A Quiz on the Net Benefits of Trade Creation and Trade Diversion in the QIZs of Jordan and Egypt

The main objectives of this study are: (1) to quantify the amounts of both trade creation and trade diversion in each of the countries involved, (2) to explain why the effects especially in Jordan have been much larger than one might have expected and seemingly larger than those in Egypt even though Egypt may have had a stronger comparative advantage in such exports than Jordan, and (3) to identify and explain those effects other than on trade, such as in attracting FDI, developing local entrepreneurship, encouraging female labor force participation, developing linkages to firms outside the QIZ and on broader trade and industrial policies. We shall also try to identify policy and other changes that might have allowed these effects to be more positive and stronger than they actually were. Because of the longer experience with the Jordanian QIZs, somewhat more emphasis is placed on the Jordanian data and more detailed statistical analysis were possible. But the Egyptian case is also illustrative, especially for looking at the differential benefits on firms of different size, diversity and sophistication of product lines and benefits accruing to Egypt from attracting Turkish investments.