Sunday,22 October, 2017
Current issue | Issue 1123, 22-28 November 2012-
Sunday,22 October, 2017
Issue 1123, 22-28 November 2012-

Ahram Weekly

On the other hand

An expanded free trade agreement
between Egypt and Turkey is not yet favoured
by some sectors on the Egyptian side,
reports Ahmed Kotb

Al-Ahram Weekly

Egyptian Minister of Industry and Foreign Trade Hatem Saleh announced last week that the ministry is studying the expansion of the current Free Trade Area (FTA) agreement with Turkey in order to allow for a larger volume of trade exchange. Egypt’s FTA with Turkey was signed in 2005 and came into force in 2007.
Since the FTA agreement, the trade volume between Egypt and Turkey increased from $1.5 billion in 2007 to stand now at approximately $4 billion, and is expected to reach $5 billion by the end of this year. Expanding the FTA agreement, according to officials, will boost trade to $10 billion within 10 years.
However, a number of Egyptian producers believe that it is not the right time for their sector to join the FTA agreement because of certain difficulties they face at the moment.
One such sector is poultry. According to Abdel-Aziz Al-Sayed, head of the Poultry Division at the Cairo Chamber of Commerce, expanding the FTA to include poultry would have devastating effects on the industry which has investments worth LE25 billion (about $4.1 billion) and a labour force of two million workers. “The industry suffers from a 40 per cent slump. Production costs have increased and selling prices are low,” Al-Sayed explained to Al-Ahram Weekly, adding that Egypt’s daily production of poultry is now as low as one million, down from 1.6 million last year.  
“We first have to think about solving the problems that the industry is suffering from in order to be competitive in a strong market like Turkey’s,” he stressed.
Al-Sayed identified the main problems as the rising price of fodder (Egypt imports 50 per cent of its needs of fodder), which is sometimes exacerbated by strikes of truck drivers, and the usage of rudimentary equipment in poultry farms that does not allow for steady growth. Besides, he added, exports of the poultry sector have stopped since 2006 as a result of the Bird Flu epidemic.
The Chamber of Food Industries at the Federation of Egyptian industries announced that it refuses any modifications to the current FTA agreement regarding the sector.
“The food industries sector is faced with several challenges in the local market that prevent it from competing with imported products,” Mohamed Shoukri, head of the Chamber of Food Industries, told the Weekly. He pointed to sales tax and smuggling as two main factors that hinder the competitiveness of Egyptian products, as well as the logistics support that the imported products receive from their country of origin.
Moreover, Shoukri added that the trade balance has been in Turkey’s favour since 2007, and that around 70 per cent of trade volume was in favour of Turkey in 2011. “We asked the Egyptian negotiating team not to reach an agreement before thinking of the best terms that would secure the interest of Egyptian products,” he stated.
Article 14 of the current FTA agreement stipulates that Egypt could increase customs duties by up to 25 per cent to protect infant industries or certain sectors undergoing restructuring or facing serious difficulties. The agreement says these measures shall be applied for a period not exceeding five years unless a longer duration is authorised by the joint committee. Modifications to the latter article are what worry sectors like poultry and food industries.
Major Egyptian exports to Turkey include petroleum, chemical fertilisers, coal and copper wires. Imports from Turkey, on the other hand, include steel products and minerals.
“The future of Egypt-Turkey trade relations looks very bright, but obstacles have to be removed and we have to be ready for the competition,” Shoukri said.
Four trade agreements have been signed by Egypt and Turkey. The first was signed in 1966. It was followed by three other agreements in 1976, 1996 and 2005. The latter was followed by a number of agreements to enhance the trade relations.

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