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Beyond free trade

CAIRO: U.S. Secretary of State Condoleezza Rice sealed the fate of free trade with Egypt after her visit last week. Negotiations on any agreement on the matter are now unlikely to commence before 2009. Despite attempts to pass off the postponement of free trade talks to internal political conditions within the U.S. Congress, the topic …


CAIRO: U.S. Secretary of State Condoleezza Rice sealed the fate of free trade with Egypt after her visit last week. Negotiations on any agreement on the matter are now unlikely to commence before 2009.

Despite attempts to pass off the postponement of free trade talks to internal political conditions within the U.S. Congress, the topic dominated discussions during a press conference yesterday with U.S. Commerce Secretary Carlos Gutierrez and Minister of Trade and Industry Rachid Mohamed Rachid.

Gutierrez says that the U.S. administration s decision to postpone negotiations on free trade came down to timing , citing the recent ratification of the controversial Central American Free Trade Agreement which was passed by only one vote in Congress as an indication of legislators aversion to eliminating trade barriers.

Rachid nevertheless described the open and candid dialogue between the two counterparts regarding Egypt s refusal to link discussions on trade and investment to political circumstances. Until we reach a stage where we are both convinced enough that this is really in the interest of our economies, says Rachid, and making it clear that it is an agreement that is under the umbrella of the strategic relationship between the United States and Egypt, and not necessarily linked to any other ups and downs in any part of the relationship, then that s the right time to start [free trade negotiations].

Free trade discussions between the two countries fall under the U.S. Middle East Partnership Initiative, which seeks to increase engagement with the region and encourage political, economic and legislative changes. The U.S. has either signed or is in the process of negotiating free trade agreements with a number of smaller countries in the region which include Israel, Bahrain, Jordan and the United Arab Emirates but, leaves out more populous countries such as Egypt and Saudi Arabia. With the continued exclusion of such countries, the initiative falls short of its goal of establishing a free trade area in the Middle East.

Meanwhile, Egypt benefits from the Qualified Industrial Zones (QIZ) agreement with the United States and Israel, which allows products manufactured in certain pre-approved zones open access to the U.S. market provided the products contain a minimum of 11.7 percent as inputs from Israel. Exports from such zones continued to grow last year, reaching over $100 million during the first eight months of 2005. This growth is causing all major Egyptian QIZ exporters to expand capacity and to attract greater outside investment, says Gutierrez.

Gutierrez and Rachid also signed a memorandum of understanding to renew the term of the U.S. Egypt Business Council for a further three years, reactivating the council after a period of stagnation. It is an ideal forum for cooperation and a mechanism for providing information, analysis, advice and guidance for the mutual benefit of both parties, says Rachid.

Gutierrez emphasized the need for further discussions on a number of trade-related areas – including customs standardization, product testing and intellectual property rights – despite the deadlock on free trade, adding that progress on such matters is in the economic interest of both countries and will, in any case, be a necessary prerequisite for an eventual free trade agreement.

Gutierrez specifically cited intellectual property rights as one of the priorities of U.S. President George Bush. Copyrights and patents have been a contentious issue between the U.S. and a number of developing countries, particularly in the field of pharmaceuticals where the latter produce cheap generic versions of patented drugs.

Last year, for example, a Washington-based lobby group representing American pharmaceutical companies protested the Egyptian government s approval for local production of generic versions of patented drugs, demanding that their government take remedial action. We believe the way to guarantee that we continue to have medicine, innovations and new ideas, Gutierrez explains, and that these companies continue to take the risk of investment, is to have environments that protect patents.

Gutierrez recognizes the challenge of resolving such disputes, and he is right to emphasize the other aspects of commercial relations besides free trade. It is increasingly clear that a free trade agreement between the two countries is unlikely to be signed before the end of the decade; many in the business community recognize this. We will content ourselves with our normal trade relations as close friends and allies, and do without an FTA (free trade agreement), wrote Taher Helmy, president of the American Chamber of Commerce in Egypt, in an article published earlier in The Daily star Egypt.

It is also likely that, notwithstanding the political complexities in Washington and the turning tide against globalization, both governments will eventually reach common ground on free trade negotiations. While we have not reached a point where we can formally begin FTA negotiations with Egypt, we all know that in due time it will happen, says Gutierrez.

The current stalemate of free trade talks may be the result of protectionist tendencies in Congress, or it may be due to political differences over Egypt s delay of municipal elections and the arrest of dissident Ayman Nour. In reality both factors probably contributed to the U.S. administration s decision not to proceed. And while the Egyptian and U.S. governments remain politically divergent, they share a common economic philosophy which assures the continued harmonization of trade and investment policies, paving the way to a free trade agreement when the political conditions are more conducive.

Topics: Investment

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