After more than two years of estrangement, Egyptian and US trade officials are once again meeting to reactivate the Trade and Investment Framework Agreement, Niveen Wahish writes Following the talks between Rasheed Mohamed Rasheed, the Egyptian minister of industry and foreign trade, and Catherine Novelli, assistant US trade representative for Europe and the Mediterranean, the two officials highlighted the fundamental soundness of their relationship while emphasising that there is still much work to do before reaching a Free Trade Agreement (FTA). As Rasheed put it, "we do not have any differences about the destination of where we want to go. This does not mean that from where we are to where we want to go is a simple journey." During a press conference, the two high-ranking officials reiterated statements such as "this TIFA [Trade and Investment Framework Agreement] discussion is a continuum that will lead to our shared goal at the mutually appropriate time of entering into FTA negotiations and to deepening our dialogue" and "when you are at the position we are today, that is because of the totality of the relationship between our countries." While aiming to assuage doubts, these statements came short of what the press and the business community wanted to hear about the initiation of a free trade area. Despite their generally positive tone, these statements did not specify when such an endeavour would finally be launched. As Novelli said, "we have not entered a phase of actually negotiating the terms of an FTA at this point. Under our law, before we can sit down at a negotiating table we need to notify our Congress that we intend to do that, then there is a 90-day waiting period in which we undertake public consultations." The last time a TIFA meeting was held between Egyptian and US officials was back in 2002. Establishment of a TIFA is usually cited as one of the key stepping stones towards the initiation of a free trade area. At the time, a dispute over genetically modified foods was raging between the US and the EU, and Egypt sided with the EU. That position cost Egypt dearly. US Trade Representative Robert Zoellick abruptly announced that Egypt was not eligible for an FTA, though only a month earlier he had named it along with Morocco and Bahrain as candidates awaiting the start of negotiations. Last week's TIFA meeting, both officials said, was used to present Egypt's reform package and hear out American expectations. "We came away extremely impressed by what has happened so far and the determination to continue to persevere with further reforms," said Novelli. She pointed out that in the past such discussions were used to jump-start negotiations, "so that the negotiating phase can take less time." No date has been set for the next formal TIFA meeting, but both sides have agreed to hold smaller conferences on the expert level to work out technical details. Currently the US has free trade agreements with Israel and Jordan, while Morocco's FTA is nearly complete and a proposed FTA with Bahrain is before the US Congress. Negotiations with Oman and the United Arab Emirates, Novelli said, will start in the upcoming weeks. These agreements all fall into the framework of the creation of a Middle East Free Trade Area by 2013 which President George W Bush initiated in 2003. Rasheed stressed that there is no major roadblock preventing the launch of negotiations, "it's something we can do when it's appropriate," he said. An FTA is viewed as an opportunity to enter the US market tariff-free. That has already been partially provided for through the signature of the Qualified Industrial Zones (QIZ) protocol. The protocol enables Egyptian manufacturers in three specified zones (Greater Cairo, Alexandria, and the Suez Canal Zone) to export tariff-free to the US provided 11.7 per cent of their input is Israeli. That 11.7 per cent does not have to be for every single shipment, but is calculated relative to the company's total exports for the three months for which it has been certified. There has been high demand for QIZ certification from Egyptian manufacturers. Last week the joint Egyptian-Israeli committee met to look into the submitted applications, approving 397 companies. According to Ali Awni, head of the QIZ support unit which screened the applications before they reached the joint committee, the vast majority of those who applied are textiles and apparel manufacturers. Currently, 42 per cent of Egypt's textile exports are to the US market. According to the data they presented, 40 per cent of the companies had exported previously to the US while the remaining 60 per cent are new to the market. The bulk of the approved companies are located in Alexandria and the 10th of Ramadan city , followed by Shubra Al-Kheima and Port Said. The QIZ unit screens applications for certification throughout the year, while the Egyptian-Israeli joint committee meets quarterly to examine these applications. Since the initial 397 companies were approved, the pace of incoming new applications has slowed down. According to Awni, "we do not yet know what is still out there." He said that while some may consider making use of the protocol, others may decide they are not competitive enough to enter the US market. Meanwhile, some companies already enjoy low tariffs, like those exporting sheets and towels. These may find that the QIZ is of questionable utility to them, as they would have to buy costlier inputs from Israel, offsetting the modest benefits of the tariff elimination. The Egyptian QIZ deal is similar to the landmark arrangement forged between the US, Israel and Jordan back in 1999. http://www.qizegypt.gov.eg/
