17 - 23 June 1999
Issue No. 434
|Published in Cairo by AL-AHRAM established in 1875|
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A new agenda for Egypt-US tiesBy Aziza Sami
President Hosni Mubarak's scheduled visit to the US at the end of this month comes at a turning point in Egypt-US bilateral relations. Egypt is mounting a drive to raise trade ties between the two countries to the level of their strategic political relationship. Emphasis is being given by both countries to transforming the economic relationship, which for over 20 years has been dominated by economic assistance, to one of increased bilateral trade and mutual commercial interests.
Daniel Kurtzer Sallama Shaker Shafiq Gabr
While annual economic assistance -- originally $815 million disbursed through the US Agency for International Development (USAID) -- is being reduced by five per cent annually over a period of 10 years starting in the current fiscal year, part of these funds is being directed to a new effort to promote trade ties between the two countries. This endeavour is expressed through the US-Egypt Partnership for Economic Growth and Development, known as the Gore-Mubarak Partnership, initiated in 1994.
"The new strategy under the Partnership is to move Egypt from an assistance-based relationship to one based on trade, addressing the barriers to sustainable development and allowing Egypt to become more competitive globally," said Ambassador Sallama Shaker, assistant foreign minister for North and Latin America.
Given the need to promote stronger trade ties and more US direct investment in Egypt, both sides hope that President Mubarak's visit to Washington will include the signing of a Trade and Investment Framework Agreement (TIFA), which the two countries have been negotiating. The agreement should expand free trade between the two countries, and is considered, in theory at least, a precursor to an Egypt-US free trade area (FTA).
Egypt and the US Overseas Investment Corporation are also in the final stages of negotiating an agreement which is intended to stimulate more investment by American companies in Egypt, according to US Ambassador to Cairo Daniel Kurtzer.
"We are also hoping to sign a memorandum on renewable energy between the Egyptian Ministry of Electricity and the US Department of Energy," Kurtzer told reporters last week.
On the agenda in Washington as well will be efforts to improve networking between the private sectors of both countries through the US-Egypt Presidents' Council, an advisory body to President Mubarak and Vice-President Gore. This group brings together Egyptian and American business representatives and was established as part of the Gore-Mubarak Partnership.
On the table during the Washington talks will be issues which have figured prominently in bilateral trade relations over the past couple of years. These include exports, technology transfer and intellectual property rights (IPR), especially in the manufacture of computer software, with American companies seeking to protect their rights in the Egyptian market, and Egyptian manufacturers seeking protection from the piracy of Arabic films and music in the American market.
Several major Information Technology (IT) companies are currently looking at the Egyptian market for possible sizeable investments, but they are held back by the IPR issue on which they are demanding more progress. They and other US companies consider the current general environment in Egypt not sufficiently oriented to export, and more tailored to local demands, according to the chairman of Egypt's International Economic Forum, Shafiq Gabr, who formerly headed the American Chamber of Commerce in Egypt.
It is also expected that issues which have caused some tension between the two countries will be raised. One of these is the early opening up of the Egyptian pharmaceuticals market which American companies are demanding as a prerequisite for their investment. However, this has been countered by a campaign by the Egyptian pharmaceuticals sector.
As a gesture of political goodwill, President Mubarak and US Vice-President Al Gore reached an understanding that no moves will be made to pressure early liberalisation of the Egyptian pharmaceuticals sector, given its strategic importance as an industry catering to over 90 per cent of the Egyptian population's needs.
But the issue remains contentious beneath the surface. Talks with American pharmaceutical companies are expected to focus on encouraging them to invest in research and technology which will enable Egyptian companies to compete globally once the sector is liberalised in the year 2005 under the terms of the GATT.
The issue of Egyptian textile export quotas will also come up, with the Egyptian side still aiming at increasing the quotas allowed for shirts, an issue over which there have been "differences in policy", between Egypt and the US during the past year, according to Kurtzer.
As the philosophy of the relationship is now changing to one not measured by the level of economic assistance but by whether the relationship is enabling the Egyptian economy to become more competitive, the four US-Egypt Partnership sub-committees have been hard at work over the past three years, coordinating efforts in their respective domains. These are trade and finance, science and technology, environment and sustainable development and education and human resource development. The aim is to assist Egypt to export quality goods to other markets.
The focus of the partnership, according to Assistant Minister Shaker, is to find opportunities which will create "500,000 jobs on an annual basis" in Egypt. A major conference entitled "Aid to Trade '99", due to open in Alexandria tomorrow, aims at showcasing the progress and opportunities attained so far through the partnership.
African markets are another dimension of Egypt-US trade ties. With American policy aiming to establish stability in Africa, the US also wants to access more markets in the continent. On the agenda will be ways of promoting US trade to Africa via Egypt which has now become a member of the Common Market for Eastern and Southern Africa (COMESA), and making use of Egypt's impending partnership with the EU to create an advantage -- through tariff exemptions -- for American goods in the Mediterranean market. "Egypt, with its strategic relations, can be a hub for American trade and investment, particularly if they use our free trade zones as hubs for [transshipment of] American goods," said Shaker.
In spite of ongoing high-level initiatives, American investments in Egypt are not commensurate with the scope and time span of the two countries' bilateral ties. US investments in Egypt are currently estimated at approximately $2 billion, of which over half are in the petroleum sector. The balance of trade is also heavily tilted in favour of the US.
"On the Egyptian side, we believe there should be greater investment by US companies in Egypt," said businessman Gabr. "I say this even as investments in non-oil sectors have doubled over the past 18 months, specifically where privatisation has been in areas of interest to US investors, such as power plants. An American multinational, Intergen, has secured [the contract for] the $500 million Sidi Kreir power plant. US Steel and its affiliates have invested in the Aswan Iron and Steel projects. There are also the two mobile phone licences, but from my point of view this is not enough," said Gabr. He nevertheless directed some self-criticism to what he described as an overall Egyptian investment climate which is not always attractive to foreign businesses.
"The Egyptian market must provide not just an investment law, but an overall package, an environment where investors can deal according to a market which is operating naturally, according to rules which apply to everyone -- and not [through] personal contacts. There is a need [in Egypt] to establish what I call the institutionalisation of reform," said Gabr.
US investors, like any others when considering a market, look at the issues which can either promote or undermine investments, such as "non-tariff barriers, bureaucracy, infrastructure, transportation, and manpower problems," according to Kurtzer.
And high-level initiatives notwithstanding, the idea of a free trade area between Egypt and the US, which should symbolise their relationship, remains a theoretical premise. "There are differences in the economies of both countries which would not make it very easy to implement an FTA," said Kurtzer. He added, "An FTA is very healthy, but will be very hard to do, because our markets and economies are very different and we have to be careful how we relate to each other."
Over the past few weeks, American officials in Cairo have advocated the principle that Egypt and Israel cooperate to promote Egyptian exports to the US.
Ambassador Kurtzer points out that Egyptian exports, specifically in the horticultural and textiles sectors, can gain access to the US market if they "enter into projects with Israel, Palestine, and Jordan".
This statement suggests a revival of earlier proposals for regional economic cooperation including Israel, which Cairo has made conditional on progress in the peace process. This brings to the fore the assumption in Egypt-US economic relations -- implicit when they were born over 20 years ago following the Camp David peace accords -- that progress in Middle East peace talks should enhance the economic well-being of Egypt as well as that of Israel.
And so underlying the agenda in Washington will be the unspoken but clear premise that Egypt-US economic ties currently fall short of the strategic commitments made by Egypt to peace and to the Camp David Accords.