14 - 20 March 2002
Issue No.577
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Al-Ahram Weekly Online 14 - 20 March 2002 Issue No.577 |
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Trading places
Although primarily a political visit, President Mubarak's trip to the US last week was nonetheless an opportunity to talk shop. Nevine Khalil reviews the US-Egyptian economic issues on the agenda
Increasing investment, trade and dialogue between the official and private sectors in the US and Egypt topped economic discussions during President Hosni Mubarak's visit to the US last week.
The Cairo delegation asked for more market access for Egyptian products, and US officials were "very helpful and supportive," according to Minister of Foreign Trade Youssef Boutros Ghali. They even made good on their promise to open up a number of market sectors by announcing the cancellation of US tariffs on imported Egyptian steel. Other topics of discussions included market access for the trade in fresh fruits and vegetables and construction materials such as ceramics and granite, though no decisions were taken. Reducing or eliminating tariffs and opening various markets will allow a judgement to be made on the competitiveness of Egyptian products ahead of the long- awaited Free Trade Agreement (FTA).
But finalising an FTA remains something for the distant future, as Egypt is first required to carry out several reforms to strengthen its economy. Throughout 2000, Egypt stepped up contacts with the US administration, Congress and business circles to pave the way for FTA negotiations. While both sides agree on its importance and benefits, no concrete steps were taken to start structured talks.
The two sides continue gradually to address various issues pertaining to an FTA, but it is unclear how long the pre-FTA negotiation phase will last. "Just because we're not signing an FTA, it doesn't mean there isn't progress being made," Boutros Ghali told reporters last week. "The relationship between the two countries is dynamic. Nothing happens overnight." Standing beside him, Secretary of Commerce Don Evans, who had just come out of a meeting with Mubarak, agreed. "We're still having [FTA] discussions," he said. "We've had a lot to do over the past year and we're optimistic about making progress."
Discussions on an FTA began under US President Bill Clinton's Democrat administration, and are expected to progress faster with George W Bush's incumbent Republican team. Boutros Ghali argued that, in general, the Democrats "are less convinced of free trade, whereas the Republicans champion free trade across the world." As a result, Secretary of Commerce Evans, Trade Representative Robert Zoellick -- who will soon visit Egypt -- and Assistant Secretary of the Treasury Steven Radelet, were apparently more receptive to the idea during talks with Boutros Ghali.
The current trade balance is overwhelmingly tipped in favour of the US, with Egypt exporting some $880 worth of products to the US, and importing nearly four times as much, in products worth $3.8 billion annually. Egyptian exports mainly comprise textiles, agricultural and mineral product, as well as foodstuffs. Egyptian imports from the US rose by 12 per cent in 2001 compared to 2000 thanks to an increase in the import of seeds, military and civilian equipment.
Boutros Ghali argued, however, that, while overall US imports fell by seven per cent last year, Egypt's exports to the US went down by only five per cent. Looked at from this perspective, Egypt's performance appears stronger. "Before 11 September, average trade volume was $60-70 million a month. After that date, it went down to $40 million. That is why the figures are so low," Boutros Ghali observed. "We expect trade to increase in the second quarter of 2002," he added. Another reason given for the drop in exports is the recession in the US economy.
The bulk of the $2.7 billion-worth of US investment in Egypt is in the oil and gas sector, with much of the rest in the production and service sectors. "We think there is opportunity for American investment in Egypt and we're looking forward to exposing this to American investors," said Evans. A number of US companies are already operating in the energy sector in Egypt, and Washington expects that the communications bill being discussed in Egypt will provide an opportunity for further cooperation.
The most conspicuous absence during the trip was that of the usual entourage of Egyptian businessmen that accompany the president on his annual US trips. Only Presidents' Council spokesperson Gamal Mubarak was present, signalling that the council, a private sector advisory body, is not yet ready to begin business. While some Egyptian sources assured Al-Ahram Weekly that names for the Egyptian side have been short-listed and are currently being looked at by Mubarak, others said that the final list remains unfinished. Neither have the Americans decided who will be on their side, "but we're close," according to Evans.
The reformed council, re-launched under a memorandum of understanding between the two countries last October, and composed of 12 to 15 members, will continue advising both governments on the best ways to boost trade and investment through the business sectors in both countries. The first meeting of the restructured council should be held in Cairo some time in the next three months under the auspices of Boutros Ghali and Evans. This amounts to a demotion of sorts; the previous council was overseen by Mubarak and then Vice-President Al Gore.
Another hanging issue is the paucity of meetings of the US-Egypt Council on Trade and Investment (CTI), created in 1997 when Egypt and the US signed a Trade and Investment Framework Agreement (TIFA). The council is intended to meet routinely to discuss trade promotion, trade obstacles and cooperation within the framework of the World Trade Organisation. But since its inception it has met only once -- in 1999.
In other news, Washington announced on Monday that USAID will provide technical assistance for institutional capacity-building at the Ministry of Foreign Trade under a newly-awarded $20 million contract. Until 1998, Egypt was receiving $815 million in economic aid, and $1.3 billion in military assistance, but in June 1998 an understanding was reached with the US Congress to restructure the aid programme, reducing economic aid by 5 per cent (or $40 million) annually, which will halve US economic aid to Egypt by the year 2008. Military aid will remain the same until then.
In 2002, Egypt receives $645 million, $200 million of which will finance the Commodity Imports Programme (CIP), while it was agreed that an interest-bearing account will be opened to deposit unused sums of military aid. In early January, the US administration also approved the speedy release of $959 million in aid money to help Egypt overcome the negative effects of the 11 September attacks on its economy.
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