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Egyptian-Turkish trade agreement comes under fire

Al-Monitor | 9 February 2021

Egyptian-Turkish trade agreement comes under fire

by Hagar Hosny

CAIRO — In the presence of Egyptian Minister of Trade and Industry Nevin Gamea during a parliament session Feb. 2, Hafez Omran, a member of the parliamentary Industry Committee, called for the need to reconsider the free trade agreement between Egypt and Turkey, stating that such an agreement is to the detriment rather than in the interest of Egypt.

“Turkish goods enter Egypt as per the ’zero customs’ agreement. Turkish exporters to Egypt are granted export subsidies from Turkey of about 19%, with the aim of exporting products to the Egyptian market at prices less than the manufacturing cost, which affects the Egyptian industry in terms of its competitiveness,” Omran said.

Turkey and Egypt signed the free trade agreement on Dec. 27, 2005, which entered into force on March 1, 2007. The agreement aimed at establishing a free trade area between the two countries within a period not exceeding 12 years from the entry into force.

According to the government-run State Information Service website, the agreement provided, among other items, for the increase and strengthening of economic cooperation between the two parties, removal of obstacles and restrictions on commodity trade, and consolidation of Turkish investors’ confidence in the Egyptian economy, which encourage them as well as Turkish businessmen to direct their investments toward Egypt. In addition, the agreement allows Egyptian goods to enter Turkey and European markets.

Since the agreement came into force, all customs duties restrictions on trade in goods between the two countries had been canceled. According to the agreement text published on the official website of the Egyptian Ministry of Trade and Industry, neither country may impose any fees of similar effect or new restrictions.

The agreement, which was supposed to expire by the end of 2020, ought to be currently under evaluation by both sides to take a decision to freeze or renew it. Yet, so far, no steps have been taken from either side in this regard. Meanwhile, there have been calls to review the deal amid concerns that it would be renewed.

Yaman al-Hamaki, a professor of economics at Ain Sham University in Cairo, told Al-Monitor via phone, “The evaluation of any agreement necessitates a study of the economic indicators and the trade balance during the agreement’s implementation period, which includes the values of exports and imports from the two countries and the differences between them.”

She added, “The trade balance between the two countries is obviously tilted in favor of Turkey, which is benefiting more than Egypt from the agreement. This is due to the fact that Egypt’s local industry cannot compete with Turkish goods. This is evident, for instance, in Egypt’s imports of home appliances from Turkey, which are popular in Egypt."

Studying and evaluating the commercial indicators would allow Egypt to try and bridge the gaps — if any — and better implement the agreement in such a way to achieve greater economic interest to the country, according to Hamaki.

In 2018, under the agreement, Cairo and Ankara achieved a record in the volume of intra-trade, despite the political tensions between the two sides, according to statements by Mustafa Kemal Eddin Arigor, Turkey’s charge d’affaires in Egypt. Speaking at a breakfast gathering organized by the Turkish-Egyptian Businessmen Association and the Turkish Culture Center on May 25, 2019, Arigor said that the trade volume reached $5.24 billion, and the volume of Turkish exports to Egypt amounted to $3.05 billion in 2018, which is an increase of about 29.4% compared to 2017. Meanwhile, Turkish imports from Egypt reached, in the same year, $2.19 billion, an increase of 9.68% compared to the previous year, he added.

Bashir Abdel Fattah, a researcher on Turkish affairs at the independent Al-Ahram Center for Political and Strategic Studies, told Al-Monitor via phone, “Free trade agreements are signed between countries to remove restrictions on intra-trade movements, and are usually more beneficial to the country with the greater capacity of manufacturing and exporting, given the advantages granted to exporters under the agreement, generating greater profits.”

Abdel Fattah said, “Turkey’s production and export capacity is greater than that of Egypt by virtue of its association with the European Union. This is not to mention Turkey’s industrial structure, which tips the balance of profits under the agreement in Ankara’s favor.”

He noted, “Therefore, calls to reconsider the agreement with Turkey are more linked to the deteriorating political relations between Cairo and Ankara over the past few years."

Political relations between Egypt and Turkey have witnessed remarkable tension since the ousting of former Egyptian Muslim Brotherhood-affiliated President Mohammed Morsi in 2013, which Turkish President Recep Tayyip Erdogan described at the time as a “military coup.”

More recently, tension has escalated due to Egypt’s condemnation of Turkey’s aggression in the eastern Mediterranean region, as Ankara has been adamant about exploring gas in the Mediterranean near the borders of Greece and Cyprus (riparian countries with Egypt). What’s more, Turkey’s military forces and armed militias are present on Libyan territories, bordering Egypt from the west, to support the forces of Libya’s Government of National Accord, headed by Fayez al-Sarraj, in the face of the Libyan National Army led by Khalifa Hifter, supported by Egypt.

Basant Fahmy, a member of the parliamentary Economic Committee, told Al-Monitor via phone, “No trade agreement would be totally beneficial to one party at the expense of the other,” stressing that the evaluation of the agreement with Turkey ought to be based on a scientific approach away from sentiments and political relations.

“In general there is no problem in the agreement. Those who believe that some of its items ought to be amended must mention such amendments in detail, without jeopardizing the agreement as a whole,” she concluded.

 source: Al-Monitor