CAIRO: There’s hope for a US free trade agreement with Egypt, but it won’t be done on President Bush’s watch, said US Ambassador to Egypt Francis Riccardone on Tuesday.
“Both Republican and Democratic administrations have underscored global trade as a fundamental priority. As the world’s leading economy, we depend on foreign trade.and that [entails] a free trade agreement with Egypt, he explained.
He added that the US was even aspiring for a Middle East free trade area that would increase economic stability in the region.
“The next president will probably [sign] a free trade agreement with Egypt. The idea is very strong on the agenda, and [presidential candidates] have put emphasis on free trade with Egypt and the Middle East.
In what could be his last speech as the US Ambassador to Egypt, Riccardone addressed Tuesday members of the American Chamber of Commerce and delivered a speech entitled “Reflections on a vital US Egyptian partnership.
Judging by the way both Americans and Egyptians value their relationships in dollars and cents – meaning the measure of trade and investments – the ambassador pointed out that economic ties have been booming since 2004.
“US-Egyptian trade is at an all-time high. Since 2004, annual bilateral trade has increased 77 percent to $7.7 billion. That reflects a 77 percent increase in trade in both directions, he said.
Recent data shows that US exports to Egypt have grown 74 percent, while Egyptian exports to the US have soared 85 percent. “According to the Central Bank of Egypt, the United States remains Egypt’s largest national trading partner, buying 33 percent of everything Egypt exports to the world, added Riccardone.
US exports to Egypt – which soared to almost $5 billion in 2007, up from $4.1 billion in 2006 – are mainly agricultural products (19 percent), transportation equipment (21 percent), IT and electronic products (10 percent), chemicals (6 percent) and fabricated metal products (5 percent).
On the other hand, top Egyptian exports, totaling more than $2.5 billion in 2007, are textiles (34 percent), oil and gas (42 percent), as well as iron and steel (14 percent).
“Balance of trade is still in favor of the US, but Egyptian exports are growing faster than the US exports, he stated.
“A unique part of Egyptian-US trade relations is the Qualified Industrial Zone, or QIZ, program. The QIZ is maturing into a solid component of Egypt’s trade relations with the United States. Last year alone, QIZ exports increased 10 percent to $689 million, mostly in textiles, Riccardone continued. “This agreement has proven good for Egyptian workers, good for American consumers, and good for peace in the region by promoting economic cooperation with Israel. Even so, we noted a drop in QIZ exports in the fourth quarter, indicating that the early rapid growth of the program is now leveling off, as the US Dollar and the economy is currently going through [a slowdown].
Still, Riccardone pointed out, the US was currently looking into expanding the QIZ program into Upper Egypt to preserve the economic and political benefits of the agreement.
The ambassador expressed his strong confidence in Egypt’s economic prosperity, openness for business, competition, and growth. “I am not the only one who believes this. In December, the International Monetary Fund said Egypt s sound macroeconomic management and bold economic reforms ‘increased market confidence, boosted investment and helped to sustain high pace of economic growth to a record 7.1 percent.’
“The facts are indisputable, he said. The Cairo and Alexandria (CASE) Stock Exchange, he clarified, topped the 10,000 mark – up more than 40 percent year by the end of 2007 and 450 percent over the past four years.
Market capitalization reached LE 700 billion, while monthly trading of securities exceeded LE 29 billion. Foreign investments, he continued, surged to $11 billion from just $400 million in 2002, and international reserves reached $30 billion. A total of 9,000 new companies were established and 1,750 companies expanded.
“American investors are taking note and participating, Riccardone said. “Since 2002, private US direct investment in Egypt has nearly doubled to $6 billion.
The US tops the list of countries investing in Egypt. It is the largest petroleum and second largest non-petroleum foreign direct investor in the country. One of the latest American investment projects in the country is the US-based Ripplewood Holdings LLC that grabbed an 18.7 percent stake in Commercial International Bank and Citigroup Venture Capital and invested $459 Million in Amoun Pharmaceuticals.
As trade and investment figures speak for themselves, Ambassador Riccardone urged Egyptians to focus on trade rather than aid as a principal measure of success in bilateral relations.
“Egypt is no longer a less developed country. It’s leading its way up to become a more developed country, he explained. “American assistance going to Egypt is important, but it’s been reduced because Egypt needs less assistance because it is succeeding and trade is replacing aid.
Based on recent embassy figures, economic assistance levels to Egypt averaged over $800 million annually from the time of the Camp David accords in 1978 until mid-1998. As part of an overall revision in US assistance policy, aid levels have – by mutual agreement – been on a downward glide path since 1999. The USAID budget for Egypt for fiscal year 2005 was $535 million and $495 million for FY2006. Much of this assistance is tied to the government s financial sector reform initiatives including e-governance and business climate in Egypt.
Current planning foresees economic assistance levels continuing to fall by $40 million per year to a level of $407.5 million by 2009. However, Riccardone said that the US government is currently looking into earmarking $2 billion in economic assistance to Egypt this year.
“Egypt is getting there. We will stand with you, but our intentions are to increase economic assistance, he added. “What is half a billion decrease [in aid] a year compared $8 billion in trade. Which creates more jobs for Egyptians? Clearly, trade and investment is the future for Egypt.
“Our aid will continue, but it has never been meant to be permanent. We don’t want to [see too much] dependency on it.
While dollar amounts of American assistance going to Egypt are shrinking, American assistance going to Israel seems to be on the rise. “Israel faces security strains that Egypt doesn’t face, Riccardone said justifying the US policy towards aid. “Egypt doesn’t have an enemy. Egypt enjoys peace and has the military strength it needs. Israel, on the other hand, doesn’t have that sort of peace.
Riccardone will end his tenure this year, after serving as US Ambassador to Egypt since July 2005. He will be joining the US Institute for Peace for the coming year.
