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FTA... at what cost?

Business Monthly, March 2006

FTA... at what cost?

American Chamber of Commerce in Egypt

At a recent AmCham gathering, discussions with a US congressional staffer made clear that if FTA negotiations were not launched soon, Egypt would have to wait until at least 2010. The US administration’s fast-track authority to establish trade agreements expires as of mid-2007. Prior to launching negotiations, the congress must be notified and must also receive the final agreement 90 days before the fast-track authority expires. This leaves precious little time for Egypt to enter the process, and the explicitly political conditions that America has stipulated suggest that the opportunity for both parties may be lost. But the consequences of stalling the agreement or imposing it against Egypt’s better judgement may be more negative than America thinks.

A US-Egypt FTA will not be easy to negotiate, since both US demands and Egypt’s economy are complex.

Generally, US FTA’s are "deep" as opposed to "shallow" trade agreements, effecting domestic legislation as well as impacting sensitive areas of an economy. As such it will require careful examination, discussion, compromise - and therefore time. An appropriate agreement, one that serves both the Egyptian people’s and US business interests, cannot be achieved under undue pressure.

At AmCham we’ve lobbied for over a decade to hasten economic reform, to build a stable future, to pave the way for an FTA to deepen our economic gains and enhance US trade and economic relations. We’ve worked hard to make our vision of an open market a workable reality. Indeed, economic conditions stood between us and an FTA for many years; so long as governmental reform efforts were unsatisfactory, both our private sector and the American authorities were frustrated in the attempt to achieve the sought-after FTA.

But since 2004, the Nazif government demonstrated strong commitment and momentum, and the FTA was back on track. By its own admission, America was impressed with our progress, and the private sector took heart. We back the new government, some of whose members were drawn from our ranks, and feel that the path we’re following is the right one. What’s more, we’ve seen unprecedented political reform in the past months, underlining our belief that a democratic Egypt is within our grasp. That is why the recent decision to stall the talks is not only unfair, but disturbingly counter-productive.

It took time to transform Egypt from a centralized to a market economy. The work is ongoing; the institutional and legislative reforms required are daunting but have nevertheless begun. The fact that so much has been achieved in the absence of social upheaval is highly significant. Likewise political reform, for a country reinventing itself, is a long and arduous process, requiring the re-education of a people unaccustomed to civic responsibility and the revamping of a system that has long resisted change.

Nevertheless, important steps have been taken and more are in the works.

The public is awakening to the possibilities of a democratic Egypt and the government is responding to its demands for political reform. It is worth noting that the writing of the American constitution itself took years, and that limited terms of presidential office are a relatively recent development in American politics.

Why then should we be expected to act in haste when so much lies in the balance?

The question then is whether or not we are willing to risk our painstaking progress in order to meet the requests America has seen fit to attach to the FTA. We long for democracy and the economic stability that supports it. An FTA would help by granting better access to the opportunity-rich US market, reinvigorating the Egyptian economy and thereby facilitating political reform and democracy. But an FTA won’t help if it comes at a price that may jeopardize our future and that of our children.

The threat of Islamic radicalism is growing daily in magnitude and geographical scope, a fact of which we Egyptians, representatives of a hard-won private sector, are acutely aware. Rebuilding a nation requires the people’s trust and participation and we feel we know how best to achieve these goals. By compromising this knowledge and rushing into an FTA with the kind of political conditionality envisaged by the US, we would open the door for a radical response. This would result in the marginalization of women and religious minorities, the backtracking of economic gains, including the loss of tourism and badly needed FDI, and, above all, of our chances for a secular participatory government. It is a risk we are unwilling to take.

The general consensus of the Egyptian private sector is that an FTA should be based on economic conditions, most of which we’ve met. And just as we’ve forged ahead economically, we will, on our own terms, continue our political reforms. Basing the agreement on an imposed political agenda is unfair and unwarranted. We will content ourselves with our normal trade relations as close friends and allies, and do without an FTA.

 source: Zawya