A special relationship between Egypt and the United States has been established in the wake of the 1973 war, as a result of late Egyptian president Anwar Al-Sadat’s decision to gradually shift from the Soviet camp, sign the 1979 Camp David peace treaty with Israel, and establish stronger ties with Washington in return for various kinds of support, whether economic, military, or political.
However, what was once a symbolic alliance, gradually deteriorated over the time, to a mere transactional relationship where the US provides Egypt with $1.3bn in military assistance, and $250m of economic aid. In 2013, following the ousting of former president Mohamed Morsi, Obama’s Administration decided to suspend the $1.3bn of military aid to Egypt and hold the delivery of ten Apache helicopters, in a step which wasI opposed by Israel and the American Israel Public Affairs Committee (AIPAC). Washington decided to deliver the Apaches in 2014, and to fully restore military aid in 2015.
With Donald Trump in office, a new chapter of American-Egyptian relations could be written, especially with the mutual understanding between the two leaders, as Al-Sisi was the first Arab leader to congratulate Trump on his election victory, and Trump announced that there is good chemistry between them when they met in New York while Trump was still on the campaign trail. Egypt, which has been plagued by economic and political turmoil, as well as security challenges following the 25 January Revolution that toppled former president Hosni Mubarak, could greatly benefit from stronger economic ties with the US.
Although Al-Sisi previously visited the US in 2014 and met with Obama at the UN General Assembly, this visit is the first working visit for an Egyptian president to the US since 2009. Different important issues are on the table, especially counter terrorism and the anti-Iran alliance that Trump is reportedly eager to form. Since the Trump administration came to power, Washington has reasserted the importance of Egypt-US ties. White House spokesman Sean Spicer said on 23 January that Trump was committed to providing military assistance to Egypt in support of the Egyptian army’s fight against terrorism.
Aspects of Egypt-US economic ties
Egypt’s trade and investment relationship with the United States has deepened over the last thirty years. Since that time, the two countries have sought ways to increase their economic and trade ties, notably through various partnerships and agreements. At the beginning of the 1990s, negotiations for a free trade agreement were a topic of discussion, but no comprehensive conclusions could be reached. Egypt and the US finalised a Trade and Investment Framework Agreement (TIFA) in 1999. After the failure to reach a bilateral agreement, the US shifted to giving regional trade agreements priority, such as the 2003 Middle East Free Trade Area initiative (MEFTA). It did, however, conclude free trade agreements with Israel, Jordan, Morocco, Bahrain, and Oman. Further FTA negotiations with the United Arab Emirates and Egypt were put on hold in 2005 and 2007 respectively.
The United States is one of Egypt’s largest single trading partners, with a volume of trade reaching $3.9bn in 2016, down from $6.3bn in 2015. Egypt’s exports to the US amounted to $1.3bn in 2015/2016, representing 7% of total Egyptian exports, while Egypt’s imports from the US totalled $2.6bn, equivalent to 4.6% of total imports during the same period.
A large portion of Egypt’s exports to the US comes from the Qualifying Industrial Zones (QIZ), which comprise around 45% of Egypt’s total exports to the US and about 2% of Egypt’s total exports. QIZ exports to the US amounted to $ 895.1m in 2015. The agreement between Egypt, the US, and Israel was signed in 2005, granting duty-free entry to the US for products jointly manufactured by Egypt and Israel. Originally, QIZ products had to have 11.7% of their content comprised of Israeli inputs in the form of labour and/or material, but as of January 2008, the minimum content requirement was reduced to 10.5%.
Furthermore, in 2015 Egypt and Israel agreed to double duty-free textile exports to the United States to $2bn in a 3 year period, in addition to planning the addition of other industrial sectors to the agreement, such as food and plastics, in order to contribute more to the Egyptian economy, according to Gabi Bar, the head of the Middle East desk at the Israeli Economy Ministry.
“Our QIZ agreement with Egypt keeps getting stronger,” Bar said recently.
“It was strong under the Mubarak administration, but surprisingly got even stronger when Mohamed Morsi took over Egypt’s leadership in 2012, and now with Al-Sisi leading the country, it continues to flourish,” according to Ohad Cohen, who heads the Foreign Trade Administration at the Israeli economy ministry, as reported by the “Times of Israel.”
Economics professor at Cairo University Fakhry El-Fekki believes that Trump’s administration will positively affect the agreements between Egypt and the US, especially regarding the QIZ. He added that the amendment and promotion of the agreement will encourage other companies from other countries to invest in the Egyptian market—such as China—in order to make use of the agreement’s privileges.
Moreover, the US foreign direct investments (FDI) in Egypt registered at $ 21.3bn in 2015, making up around 33.2% of US direct investment in Africa. Egypt’s Minister of Investment and International Cooperation Sahar Nasr announced on Tuesday that Egyptian authorities are looking forward to a new phase of Egyptian-American relations and aspire to achieve greater economic cooperation and more US investment.
Prospects of stronger partnership
In the wake of the new age of terrorism, the ongoing battle against the Islamic State (IS) insurgency in Sinai, Iraq, and Syria. The importance of a stronger Egyptian-US relationship intensifies as counterterrorism is one of the most important issues for the new US administration, which could create common ground for deeper relations between both countries.
Anis Aclimandos, president of American Chamber of Commerce in Egypt (AmCham), expressed the importance of Al-Sisi’s visit to the United States in April. He highlighted the importance of the summit between Al-Sisi and his American counterpart, Trump, in strengthening the Egyptian-American relations in all fields—in particular the political and economic ones.
He added that a delegation from the Egypt-US Business Council (EUSBC) and AmCham will take part in the visit to hold meetings with American investors and businesspeople. During the meetings, the Egyptian side will explain the economic circumstances in their country and the government’s efforts to improve the investment climate.
Moreover, US ambassador to Egypt Stephen Beecroft said the US will work with Egypt to confront ongoing problems in the coming period—particularly regarding the economy—pointing out that the US has provided Egypt with aid and investments worth $70bn since 1979.
