Cairo angered by US trade talks freeze

Financial Times, London, 25 February 2006

Cairo angered by US trade talks freeze

By William Wallis in Cairo

Rachid Mohamed Rachid, Egypt’s trade and industry minister, criticised Washington yesterday for mixing business with politics in its decision to freeze negotiations on a free trade agreement.

Mr Rachid said data released this week for the fourth quarter of 2005 showed gross domestic product growth in Egypt rising above 6 per cent. The volume of industrial growth rose above 8 per cent - its highest level in more than a decade - on the back ofeconomic reforms launched in mid-2004 and a surge in foreign direct investment, he added.

Mr Rachid, a former Unilever executive who was appointed to the cabinet alongside other reform-minded ministers in 2004, has spent months preparing Egypt’s negotiating positions in expectation that talks on a free trade agreement would begin in January.

Washington decided to postpone talks after widespread fraud and violence in December’s parliamentary elections and the jailing of Ayman Nour, a liberal opposition leader. Mr Nour, who was a distant runner-up to President Hosni Mubarak in the country’s first contested presidential elections in September, has appealed against a five-year sentence forforgery.

The US decision could represent a significant setback to Egypt, as President George W. Bush’s prerogative to negotiate trade agreements expires in July 2007.

Under the president’s "trade promotion authority", Congress restricts itself only to approve or reject a negotiated trade agreement within strict time limits and without amendments.

"The USA has committed itself to have a free trade agreement with all of the Middle East by 2013. There is no way to have a free trade agreement with the Middle East without having an FTA with Egypt," Mr Rachid said.

"The objective then was that this was going to help create a better environment in the Middle East and a better relationship with the US on the business side. All these assumptions are still valid."

Egypt’s political reforms, however, have been far less convincing than recent efforts to revive the economy.

Explaining the decision to delay the trade agreement, on a visit to Cairo this week, Condoleeza Rice, the US secretary of state, said the "time is not right now for that…but we will continue to discuss it". Earlier, she indicated that setbacks to democratic reform in Egypt had affected the climate in Congress, where a free trade deal would still have to win approval.

Mr Rachid said a separate agreement with the US that allowed Egypt to export ready-made garments and other products to the US duty free, provided they include components from Israel, had helped Egypt’s textile industry remain competitive since the end of the world textile quota system last year. But longer-term strategies for Egypt’s textile and other industries partly hinged on achievement of a trade deal with the US.

"The FTA in itself for us is a very serious economic reform that should have been seen separately," Mr Rachid said. "I know from all my life experience that investors and traders want to make sure that their investments and trade are not linked to politics, because politics will always have ups and downs."

Washington has given no indication as to when it might reconsider negotiations with Egypt.

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source: FT