Freedom isn’t free
Business Today, Cairo
February 2006
Freedom Isn’t Free
Disarray on the political side of the house casts the side of free-trade talks with the United States into question
By Hadia Mostafa
Before heading to the World Economic Forum in Davos last month, US Trade Representative Amb. Rob Portman (USTR) briefed journalists in Washington on the status of several pending free trade agreement (FTA) negotiations.
“We’ll be announcing some additional FTA partners soon,” Portman said. “As I think you will notice, they will not be with small economies, because I do think we need to move on to some larger economies.” He cited South Korea, the seventh-largest US trading partner, and Malaysia, a fast-growing Asian economy, as likely candidates.
As for the Middle East, Portman had just days earlier signed an FTA with Oman, making the Gulf state the fifth country in the Middle East to have negotiated an FTA with the US after Israel, Jordan, Morocco and Bahrain. Portman also announced that the next FTA negotiation in the Middle East would probably be with the United Arab Emirates.
Egypt was conspicuously absent from Portman’s list of upcoming FTAs. His remarks on that front were: “Both political and economic issues present obstacles to an FTA with Egypt, the largest Arab country. They are beginning to reform and liberalize their economy, but we’re not quite there yet in terms of the economic or commercial side.”
His curt statement, which did not elaborate on the political obstacles, was a concise account of the recent fallout between the two countries, a fallout that has prevented the formal start of trade talks that Egypt has coveted since President George W. Bush took office in 2000.
Things appeared to be on track in 2004 as the Nazif government embarked on a new era of economic liberalization. The reformist Cabinet’s sweeping economic reforms won praise from Washington and renewed hope that an FTA might become a reality.
Trade and Industry Minister Rachid Mohamed Rachid moved the nation even farther along the road to an FTA with the Qualified Industrial Zone (QIZ) agreement with the US and Israel in December 2004. The forward-thinking minister hoped that Egypt would be following in the footsteps of Jordan, which signed a QIZ in 1998 and only two years later had a full-fledged FTA. Jordan’s exports to the US have increased from $10 million in 1999 to $1.5 billion in 2005.
President Hosni Mubarak’s constitutional amendment allowing multi-candidate presidential elections seemed to appease US concerns on the political reform front, and technical talks ahead of the expected start of formal negotiations wrapped up successfully late last year. But with Western media reports of rampant irregularities and violence at the polls during the second and third round of last fall’s parliamentary elections, American diplomats have started raising questions about whether Egypt is practicing true democracy. Still, Washington appeared ready to give Egypt the benefit of the doubt in the hope that during his new term in office, Mubarak would carry out further political reforms as promised.
In late November and early December, Rachid confirmed that Egypt was in unofficial FTA negotiations with the US. Working groups were to travel to Washington and discuss preliminary issues such as investment climate, customs and intellectual property rights as well as the general impact that an agreement of this nature might have on the two economies.
Rachid claimed this was a necessary stage so that once formal negotiations began, they could be completed quickly and cleanly. In fact, the minister was so optimistic that upon his return to Cairo from the WTO’s Ministerial Round in Hong Kong, he was quoted in the local edition of the Daily Star as saying that “an FTA agreement with the US could be concluded within one month.”
Washington did not reply with a conclusive affirmation.
Shortly after Rachid’s statement, two back-to-back events caused the situation to unravel precipitously for the government. With the December 25 sentencing of opposition Al-Ghad Party leader (and American darling) Ayman Nour to a five-year term for forging signatures on party applications and the Sudanese refugee debacle, the Egyptian government bade farewell to 2005 with a bang.
Judge Adel Abdel-Salam Gomaa, the same one who found American University in Cairo professor Saad Eddin Ibrahim guilty of defamation three years ago, sentenced Nour to five years of hard labor on what the international community is calling ‘trumped-up charges.’ The ruling has unleashed a torrent of international condemnation and criticism of the Mubarak government’s refusal to liberalize its political attitudes and learn from past mistakes.
