Al-Ahram Weekly Online   9 - 15 December 2010
Issue No. 1026
Economy
 
Published in Cairo by AL-AHRAM established in 1875

Maximising trade

The liberalisation of agricultural exports between Egypt and the EU will soon bear fruit, reports Sherine Nasr

Following years of negotiations, an agreement between the European Union and Egypt intended to further liberalise agricultural trade entered into force on 1 June 2010. The agreement is considered very ambitious. Although no concrete data has been made available yet on the agreement's impact on bilateral trade, it is almost certain that trade in agriculture will witness a boom in the coming period, and that Egyptian agricultural goods will enjoy better and broader access into European markets. The goods in question include fresh produce such as raw vegetables and fruits, processed agricultural products, fish and fishery products.

Agricultural products account for eight to 10 per cent of total trade between Egypt and the EU, and have a value of almost two billion euros in exports and imports.

Under the agreement, 90 per cent of trade in both directions benefit from de-facto full liberalisation. According to Christophe Besse, head of the trade, science and enterprise section at the EU delegation in Egypt, some 71 per cent of in value terms of Egyptian exports of agricultural goods to the EU already benefit from full liberalisation. An additional 18 per cent of key Egyptian exports such as table grapes, tomatoes and artichokes benefit from duty free-quota free treatment upon importation in the EU. "The only trade restriction is an export season which overlaps with European production," said Besse.

It is interesting to note that table grapes, for example, stand as Egypt's number one agricultural export to the EU, as it accounts for 15 per cent of the country's agricultural exports to the EU. Next are sweet oranges, fresh and chilled new potatoes and fresh strawberries.

Meanwhile, there continue to be some Egyptian agricultural products that have not yet been fully liberalised. These include strawberries, rice, several fresh fruits and vegetables as well as processed agri-products which have a high content of sugar. According to Besse, the agreement will be re- opened for further negotiations in two years' time, when exportation for these items will become fully liberalised.

In the area of agri-product exports, Egypt's main regional competitors are Morocco and Tunisia. "Egypt has an advantage as the agreement has already been enacted, while in the case of Morocco, the agreement has only been negotiated," Besse noted.

On the other hand, some 86 per cent of EU exports already benefit from full liberalisation. The main EU exports to Egypt include wheat and cotton from Greece. It is interesting to note that, "Egypt imports cotton from Greece at the value of 60 million euro. But this is a lower quality cotton mainly used in transformational industries and textiles," said Besse. The main EU products whose import is not liberalised are alcohol, tobacco and pork meat.

"Although it is still too early to draw any conclusions as to the impact of the agreement, it is almost certain that it provides a clear potential to raise bilateral trade in agricultural goods," said Besse.

Notably, signs of recovery in trade have been clear over the course of 2010. Bilateral trade is currently inching back up to the previous peak of 2007, as a total trade of 20.5 billion euro is anticipated in 2010. "The new agreement will further boost exports of Egyptian agricultural goods to the EU," said Besse.

The latest statistics by the Central Bank of Egypt (CBE) have shown that EU-Egyptian bilateral trade grew by nine per cent in 2010 over 2009, while it is inching ever closer to the 2007 peak. Further, Egypt has improved its ranking as a trade partner to EU, rising from 34th place in 2007 to 28th in 2010.

"This is basically because EU exports to Egypt have grown. The Egyptian domestic market is growing in all directions in terms of consumption and investment by companies and this fuel imports," said Besse, who added that 40 per cent of EU's exports to Egypt are in capital goods such as machinery and vehicles.

While Egypt is the EU's fifth trade partner in the region following Turkey, Algeria, Israel and South Africa, the European bloc remains by far Egypt's top trade partner, with a market share of 36 per cent. In terms of foreign direct investment (FDI) inflows, the EU brings 60 per cent of the total FDI inflows into the country, compared to 35 per cent two years ago. According to the CBE, gross FDI inflows to Egypt reached $11 billion in 2009 to 2010.

The United Kingdom tops the list of EU investors, particularly in the oil sector, at $3.2 billion in 2008 to 2009, followed by Belgium. In short, according to Besse, "the EU is Egypt's top trade partner and investor."

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