Nothing for free

Is freer trade moving towards centre stage in Egypt-US relations? asks Aziza Sami
During President Hosni Mubarak's upcoming visit to Washington, scheduled to begin 2 April, the economic agenda will receive close attention. While such a focus for a visit by an Egyptian president to the United states is not novel, now that there is a new administration in the White House some changes to this agenda are expected.
Two institutions for which modifications are anticipated are the US-Egypt Partnership and the Presidents Council, the high-powered body formed of Egyptian and American private business representatives, both of which were established under the Mubarak-Gore Initiative in 1994. The Egyptian side is also interested in raising the possibility of negotiating a free trade area (FTA) between the two countries. New directions and emphases for US economic assistance disbursed under USAID (the United States Agency for International Development) are also a topic being treated in ongoing discussions between the two sides.
The possibility of establishing an FTA is expected to hold centre stage in the coming period -- regardless of when such negotiations are actually initiated. Both the Egyptian government and businesses deem an FTA important for giving Egyptian products full access to the US market. From an American vantage point, an FTA with Egypt is conceived as an arrangement that would act as a "catalyst" for effecting further liberalisation of the economy.
During his visit to Cairo last month, US Secretary of State Colin Powell indicated that the two sides were interested in discussing the issue. However, US Ambassador to Egypt Daniel Kurtzer, speaking to reporters in Alexandria this week, said that although an FTA is on the bilateral agenda, he does not expect that it will be discussed in any detail during Mubarak's visit given that the Bush administration is now concentrating on the goal of obtaining congressional agreement for establishing a trade promotion authority. Popularly known as the "fast track agreement," this would give the US administration the right to initiate negotiations for an FTA with any country without obtaining prior congressional permission. Should the fast track agreement go through, Congress would then either accept or reject an FTA agreement outright, "rather than picking it apart before approving it [as is currently the case]," said Kurtzer.
Referring to the future of the US-Egypt Partnership, which has been the main institution effecting the motto "from aid to trade," Kurtzer said, "We still don't know [what changes will be made to the partnership]. Both the Egyptian and American sides are thinking about this right now," and President Mubarak "convened a meeting last week among his advisers to determine this issue." The American ambassador added he hoped that by the end of the current week "we would have some Egyptian suggestions [on the matter]." Currently, the partnership comprises several committees promoting trade, investment and social development in different sectors of the economy.
However, he added that "the real question is whether the partnership will continue on the same path, or whether we need [it] at all. Maybe we can conduct our relationship without an umbrella. There are still three weeks before the visit. I don't know if we will have the final answer on structure by [that] time."
The Presidents Council is also expected to undergo changes although the extent of these is, likewise, unclear. In response to a comment that this body has failed to live up to expectations in promoting bilateral trade, Kurtzer said, "This is a private sector group which was stimulated by President Mubarak and [former] Vice-President Gore. The degree to which it has worked effectively, or not, is [an issue] between the private sectors. The government does not control its agenda or set its meetings, [yet] from a government perspective we think it very important to have a dialogue between the private sector, on both sides, and between it and the governments. But whether they [the council] want to continue to exist depends on their own feelings."
The head of the US side of the Presidents Council, Richard Gadbaw, head of General Electric's law and policy division, had told Al-Ahram Weekly in a recent interview that the US side of the council would be talking with the new administration about the necessity of "keeping the ongoing pattern of dialogue between the private sectors," adding that he expected that the council would undergo a change in name, and perhaps in formation.
In 1999, according to the latest figures made available by the US embassy, trade between the two countries comprised $650 million in Egyptian exports to the US, and $3.05 billion in American exports to Egypt. A substantial portion of this latter figure is accounted for by USAID's commodity import programme.
Kurtzer indicated that in order to promote US investment in Egypt, it is necessary "to create an environment which the investor feels is with, and not against him, customs valuations which are with, and not against him, and a bureaucracy which is with, and not against him." Kurtzer advised that these issues be dealt with sooner, rather than later, so that investors decide to come to Egypt now "instead of saying, 'maybe we will wait for five years before coming here,'"
Once American investors make the decision to work within the Egyptian economy, said Kurtzer, they are typically very successful. "We have had very good success with some of our major companies, [although] it has been hard for them to overcome the initial hurdles."
Some American companies are currently facing problems related to customs and tariffs, not unlike those faced by Egyptian companies, Kurtzer said, adding that one American company which he declined to name had "started out quite successfully in producing a very nice, high-quality product. Customs began imposing fees for raw materials which [the company] needed in order to produce here. Production fell by 67 per cent, and the company is now selling out to its Egyptian partners."
Kurtzer referred to the need to balance what he described as "an acceptable tension between the desire of the customs authority to collect taxes, and the interests of a company which has 600 to 700 employees," adding that the Egyptian government has to look at the issue globally, making sure that such payments do not threaten a business's "existence."
The flow of investment from the US will increase as economic liberalisation in various sectors proceeds, suggested Kurtzer. The development of intellectual property rights laws, improvements in procedures for customs valuation and increased efficiency in the bureaucracy are all factors that will "jump-start the economy and increase investment."
Reiterating the points about customs tariffs and intellectual property rights that he had made in a speech last July on the prerequisites for negotiating an FTA, Kurtzer said that the crux of that address "remains the agenda between the two countries. There are not American dictates, or an American agenda."
In his July 2000 speech, Kurtzer said Egypt "could comply fully with the World Trade Organisation (WTO)'s TRIPS (Trade Related Intellectual Property Rights) Agreement." Similarly, he said that it "could comply fully" with the WTO's Customs Valuation Agreement. Egypt was originally due to implement the WTO Customs Valuation Agreement on July 1, 2000, but a one year grace period has been granted.
Implementation of the Customs Valuation Agreement, said Kurtzer, will "ensure that duty rates are applied in a neutral and uniform manner, precluding the use of arbitrary customs values. Customs reform will also help to increase transparency and speed clearance of shipments."
Speaking to the American Chamber of Commerce on Tuesday Kurtzer commented that since he had "outlined steps [needed to initiate negotiations for an FTA], none of the measures noted have been implemented." He added that "there is a difference of view, on whether reform measures should precede free trade negotiations, or proceed parallel with them. But there is no difference of view on the urgent need for steps to be taken to get the Egyptian economy going again and to signal to investors that Egypt is the place to invest."
Issues related to intellectual property rights, customs valuation, tariffs, services and standards are currently being discussed by both sides through the Trade and Investment Framework Agreement (TIFA), the mechanism for negotiating trade issues between Egypt and the US which has been in place since 1999. E-commerce, military procurement, and Qualifying Industrial Zones, export promotion and technical assistance are also issues being discussed under TIFA.
Additional reporting by Khaled Dawoud
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