CAIRO: Minister of Trade and Industry Rachid Mohamed Rachid issued a decree late Tuesday ending import restrictions on textiles, yarn and tin, citing stabilized prices.
Safeguard measures on these products were instituted early in 2009 to prevent the importation of items priced below production cost. The items at issue included cotton and mix thread yarns, cotton and mix thread textiles, and cold rolled tin sheets.
The decision to remove these restrictions came as a result of stabilizing prices in the Egyptian textiles, yarn and tin markets and the neutralization of instabilities threatening these industries, the ministry said in a press statement.
The lifting of these measures has also come as a result of international pressure and consensus against protectionist economic policies, even during this period of global financial turmoil.
Egypt is bound by the GATT agreement, which provides that trade restrictions may only be implemented to protect local industries from excessive imports under certain conditions and not as a means of preventing competition. These conditions, however, are difficult to meet and can include countermeasures from other signatories to the agreement.
As a result, Egypt had come under fire from India for implementing import safeguards in the textile industry, a measure that included raising India’s import tax for cotton textiles from the standard 15 percent to 30 percent.
Egypt’s implementation of protectionist measures was actionable by India at the World Trade Organization, where they could have demanded compensation for lost revenues during the period where safeguards were implemented. Egypt is India’s fifth largest textile export market and the source of $100 million in yearly revenues.
In the face of global recession and decreased demands for goods across sectors, however, the decision to implement protective measures has become commonplace despite the possible consequences, with countries like Turkey taking similar actions to protect vulnerable markets.
In a statement on the decision to lift the safeguards, Minister Rachid explained that while the Ministry strives to promote competition, protective measures are sometimes necessary to aid faltering sectors.
We have always believed that free competition is the key to improving the competitiveness of Egyptian products in both the domestic and international markets. However, safeguard measures are sometimes used to prevent trade and price distortions on both the domestic and international markets.
“While all countries are dealing with the impact of the current international economic crisis, this does not mean that support or stimulus packages offered by countries should add up to distortion of international trade. That is why these measures were introduced in the first place, he said.
The decision to abolish these safeguards is part of a larger plan to promote commerce across the Egyptian economy according to Youmna El-Hamaky, an economist and member of the Shoura Council.
“We have to look at why we do not have comparative advantage in a sector like textiles and reform the industry from the bottom up. It’s not just a matter of safeguards and protectionism, its literally a matter of encouraging farmers to grow cotton in the first place and the needed reforms go from that level up to the highest levels of government policy, she said.
