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Al-Ahram Weekly 24 - 30 June 1999 Issue No. 435 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 24 - 30 June 1999 Issue No. 435
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Interview Travel Sports Time Out Chronicles People Cartoons Letters Terms of trade
By Aziza SamiAn important aim of President Mubarak's visit to the US, scheduled to begin on Saturday, is the signing of a Trade and Investment Framework Agreement (TIFA), which should boost bilateral economic relations, and reinforce a freer trade flow between Egypt and the US. "It is a critical and important step towards freer trade between our two countries," US ambassador to Cairo Daniel Kurtzer said this week. While increased liberalisation of Egypt's economy is in the US's interest, and an incentive for American companies to invest in this country's market, Egypt seeks to promote a substantial increase in exports to the American market. But further questions concern the existing pattern of bilateral economic relations and whether they can fulfil mutual interests, even after the signing of the TIFA.
According to a rough estimate by Ambassador Kurtzer, US exports to Egypt currently stand at $3 to $4 billion annually, while Egyptian exports to the US are in the range of $700-800 million per year. This lopsided trade balance is basically the outcome of the economic assistance provided by the US Agency for International Development (USAID), several of whose programmes stipulate the importing of US goods.
At the same time, there is no commercial arrangement promoting Egyptian exports to the US. Even major investment initiatives worth $4 billion, announced in Cairo last May by three US government trade and investment agencies, were in large part conditional on clauses promoting US exports.
And while Egyptian exporters do not contest the US's right to promote its commercial interests, the question is how, on a practical level, this pattern can redress the current imbalance between the two countries. In fact, at present, despite"close strategic ties" a substantial percentage of one of Egypt's most important export items, textiles, is denied access to the American market as a result of protectionist measures and political lobbying inside the Congress by US textile industrialists.
This week, US trade officials suggested that Egyptian producers resort to the American Generalised System of Preferences (GSP), as an ultimate solution to promoting their exports to the US. Textiles, almost half of which are subject to the quota system imposed by US authorities, were not included. Nor does the GSP provide Egypt with any particular comparative advantage, since it is generalised to include exports by all developing countries to the US. "The GSP is not a usable programme," said Mohamed Qassem, chairman of the Egyptian Garment Exporters Association. "Only trivia such as rugs, galabiyas and dancing costumes are included, which do not add to the current volume of trade with the US," he explained.
Another hindrance to Egyptian exports to the US is a 1997 US law, which includes a clause prohibiting entry of goods into the American market if child labour has been involved in their manufacture. "This is the right cause for the wrong reasons," said Qassem citing it as a protectionist measure which can be contested before the World Trade Organisation. Other restrictive laws include anti-dumping and environmental control laws. The ultimate answer to a real increase in Egyptian exports to the US, therefore, lies in creating a free trade area between the two countries, according to Qassem who, nevertheless, expressed scepticism that such an arrangement will materialise in the foreseeable future.
At present, there seems to be no indication that US economic policy on Egypt is seriously working towards devising a free trade area. Ambassador Kurtzer last week described the idea as "not easy", and added: "It will take time."
At a meeting with American Chamber of Commerce members two weeks ago, on the other hand, Kurtzer suggested that Egyptian exporters work in joint ventures to promote their textile and horticultural exports to the American market through free trade areas existing between the US and "the Palestinian territories, Jordan and Israel". He elaborated more on this statement this week saying: "Until we do have a free trade relationship between Egypt and the US, we [already have] a free trade relationship between the US and Israel, and the US and the Palestinian territories. So you need to examine carefully ways in which you may be able to take advantage of the existing relationships, even while you build freer trade. Goods exported to the US through these arrangements would be duty-free."
But given the fragile state of the Palestinian economy, and the problems besetting the Jordanian economy, what Kurtzer seems to be suggesting, in essence, is that only through joint ventures with Israel can Egyptian exporters gain substantial entry into the US market. "We know that this is the stance of the US administration and we don't mind them saying it," commented a high-ranking Egyptian official, "but the Egyptian position remains firm: the issue of Middle Eastern economic cooperation is a highly political matter."
The idea of pushing Egypt into regional integration with Israel as a means of promoting two of its most important export sectors, textiles and agriculture, for entry into the American market raises questions about the equality that the US is ready to grant Egypt as an economic partner. This question also reflects on how the "strategic relationship" will evolve in the future.
