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Strengthening ties – An Egypt-US Free Trade Area – June 2010

Strengthening ties – An Egypt-US Free Trade Area – June 2010

“So I propose the establishment of a U.S.-Middle East free trade area within a decade, to bring the Middle East into an expanding circle of opportunity, to provide hope for the people who live in that region.”
– George W. Bush

On July 1, 1999, in Washington D.C. Egypt and the United States (US)) signed the Egypt USA Trade and Investment Framework Agreement (TIFA).  The purpose of the Agreement is to facilitate and expand the trade in goods between the two countries.  Also, the Agreement is deemed to be an initial pace to form an Egypt US Free Trade Area (FTA).

On May 9, 2003, the former US president, George W. Bush, urged for the formation a US Middle East Free Trade Area (MEFTA).

Being a developing country, Egypt could economically benefit from the establishment of an Egypt US FTA because the levels of Foreign direct investment (FDI) in Egypt will increase, leading to a less need of American aids to be provided to Egypt.  Moreover, the market access will be enhanced, the Egyptian consumer will have a variety of choices and political ties between the two countries will get stronger.

About 33 Egyptian companies are classified under the Qualified Industrial Zones (QIZ) to export goods to the US duty free, but the Egyptian producers must comply with a rule of origin indicating that 10.8% of the Egyptian product must be of Israeli components.  Because of such condition, only 166 out of 733 companies take advantage of the QIZ.   However, with the establishment of an Egypt US FTA, all of the Egyptian companies (plus those established in Egypt as a result of the FDI there) would try to export their products to the US to take advantage of the duty free access without the mentioned condition.

As a matter of fact, the US is expected to ask Egypt to comply with specific conditions before forming an Egypt US FTA.  These conditions would be related normally with Intellectual property rights and environmental and labor standards.   Of course it would not be easy for Egypt to meet these standards, but at least the proper compliance with them would help in the development process of Egypt.

In 1995, after five years from conclusion of the Egypt US TIFA, 47% of the Egyptian crops imports were from the US, 34.7% of the Egyptian furniture imports were from the US and 20% of the Egyptian rubber and plastics imports were from the US.  Moreover, 49.1% of the Egyptian apparel exports were in the US market and 10.6% of the Egyptian furniture exports were in the US market.   If the TIFA resulted in the improvement of the trading relationship between Egypt and the US, then this indicates what the formation of an Egypt US FTA could do in strengthening the Egyptian US trading ties… HOPEFULLY SOMEDAY.

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