Al-Ahram Weekly, Cairo, 9 - 15 March 2006
When the time is right
A free trade agreement with the US is on hold, and nobody is saying for how long, writes Nevine Wahish
"The time is not right." US Commerce Secretary Carlos Gutierrez’s terse statement summed up his answers to repeated questions as to why negotiations for a free trade agreement (FTA) between Egypt and the US appear to have been abandoned.
The highlight of Gutierrez’s one-day visit to Cairo last week should have been the signing of a memorandum of understanding reconstituting the US-Egypt Business Council. It came as no surprise, though, that few were interested in the details of the council. What people wanted to know is why the launch of FTA negotiations — expected in January — had been delayed.
Gutierrez reiterated statements made by US Secretary of State Condoleezza Rice during her recent visit to Egypt. "The environment has to be right," he said, before negotiations can be launched. He pointed out that the US administration had faced a difficult time pushing the US-Central America Free Trade Agreement (CAFTA) — which liberalises trade between the US and Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua — through Congress.
"We want to get it [the FTA with Egypt] through and avoid a situation whereby the environment does not enable the agreement to succeed. Our judgement of the best time to succeed will determine when to start," Gutierrez insisted. Later, at a press roundtable, he elaborated: "we have to be sure that we can convince people that this is not a time for protectionism [but] a time to be part of the global economy."
Given levels of protectionist sentiment in Congress, which the administration must furnish with a 60-day notification period before initiating FTA negotiations and a further 90- day period to review any deal that results, Gutierrez appeared to be suggesting that it would be difficult to win Congressional support.
Addressing members of the American Chamber of Commerce in Cairo (AmCham), he asked for "a little bit of patience" and stressed that "the right time will come".
In the meantime Egyptian officials and businessmen are coming to terms with the indefinite delays. As Minister of Trade Rachid Mohamed Rachid stressed, trade agreements are about mutual interests and not a gift presented by one party to another.
The Egyptian position is that it is not ready to enter into any agreement that has conditions unrelated to trade, though Rachid was keen to underline that the relationship between the two countries "develops into an FTA in a way suited to both parties".
Much of the preparatory work towards an FTA has already been completed. "We had arrived at a point where we could start negotiations," said Rachid.
For the best part of a year 14 committees had been following through on potentially contentious issues including intellectual property rights, customs and banking: the fact that following their work negotiations continued to be delayed suggests that this time round Washington had reservations not over a lack of substantial economic reform but rather over political reform.
AmCham’s annual door-knock mission — currently in the US — will not be pushing for the FTA "as it used to", says AmCham’s Executive Director Hisham Fahmi. Rather, it will do what it always has and seek to communicate and air issues from the private sector’s perspective. The mission’s main aim, says Fahmi, will be to draw attention to the business- friendly environment that has resulted from reforms already undertaken. And while the business community still believes that the FTA would be a good thing "if the US says that it is not ready then so be it."
Fahmi does, however, point out that the delay could result in quantities of Egyptian trade being diverted to the EU with which Egypt has an association agreement allowing tariff-free access to the EU market.
Egypt, believes Fahmi, has done its share in terms of the reforms needed to kick-start FTA negotiations. It is a point on which Gutierrez appeared to agree, praising reforms already implemented and encouraging more: "that would speed up the process of negotiations," he said, adding that both sides should continue foster an environment in which business can prosper.
"The point is to not stop, to continue making progress on reform, to adjust our systems to be able to have an FTA. A lot of the things you do for an FTA make sense anyway, are good for the economy so you might as well do them and we would have made up ground when the time comes," he told reporters.
Meanwhile, Gutierrez refused to be drawn on what political considerations might have swayed the administration’s decision, arguing that his mandate did not extend beyond the purely commercial.
While praising Egypt’s reform efforts he highlighted that much work remains to be done, particularly in the area of intellectual property rights. And he expressed his hope that through the business council the private sectors in both countries will have ample space to develop their relationship.
With the FTA now in limbo, Fahmi said that businessmen will concentrate on other initiatives to increase trade and investment, to which end AmCham has planned a conference in New York during the mission promoting investment opportunities in Egypt.
The US is Egypt’s largest trading partner, accounting for 16 per cent of Egypt’s total trade, though between April-June 2005 Egypt ranked only 54th — with 0.2 per cent — in terms America’s own trade. Trade between the two reached $5 billion last year, with Egypt exporting $1.8 worth of goods. It had been hoped that an FTA would spur a significant increase in that figure.
"The importance of this market is that it is growing, as is our penetration of the market. The agreement would help, though in its absence we will continue to do what we have been doing," said Rachid.
There is concern that delaying negotiations could mean they get pushed back as far as 2010. Within a year the US administration will lose its Trade Promotion Authority, the "fast- track" mandate that enables the White House to ask for Congressional approval on trade deals without allowing amendments to be made. In 12 months time Congress will be able to reject specific articles of any agreement, making it a much more time consuming business to finalise any agreement.
Four Arab countries — Jordan, Morocco, Bahrain and Oman — have already signed FTAs with the US as part of the latter’s long term goal to see the emergence of a Middle East Free Trade Area by 2013.