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Al-Ahram Weekly 1 - 7 June 2000 Issue No. 484 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 1 - 7 June 2000 Issue No. 484
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Focus Features Heritage Travel Living Sports Profile People Time Out Chronicles Cartoons Letters A few weeks more
By Niveen WahishEarly this week, Prime Minister Atef Ebeid met with the economic ministerial group to discuss the final text of the Egypt-EU partnership agreement, concluded in June 1999 after several years of negotiations. The text is expected to be presented to President Mubarak for his approval following his return from Spain, though during the meeting ministers identified a number of issues remaining in need of clarification by the European side before the agreement is initialised.
Opponents of the agreement have consistently claimed that Egypt is better off with the 1977 protocol currently applied while industrialists -- particularly in the textile and agricultural sectors -- have repeatedly voiced concern over the ability of local industries to compete with European competitors once trade barriers are lowered.
Gamal Bayoumi, assistant foreign minister for EU Affairs and the chief negotiator in the partnership talks, dismisses such criticisms, arguing that signing the agreement places Egypt in a stronger position when it comes to ironing out trade snags. There have, he points out, been no dumping claims against Egypt from the EU since the text of the partnership deal was concluded. Nor has there been a single case of Egyptian potatoes being rejected by the EU due to brown rot, a cause of conflict for several years now.
The rules of origin embodied in the agreement have been the focus of specific criticisms by industrialists, who fear that they are too restrictive in quantifying the amount of processing that imported materials undergo before they can be labelled made in Egypt. While rules of origin differ from one industry to the other, Bayoumi insists that "there is no room for changing them since to do so would result in Egypt being isolated and mitigate against cumulation [using inputs from other Arab-Mediterranean countries and still classifying the finished product as Egyptian]."
Unlike the Tunisian and Moroccan partnership deals, the Egyptian negotiating team also secured provision in the agreement allowing for a drawback system by which exporters receive government refunds on taxes and customs paid on production inputs once finished items are exported. More contentiously, the EU has also pledged LE1 billion over three years to an Industry Modernisation Programme, intended to help promote greater competitiveness in international markets by modernising enterprises, reforming the business environment and strengthening business institutions. The Egyptian government, along with the Egyptian private sector, is contributing a similar amount. The EU contribution to the IMP is part of more than LE2.2 billion pledged to Egypt in the past three years. This makes Egypt the largest recipient of EU foreign assistance, says Bayoumi, yet critics are demanding much more.
IMP funds, insist the agreements detractors, should be directed at modernising the largest possible number of factories rather than be limited to consultancy services and studies.
Moreover Prime Minister Atef Ebeid, while addressing members of the German Arab Chamber of Industry and Commerce (GACIC) this week, demanded that "the resources (of assistance) must be known in advance," and that "a degree of freedom must be given to the Egyptian government in managing these resources."
El-Moataz Abdel-Maqsoud, head of the Holding Company for Spinning and Weaving, believes that apart from the IMP, EU funds should be made available for upgrading the Egyptian textiles sector which is in "dire need of restructuring." Abdel-Maqsoud is satisfied that under the proposed agreement, Egyptian exports will not be limited by quotas, which is not the case under the current protocol. He does not believe, though, that Egyptian products can compete in the European market, given current quality levels.
That may soon change. The MEDA programme -- the main channel through which the EU funnels grants and loans -- is currently assessing ways of building the capacity of the textile sector.
While funds will be earmarked to upgrade Egyptian industry, European goods will not be allowed immediate entry into the Egyptian market. Under the terms of the agreement, customs duties on EU exports to Egypt are to be dismantled in three phases, over a 12-year transitional period. The first will include raw materials and capital goods, the second production inputs, while final products will be left till last.
Eberhard Rhein, former director of the EU commission in charge of the Mediterranean and the Arab world, earlier told Al-Ahram Weekly that "delaying the signing means giving more time to local producers to lag behind. Once it is inevitable [the agreement signed], they will do the job and [upgrade their performance]."
It is a view shared by Hesham El-Tanbouly, chairman of a company exporting processed agricultural goods to the EU. Opening up the Egyptian market, he believes, will benefit consumers. By keeping barriers in place, the government guarantees local producers a market regardless of quality or price.
But once local manufacturers are faced with competition, they will have to shape up says El-Tanbouly, though they might be helped by the government with measures such as tax incentives to improve performance. Local producers will always find something to be dissatisfied with, says El-Tanbouly, though he concedes "the EU could give Egypt better terms, especially for its agricultural and agro-food exports."
Agriculture is one of the thornier issues hampering the conclusion of negotiations. Egypt had demanded that agricultural and processed agricultural goods receive the same treatment as industrial goods, which under the agreement are allowed immediate free entry into European markets. But the European Common Agricultural Policy (CAP) limits agricultural imports into the EU. Currently, Egypt's agricultural exports are restricted seasonally, and subject to quotas.
Bayoumi has assured the agro-food industry that many EU exports to Egypt will receive only minimal customs reductions. And if Egyptian manufacturers cannot deal with a 15 to 25 percent customs reduction on a few EU products, he argues, then they do not deserve to be in business.