Less than a week later, Egyptian riot police stormed the square in front of the Mustafa Mahmoud Mosque in Mohandiseen, where over 2,000 Sudanese asylum seekers were staging a three-month sit-in to protest UNHCR policy. When the protestors refused to move peacefully, a chaotic scene ensued. Hundreds of police sprayed the asylum seekers with high-powered jets of cold water causing dangerous stampedes. Police were forced to drag demonstrators by the feet across the square into buses for transfer to detention centers.
The scene that night, as captured by television cameras broadcasting across the globe, appeared barbaric. Several news agencies reported that the police were responsible for the deaths of at least 27 people including women, children and the elderly.
The international community reacted with further criticism, rehashing Egypt’s less-than-honorable human rights record. While the US condemned the treatment of the Sudanese refugees, Nour remained the priority issue with the Bush administration, which had already intervened on his behalf last March when Secretary of State Condoleezza Rice canceled a visit to Egypt in protest of his arrest. Nour was released on bail shortly afterwards.
On December 23, the first of two scathing editorials appeared in the Washington Post, lambasting President Mubarak personally for his alleged persecution of Nour, who is now being heralded by the West as Egypt’s champion of secular democracy. The Washington Post went even farther, calling Nour a “freedom fighter;” Mr. Justice Gomaa, “a sycophantic follower” of the president; and the trial, “a vindictive persecution of Mr. Nour, whom he [the president] perceives as a political rival to his son, Gamal.”
The Post’s most recent editorial supporting Nour and denouncing Egypt ran on January 17. It claimed that as “a first step toward adjusting its relationship with Egypt following President Hosni Mubarak’s flagrant violation of his promises to lead a transition to democracy, an Egyptian delegation that was to visit Washington this month to discuss a free trade agreement has been disinvited, and the agreement put on hold.”
To make matters worse, Reuters reported that a senior congressional staffer told a gathering of businessmen at an American Chamber of Commerce in Egypt breakfast that if FTA negotiations were not launched within a few weeks, Egypt might not have another chance until 2010.
According to the USTR, this refers to the president’s authority to negotiate trade agreements on a fast track, which expires mid-2007. Under the fast-track system, Congress has to approve or reject a negotiated trade agreement within a strict time frame, without amending it. To have time to get trade deals through Congress by mid-2007, negotiations have to start moving quickly because there are several countries in line for trade talks with the US.
Egypt has denied that a specific Egyptian trade delegation invitation has been withdrawn by Washington. Rachid’s office says that there was no specific delegation scheduled to go to Washington in the first place. On January 24, the minister himself issued a written statement saying that formal negotiations had not yet begun “due to certain outstanding commercial and political issues,” without further elaboration on what those issues were.
While Rachid did not give credence to press reports that differences between the US and Egypt were so sharp that an FTA would not be concluded any time soon, his tone on the issue was decidedly more somber than it was a month ago.
“We are optimistic these issues will be resolved and that discussions will resume. But in the end, should Egypt and the United States choose not to conclude an FTA, then this will have no adverse effect on the long-standing friendship between us,” Rachid said in the statement.
Regardless of the impact on the general temperament of US-Egyptian relations, it’s a shame that Egypt has squandered the opportunity for an FTA that its economic reformers have worked so diligently towards for months because the country’s slow pace of political reform refuses to catch up with its economic achievements.
There is no reason Egypt should lag behind Bahrain, Jordan, Morocco and Oman.
We can argue the merits of an FTA and the United States’ right to dictate its political agenda to the Middle East in return for the privilege of free trade with the world’s largest economy. We can speculate on the innocence and integrity of Ayman Nour and his elevated status as the US’s new poster child for democracy. But what we can’t contest at this point is how tarnished Egypt’s image has become. Cosmetic reform can only go so far. Unless there is real political change, Egypt will continue to hamper its own prospects of becoming the global economic player it should be.
