CAIRO: As Egypt liberalizes its economy and moves closer to the European economic sphere, it could be doing so at the expense of its trade relationship with the US, warns an Egyptian business leader.
The growing ties behind the EU-Egypt economic partnership have been bolstered by the Euro-Mediterranean neighborhood policy and other agreements, but no such official agreements exist with the US, says Magda Shahin, a director at the American Chamber of Commerce in Egypt.
Shahin points out this could mean a squandering of significant business potential with the US.
“My sense is we’re missing such a dialogue with the US, she told a gathering of business leaders on Sunday.
While the US is still Egypt’s largest trading partner, with about LE 34 billion in trade last year, the EU is working towards the creation of a Euro-Mediterranean free-trade zone by 2010. To help Egypt’s economy get up to par, Europe is extending aid, grants and the transfer of technology in preparation of the deadline.
The Euro-Mediterranean agreement also allows for a transitional period designed to favor Egypt. During the first year of the agreement, the EU will drop its tariff barriers and allow Egypt free access to its markets, but Egypt won’t have to drop tariff barriers for another 16 years, meaning domestic industries will be protected and given a chance to ramp up their business models.
But while these terms are favorable to Egypt, “it’s not in our favor to keep the US away, says Gamal El Din Bayoumi, a representative from the Ministry of International Co-operation.
According to Ayman Zein El-Din, a representative from the Ministry of Foreign Affairs, “what we need to recognize [is that] Egypt and the United States are deepening their relationship with other partners, and without having formal trade agreements, “we might go our separate ways to the detriment of our long-term relationship.
Currently, a large growth area in the Egypt-US relationship has been through Qualified Industrial Zones (QIZ), which allow goods to be shipped without protectionist tariffs to the US. During the first 11 months of last year, Egypt exported about LE 3.5 billion worth of goods through QIZ – 22 percent of all exports to the US.
“QIZ have helped put Egypt on the radar screen, says Ali Anwi, who works in the Ministry of Trade’s QIZ unit. He adds that “this creates a very interesting pull. This wasn’t the case two years back.
However, while QIZ have been a “bright spot, we should move beyond this and push for a full-fledged free trade agreement with the US, says Anwi.
This will require Egypt to ramp up and renovate its economic structure and infrastructure, “because you need to be in good shape before you can benefit.
“The problems we’re having with Egypt are the heritage of 40 to 50 years of socialism, says Anwi, who adds that even with the growth of the QIZ, Egypt has a deficiency of skilled labor.
“FTA is much deeper than QIZ, but are we ready? I think we’re not. I think we have to do some homework before we can go for it.
An FTA could be a long way off, according to William Stewart, an economic affairs counselor at the US embassy.
“My sense is that the FTA is something we’re going to have to think about more long term, he says, noting that the latest Bilateral Investment Treaty, taken along with the existing Trade and Investment Framework Agreement (TIFA) provides a framework and a mechanism for a growth in trade.
Stewart adds that “if you become so concentrated on just [free trade] agreements it can “stop you from moving ahead.
However, according to Essam Montasser, an economics professor at the American University in Cairo, rather than concentrating on Europe and the US, Egypt should look to other Arab states for increased trading opportunities, which can then present a unified bloc in the global economy.
“Egypt now has no production structure. We import energy, food and capital goods. Are a few textiles going to make this up?
He noted that the explosive economic growth in the Gulf States is outpacing that of American and European economies.
