A wider use of the Generalised System of Preferences may well work miracles to boost Egypt's exports to the US, Niveen Wahish hears some expert advice For years Egypt has chased after a free trade agreement with the United States, but to no avail. Such an agreement would grant Egyptian exports duty-free access to the US. Today, with the expiration of the Trade Promotion Authority of current US President George W Bush and the arrival of a new administration in Washington DC, near-future "prospects for such an agreement are less than slim," said Tom Walter, executive vice- president of the American Chamber of Commerce in Cairo. Given this reality, the next-best option, said Walter, would be to take advantage of preferential treatments. One such preferential treatment that is in fact not too widely known among the export community is the Generalised System of Preferences (GSP). Although the GSP has been in existence since the mid-1970s, Egypt has taken limited advantage of it. In 2007, for instance, it exported only 2.7 per cent of its total exports to the US under this system. The GSP provides duty-free access to some 4,000 products that are not manufactured within the US but are nevertheless needed by the US market. Included are items such as production inputs, building stone, aluminium, jewellery, chemicals, marble, minerals, silk- blend apparel, most carpeting machinery and electronics. According to Marideth Sandler from the Office of the US Trade Representative, out of the 4,000-plus items, Egypt currently exports 364 products under GSP. Both Sandler and Walter addressed audiences from a panel discussion organised this week by the American Chamber of Commerce to raise awareness of this opportunity that exporters may be missing out on. Sandler used the ceramics sector to illustrate the potential benefits. "A 26 per cent duty is collected on ceramics imported into the US, but under the GSP Egyptian ceramics could be imported at zero duty," she said. Further, Sandler suggested this be one of the ways Egyptian exporters should market their goods in the US market: to inform their trade partners in the US that by importing Egyptian products under GSP, they are importing duty- free goods and can in turn expect to sell cheaper products to their own customers. At the moment Egypt is not fully exploiting the benefits that it could reap from this system. According to Sandler Egypt ranks 32nd by volume of exports, out of 132 countries exporting to the US under the GSP. India and Thailand are among the top countries making the most of the system. Even Tunisia is doing better than Egypt, ranking at number 15, with 30 per cent of its exports entering the US under GSP. Egypt in the meantime, Sandler said, witnessed a drop in its exports under GSP from $42.5 million during the first eight months of 2007 down to $34.7 million during the same period in 2008. Meanwhile, she praised the fact that Egypt is able to export a wide variety of products, adding that what needs to be done now is to strengthen the trend by increasing volume. Egypt could take over in areas where other countries have lost their GSP preferences. Or it could export to the US products it is already exporting to other markets, such as hand-woven cotton fabrics, sugar confectionery, juices or coffee preparations. "The door is open: exporters need to walk through it," she said emphatically. In order to benefit from GSP, exported items need to be on the list of GSP items, and be exported directly from Egypt. Otherwise, if they are to make any stopovers during the shipping process, these items need to be clearly addressed to the US. Another essential criterion is that products must be manufactured locally, or at least 35 per cent of their processing must be carried out locally. What is also important, pointed out Sandler, is that Egyptian exporters must inform importers that the product is eligible for GSP, because they may simply be unaware of this fact. On the other hand, GSP does not come without its drawbacks, at least from Egypt's point of view. According to Walid El-Nozahi, head of the Central Administration for the World Trade Organisation trade agreements section at the Ministry of Trade and Industry, among these drawbacks is the fact that the system does not grant the preferential treatment to goods in which Egypt has an interest such as textiles, apparel, watches, footwear, handbags, leather and luggage. This is because these products are also manufactured locally in the US. Furthermore, he said that compiling information on products to ask for their inclusion in the system is a tough process, particularly since it is not easy to acquire information from businesses. "In 2007, we requested the inclusion of 12 items. Only two were approved," El-Nozahi said. The capacity of factories to export was also seen by the audience as an obstacle to the enjoyment of the full benefits offered by GSP. However, Sandler pointed out that exporters do not necessarily have to be large-scale. "There are many types of small shops. These are an opportunity for small suppliers," she said. More exports under the GSP could mean a boost to an already growing Egypt-US trade relationship. US Ambassador to Egypt Margaret Scobey, speaking at the event, highlighted some interesting figures. "The US buys 33 per cent of Egypt's total exports," Scobey said. She added that in 2007, Egypt and the US concluded "a record $7.9 billion worth of business together, a 75 per cent increase in just three years." The growth has carried into 2008, with an increase of 19 per cent for first quarter figures. Egypt is number 62 on a list of 233 countries exporting to the US. The sheer size of US imports, some $641 billion in 2007 from developing countries excluding China, is representative of the scale of the possibilities just waiting to be maximised by Egyptian exporters.
