A new trade pact between Egypt and Mercosur has been hailed as a one-of-a-kind breakthrough, but sceptics are not optimistic, Niveen Wahish reports On Tuesday, Egypt signed a free trade agreement (FTA) with Mercosur, the South American trade bloc that includes Brazil, Argentina, Uruguay and Paraguay. The bloc's associate members include Bolivia, Chile, Colombia, Ecuador and Peru. According to Egyptian Minister of Trade and Industry Rachid Mohamed Rachid, the trade pact is part of the government's strategy to boost exports to LE200 billion (around $35 billion) by 2013. The agreement grants preferential treatment for Egyptian products entering the markets of Latin America. But that may be easier said than done. Ministry of Trade and Industry (MTI) figures show that while Egypt's exports to Brazil, the biggest of the Mercosur group, came to around $88 million in 2009, its imports from Brazil reached $1.4 billion. And the trade balance with Argentina is not much better. This being the case, critics believe the FTA with Mercosur will work more in favour of the South American countries than it will Egypt. "They have their eyes on the 80-million consumer Egyptian market," said one observer who preferred to remain anonymous. In fact, Argentine Industry Minister Débora Giorgi has been quoted as saying, "New opportunities in products that we currently don't sell [to Egypt], such as vehicles, auto-parts, pharmaceutical drugs, paper products, chicken, and fruits, among others, will open up." He was speaking during the 39th Mercosur Summit held in Argentina, during which the FTA was signed. The bloc is already a heavy agricultural and food produce exporter to Egypt. According to Giorgi, with the agreement majority of Mercosur exports to Egypt will enter Egypt free of tariffs beginning immediately. According to an MTI statement this will mean a reduction of the cost of Egyptian imports for key items including sugar, meat and soy oil. According to The Buenos Aries Herald, tariffs will be removed in four stages. During the first and immediate stage, tariffs will be eliminated on products including meat, butter, wheat, corn, and oil. In the second phase, tariffs on milk and industrial goods will be eliminated within the next four years. Other industrial goods will be part of the third and fourth phases to go into effect in eight to 10 years from now, respectively. The anonymous observer questioned why MTI was signing free trade agreements "left and right". He said with scepticism: "There is almost nobody left with whom we have not signed an FTA." In his opinion, "Egypt might as well lift all customs across the border with the whole world, like the Singapore prototype." The observer does not see what difference the agreement will make in boosting Egypt's exports. Egyptian exporters have traditionally cited the geographical distance and lack of direct transport lines as a main obstacle to their penetration into the South American market. But the observer said that these very pretexts have not kept the South Americans from tapping the Egyptian market. Indeed, he only sees the agreement as a threat. "Being a huge agricultural exporter, Mercosur products are bound to inundate our market, beating our own produce." To him, an agreement with Mexico would have been more fruitful, and would have been the real ticket to enter the US market. But Ahmed Ghoneim, professor of economics at Cairo University, is not worried. Although he does not believe the agreement is very meaningful, he believes it will do little harm. He thinks geographical distance does have a role to play, and in terms of percentages to Egypt's overall trade, he does not expect much change. However, he lamented that the trade pact did not go through a thorough consultative process within the Egyptian business community before it was concluded. He hopes that the agreement can be a step towards attracting South American investments that hope to enter other markets with which Egypt has other trade pacts. While this is the first time that Mercosur members have approved that a non-Latin American country joins their bloc, it may not be the last. The trade bloc is also negotiating trade pacts with Jordan, Morocco and the Gulf Cooperation Council (GCC). Egypt first proposed to negotiate an FTA with Mercosur in 2004, but negotiations proved slow. Only since 2009 did the process speed up. According to the MTI statement, "with free trade agreements with the strongest performing economies in Latin America and a free trade agreement with African countries, Egypt can become a key player in linking the economies of both trading blocks, expanding both bilateral trade and investments between them. Moreover, this agreement could also pave the way for harmonizing the international agenda for countries of the South on the international level, such as during World Trade Organization negotiations."
