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Trading diplomacy

Al-Ahram, Egypt

Trading diplomacy

Niveen Wahish and Dina Ezzat seek the real story behind delayed US-Egyptian negotiations on a bilateral free trade agreement

26 January - 1 February 2006

This week the issue of a potential US- Egyptian free trade agreement (FTA) emerged back in the spotlight. Reports coming from Washington suggest that the Bush administration has once again put on hold Egypt’s long aspired to dreams of a bilateral FTA. The reasons offered by the US administration this time, as relayed through trade diplomats and other officials, were not typical complaints over lax governmental efforts to pursue substantial economic reforms, as required by the US administration. Egypt’s slow pace of political reform — as assessed by Washington — is the sticking point now.

Conspicuously, shortly after US Vice- President Dick Cheney visited Cairo for talks on a host of regional issues, trade sources in the US told the American press, which has quietly been advising the administration to bloc FTA negotiations with Egypt, that a visit by an Egyptian trade delegation to Washington was cancelled and that talk of an FTA was off.

On Tuesday, however, the office of Egyptian Trade and Industry Minister Rachid Mohamed Rachid, who has visited the US at least four times during recent months in the hope of kick-starting negotiations, denied that any invitation to the Egyptian trade delegation was cancelled. In a written statement, Rachid stressed that the negotiation process is still pending agreement on "certain outstanding commercial and political issues."

Signs are that these outstanding issues will remain unresolved throughout the remaining tenure of the current US administration. The US is Egypt’s largest trade partner. As of 2004, nine per cent of Egyptian trade was with the US. During April-June 2005, Egypt ranked 54th in terms of the total trade with the US (0.2 per cent of US total trade). Egyptian exports to the US in 2004 reached around $1.3 billion while imports amounted to $3.1 billion, according to Ministry of Trade figures. A free trade agreement, officials and businessmen say, could significantly bolster these figures.

For now, officials and businessmen admit, trade and investment hopes are dashed. Neither the US administration nor Congress is particularly keen to move forward. Both regard this as an unfortunate — and to a great extent unexpected — turn of events, since Egypt, they say, has made many political and economic moves in the hope that negotiations could be launched as early as this month. Seemingly, the US administration disagrees.

The case of the Ghad leader Ayman Nour, who was recently sentenced to a five-year prison term for supposedly forging signatures to increase the number of registered members of his party, is cited by some US sources as key to recent developments. However, some well-informed sources suggest that while the US is generally unimpressed with Egypt’s record of political reform, and despite the fact that some Egyptian and American activists have been lobbying Congress and the US administration relative to Nour’s case and others concerning political rights, the fact of the matter is that Washington is unhappy with Egypt’s stance on a host of regional issues, including its reluctance to back the US agenda at the International Atomic Energy Agency and in the UN Security Council, and its opposition to sending Egyptian troops to Iraq to help the US out of its quagmire. Postponing trade agreement talks are there for a "retaliatory measure".

Egyptian officials disagree amongst themselves on who is really responsible for the current failure but are willing to admit that it is a collective responsibility borne of decisions — some of which pertaining to national security — many of which were unavoidable. "Egypt has done all it could in terms of improving diplomatic and trade relations with Israel. We have taken serious steps of political reform, even if they are not the best we could have done, and we have been exercising regional diplomacy that is generally accommodating of US concerns. But there are lines that we cannot cross, even in seeking to have an FTA," commented one source.

Informed sources say that Cairo is currently considering a series of steps to contain strong anti-Egyptian sentiments in US Congress. Some of the contemplated ideas include a declaration of a roadmap of political reforms, while others include the declaration of a firm stance against some security officers who were charged with obstructing the process of legislative elections during the autumn. No ideas are being shared on the file of Ayman Nour, whose case goes to appeal in coming months.

Egypt was very much hoping to finalise negotiations with the US administration by early next year, to allow the administration to present a deal to Congress for approval (usually given) by the summer of 2007 before the July expiry date of the Trade Promotion Authority — a body that might ease otherwise harsh scrutiny of the deal on the part of Congress. Rules require the administration to give Congress a 60-day notification period before it initiates trade agreement negotiations and a 90- day period to review any resultant deal.

For its part, the business community is feeling very disappointed. Speaking to Al-Ahram Weekly, some senior business sources expressed their concern that politics is intervening with business. "The issue has become so politicised; we are not sure to what extent our input as businessmen can help," said one businessman who asked for his name to be withheld.

Nonetheless, members of the business community are rallying. Congressional staffers who were in Egypt last week were loaded with messages directed to their employers, urging them to understand that the FTA is crucial to the reform effort and can not be considered a reward for reform. Even US companies operating in Egypt have promised to deliver the message. Neville Isdell, chairman and CEO of Coca Cola Company, who was in Cairo last week, stressed the importance of the FTA for the two countries, and according to one informed source promised to lobby for the agreement back in Washington.

The business community is working under a very tight deadline, knowing that if not launched within four weeks negotiations are almost certainly doomed to be pushed back as far as 2010. Diplomatic and trade sources as well as members of the business community note that it is very important that Egypt garner support in Congress. According to Washington-based diplomats, Egypt is trying hard, but this is not proving an easy assignment.

Egyptian officials argue that the fact that President Hosni Mubarak missed his annual trip to the US last year, and that "nothing is certain yet" regarding any trip this year, is not proving helpful to the image of Egyptian-US relations in Congress, despite efforts exerted by the Egyptian Embassy in Washington. Further, it is widely accepted in Egypt that even if the political element is addressed in one way or the other, negotiations are bound to be hard and to involve serious compromises on the Cairo side.

Trade sources admit that the whole saga of an FTA with the US has become an irritating process. "The US has been moving the goalposts every time it looks like we will score," said one source. When negotiations came to a standstill last time it was over the issue of genetically modified foods, immediately before the Cancun Ministerial Conference in 2003. "At least it was a trade issue we differed upon," the source commented.

The US administration, meanwhile has not given a straightforward answer as to whether or not they have suspended the possibility of launching FTA talks. Robert Portman, US trade representative, has been cited as saying that the US still sees "tremendous potential economic opportunities" in pursuing a bilateral trade agreement with Egypt. He added that the US thinks an FTA would help to support and encourage economic reforms that are already underway in Egypt. Portman nonetheless stressed that, "we still have both commercial and political concerns which may not allow us to launch formal FTA discussions."

Portman’s remarks come in the wake of recent statements by State Department Spokesman Sean McCormack, making clear that the US administration believes that political and economic considerations are interlocked, with "democratic reforms, good governance, going hand-in-hand with the expansion of economic opportunities and the expansion of trade."

So far, four Arab countries (Jordan, Morocco, Bahrain and Oman) have signed FTAs with the US. The various FTAs the US is concluding throughout the region are part of a broader plan to create a Middle East Free Trade Area by 2013.

Hopes of a near launch of FTA negotiations surfaced last year when Egyptian and US officials met under the umbrella of the Trade and Investment Framework Agreement (TIFA) first signed in 1999. Since last year’s meeting, technical working groups have been discussing various topics in preparation for the launch of FTA negotiations.