Ten years passed this month since the Association Agreement between Egypt and the European Union (EU) came into force. The agreement gave the green light to establishing a free-trade area with the elimination of tariffs on industrial products. This has entitled the tariff-free entrance of Egyptian industrial products to European markets without restrictions on quantities since January 2004. There has also been a gradual abolition of customs duties on European industrial products entering Egypt over the past ten years. The original agreement was annexed by another in June 2010 to give the same treatment to Egyptian agricultural, processed agricultural and fisheries products. According to figures from the Ministry of International Cooperation, since 2004 Egypt-EU bilateral trade has more than doubled, reaching its highest level ever in 2012 and going from 11.5 billion euros in 2004 to 23.8 billion euros in 2012. According to Minister of Planning Ashraf Al-Arabi, the EU is Egypt's largest trading partner, with bilateral trade counting for 30 per cent of Egypt's total foreign trade. Egypt's exports of goods to the EU are dominated by energy, followed by chemicals, textiles and clothes, while its imports consist mainly of machinery and chemicals. Egypt's imports of services from the EU are dominated by business services, while its exports to the EU consist mainly of travel services and transport. The relationship between Egypt and the EU was further strengthened with the implementation of the European Neighbourhood Policy in 2007. This offers EU neighbours, including Egypt, certain privileges under a mutual commitment to common values such as democracy, human rights, the rule of law, good governance, and sustainable development and the principles of the market economy. Gamal Bayoumi, Secretary-General of the European Partnership Unit at the Ministry of International Cooperation and the main negotiator of the agreement from the Egyptian side, told Al-Ahram Weekly that bilateral cooperation had been deepened through the application of regulations by both sides. Since 2007, EU financial cooperation with Egypt has fallen under the European Neighbourhood and Partnership Instrument (ENPI) that defines priorities for financial cooperation. These priorities include supporting political reform, human rights, the judiciary, economic reform and the sustainable development. According to Bayoumi, the bilateral ENPI budget for Egypt for the three-year period 2011-2013 was 449 million euros, an average of broadly 150 million euros annually, which represents an increase of over five per cent compared to the previous programming period of 2007-2010 that totalled 558 million euros. The funds are allocated for projects in different sectors, such as improving education, human resources development, better management of available water supplies, upgrading civil society's role in developing the society and developing energy services to meet international levels. According to Alaa Ezz, Secretary-General of the Egyptian Federation of Industries, the EU is the source of 60 per cent of Egypt's foreign direct investment (FDI), representing more than 40 per cent of the EU total FDI to the Mediterranean countries. Egypt has received six billion euros from the European Investment Bank, more than 25 per cent of the total funds provided to the Mediterranean region, according to Ezz. More than half of these funds were directed to the private sector in industry, energy, transportation and small and medium enterprise (SME) projects. Since 2012, no additional funds have been approved by the EU for direct budget support to Egypt because of what the EU has described as the country's “lack of reforms.” After the ousting of former Islamist president Mohamed Morsi last year, the EU exerted pressure on the interim government to settle disputes with Morsi's backers. In August 2013, members of the European Council agreed that five billion euros, a package of grants and loans promised by the EU during Morsi's rule, should be held back pending progress to the “return of democracy.” Other members threatened that the EU could suspend a broad deal dating back to 2011 that includes provisions for a free-trade area in industrial goods and concessions on agricultural products. Bayoumi said that economic relations with the EU had not been negatively affected by the political instability in Egypt during the past three years, however. “Nothing has been changed, and bilateral economic cooperation is going on as previously agreed,” he said. According to Bayoumi, the EU had allocated an additional 500 million euros to support Egypt, but the money was to be disbursed when Egypt was able to finalise its pending agreement with the International Monetary Fund, according to James Moran, head of the European Union delegation to Egypt. Together with European development finance institutions, Moran added that the EU had kept up the flow of funding to key infrastructure developments, one example being the recent one billion euro investment in line three of the Cairo metro, and that the EU was working with the Egyptian government to enhance bilateral trade and investment. Moran said that there were well over one hundred joint programmes operating, from food security to solar energy and scientific research. The Tex Med Cluster was the newest project launched two weeks ago in Alexandria within the framework of the European Neighbourhood Policy Instrument, he said. The project aims at transferring technology and management sciences, upgrading human resources and attracting investment. The Tex Med Cluster is designed to connect seven groups of Egyptian textiles companies with seven of their counterparts in Italy, Spain, Greece, Tunisia and Jordan. The project is being managed in cooperation with the Federation of Egyptian Industries and the Arab Academy for Sciences and Technology. Egypt and the EU were currently negotiating a new phase of cooperation and were soon to sign an agreement under the EU's Single Support Framework permitting more cooperation in the long term, Al-Arabi said during the tenth anniversary celebrations.
