States rose from 138 th to 70 th . Over that span of time, U.S. QIZ imports from Jordan rose from $0 to $1 billion, and total imports from Jordan rose from $26 million to nearly $1.5 billion ( Figure 2 ). During the years 2001-2004, Jordan's QIZ exports (totaling $927 million), accounted for more than 80% of its total exports to the United States (totaling $1,093 million, see Figure 3 ). (See Appendix B for data for all tables.) These exports, nearly all textile and apparel products ( Figure 4 ), gave a huge boost to Jordan's GDP (discussed later). At the same time, the United States exported to Jordan a wide variety of products, led by motor vehicles, machinery, and more recently mineral fuels ( Figure 5 ). Despite the initial QIZ success, some economists predicted that Jordan's QIZ growth was not sustainable because it lacked a number of necessary components. Jordan did not (1) diversify its exports beyond apparel, jewelry, and a few other products; (2) transition from labor-intensive exports to higher and more complex value-added products; (3) absorb new technology; (4) create domestic linkages to production supplies; or (5) upgrade the skills of its workers. In addition, production was placing increasing demand on Jordan's scarce resources, such as energy and water, and on its limited social support services. Finally, because of large foreign ownership and the large number of foreign workers, profits produced from exports were mostly not transferred back to Jordan. In 2001, soon after the QIZ program began to show exponential growth, the United States and Jordan negotiated a free trade agreement that went into effect that same year. This meant that Jordan no longer had to co-produce with Israel in order to achieve tariff elimination on its exports to the United States. However, Jordan would now have to meet the FTA's 35% content requirement instead of the QIZ's 11.7% requirement. In addition, full implementation of the FTA would take 10 years.