Seeing an FTA through
After five years of fruitless talk, steps towards a free trade agreement with the US are now gaining momentum, Gamal Essam El-Din reports
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US Ambassador David Welch is shown by El-Sherif how Al-Sukhna is designed to be the region's hub port
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On a visit to Ain Al-Sukhna port last week, US Ambassador to Egypt David Welch said that the political commitment to set up a Free Trade Agreement (FTA) has reached "very high levels". The ambassador's comments came just as a top-level delegation was preparing to travel to the US for talks on a wide range of economic issues, at the top of which is the controversial FTA. The delegation is headed by Minister of Foreign Trade Youssef Boutros- Ghali and the chairman of the National Democratic Party's Policies Committee, Gamal Mubarak.
When the MENA Economic Conference was held in the Qatari capital of Doha in April 1998, Madeleine Albright, said that the US decision to establish a free trade zone with Jordan was not only a reward for Jordan's active participation in the Doha Conference (which Egypt boycotted in protest against Israeli anti-peace policies), but also carried a significant message to Middle East countries that economics are not separate from politics.
Over the past five years, there has been much talk of an Egypt-US FTA. But the 11 September attacks and the war in Iraq have resulted in a more rigid US position. US administration officials are now saying that the conclusion of an FTA with Arab countries depends on two factors: achieving political democratisation and economic openness.
Several recent developments, meanwhile, have sparked new hope that an Egypt-US FTA would, at last, be reached. First, US President George Bush announced last month that a free trade zone should be set up between the US and Middle Eastern countries by the year 2013, even though he said this zone was conditional on the signing of a general peace treaty between Israel and the Arabs. Second, during US State Secretary Colin Powell's and Trade Representative Robert Zoellick's visit to Amman, Jordan, this week to attend the meeting of the World Economic Forum, Powell reaffirmed Bush's proposal of having free-trade accords with Arab countries. Zoellick is planning to visit Egypt soon to discuss the matter further.
Meanwhile, Egypt's high-level delegation to the US this week aims at persuading an array of US officials and academics that an FTA with Egypt is a necessity. The visit reflects a firm conviction among many Egyptian businessmen and economists that an FTA with the US is essential to Egypt's export-promotion strategy. "This strategy -- a matter of life and death for Egypt -- views America as [Egypt's] most promising export market in the long run," Mustafa El-Said, a former economy minister, told Al-Ahram Weekly.
US trade policies, El-Said said, have hurt Muslim countries that support America's war on terrorism. "Muslim countries, which have been in America's frontline in the war on terrorism, such as Egypt, Turkey, Indonesia and Pakistan, already face the highest barriers on their exports to the US," he said.
Textile exports to the US, for example, face a stiff system of quotas. Statistics show that, in 2002, Egypt exported nearly $900 million worth of goods to the US. The figure could be much higher if the quota system on textile and apparel exports is lifted.
Egyptian businessmen believe an FTA with America could boost Egypt's exports by $1 billion in one year. Ambassador Welch recently said Jordan's FTA with America has increased the value of Jordanian exports to the US to over $400 million in 2002 (up from less than $72 million 10 years ago).
The Egyptian government, fearing that the US-Jordan free trade zone will function largely at Egypt's expence, decided five years ago to create rival free trade zones around the Gulf of Suez. Former Prime Minister Kamal El-Ganzouri said in April 1998 that the Ataqa-Adabiya area to the West of the Gulf, covering some 230 square kilometres, would be developed as an industrial area and free zone, and a new industrial port north of Ain Al- Sukhna on the Gulf would be established.
On 18 June, Welch visited Ain Al- Sukhna port to see how the government has progressed with those plans. The ambassador's visit is significant; probably reflecting a growing US interest in concluding a free trade zone with Egypt. Ain Al-Sukhna could play a central role in this agreement, especially as Israel is expected to become a third party to it. The Gulf of Suez serves as an unrivalled strategic link between Africa and the Arab countries on the one hand, and Europe, North America and Japan on the other.
Osama El-Sherif, president and CEO of Al-Sukhna Port Development Company (SPDC), told Welch that the completion of Al-Sukhna project by the year 2020 will inject $6.4 billion as added value into the Egyptian economy every year and generate a total of around 62,000 job opportunities.
Al-Sukhna zone is divided into four phases -- each phase is developed by an Egyptian-foreign joint venture company. The basic infrastructure, such as road and rail connections, power and water supply are provided by the Egyptian government.
El-Sherif explained that the first phase, which was completed in 2002, included establishing a container terminal, a fertiliser terminal, a general cargo terminal and a bulk terminal. "More than 20 million tons will be handled by 2005, increasing to more than 90 million tons by 2020," El- Sherif said.
The port is being built on some 42 million square metres at a cost of nearly LE5 billion. Total investments up to 2020 are estimated at over $1.7 billion, El-Sherif said.
Al-Sukhna port will utilise the highest integrated management systems, such as first-class customs procedures and sophisticated security systems. The Bush administration announced last week that it intends to place teams of US inspectors at major seaports in nations with high Muslim populations to help prevent terrorists from using cargo containers to smuggle chemical, biological or nuclear weapons into the US.
Following his Al-Sukhna tour, Ambassador Welch told journalists that the US and Egypt are now conducting what is called the Trade and Investment Framework Agreement (TIFA). "In this discussion between the concerned Egyptian ministries and the US Office of the Trade Representative and other American ministries, we identify the issues that are to be discussed between the two sides leading to FTA negotiations," Welch said. This, he added, underlines what both Egypt and the US need to focus on when they start FTA negotiations. "The political commitment on both sides to include Egypt among those countries with which the US would like to have a Free Trade Agreement is now very high at the top levels," Welch said.
US Assistant Secretary of State for Near East Affairs William Burns told reporters on Tuesday that although no decision had been made yet about opening bilateral negotiations on an FTA, the existing TIFA between the two countries is proving very useful. "We are making very good use of the [TIFA] to work intensively with Egypt to sort through what makes the most sense and the best timing," said Burns. He was speaking to reporters after meeting with President Hosni Mubarak and Foreign Minister Ahmed Maher. Burns pledged that "the broad commitment [for an FTA] is there; we're going to continue to do everything we can to support Egypt's efforts to make the kind of reform in its economy," he added.
Both Egypt and the US are currently trying to make quick progress so that when Mubarak and Bush decide that the time is right to make this announcement, they can make it, he said. "The progress in the first six months of this year has been very good," Welch said.
The fact that Egypt has passed laws concerning Intellectual Property Rights [IPR] and that it has become party to the basic telecommunications agreement and the information technology agreement are important in the FTA negotiations, he said.
