CAIRO: Trade Minister Rachid Mohamed Rachid and Swiss Vice President Doris Leuthard said Tuesday that keeping bilateral trade open was essential to surviving the worst economic crisis since World War II.
Just back from last week’s World Economic Forum at the Swiss ski resort of Davos, Rachid met with Leuthard during her visit to Cairo, which ends today.
“Strong bilateral relations are fundamental because the world today is on the verge of change.after the financial crisis has sent shockwaves to the global economy, said Leuthard, who is also head of the Swiss Federal Department of Economic Affairs.
Leuthard headed Monday an economic mission to Egypt where she met with a number of officials including Prime Minister Ahmed Nazif as well as the Ministers of Finance, Trade, Investment and International Cooperation.
Egypt’s free trade agreement (FTA) with Switzerland came into effect 18 months ago.
“It’s important that the world not embark on protectionism amid the financial crisis. Therefore, an FTA plays a vital role not only in prosperous times but also in difficult times, Leuthard said.
“FTA partners are more dynamic than regular trade partners, she said. “Without an FTA, Switzerland’s exports growth rate stood at only 3 percent. After signing [a number of] FTA agreements, exports grew by 10 percent.
Egypt and Switzerland currently enjoy an FTA with the European Free Trade Association (EFTA) that was signed in January 2007. Under the agreement, Egyptian products – mainly in industrial and agricultural sectors – have privileged access to EFTA markets, which include Switzerland, Norway, Lichtenstein and Iceland.
Egyptian products entering these markets are exempt from customs- and quota-duties effective in 2007. Industrial products manufactured in EFTA countries gain customs- and quota-free access to the Egyptian market to the year 2020.
Based on Egypt’s trade ministry records, total trade between Egypt and EFTA states amounted to some $425 million in fiscal year 2006/7, with Egypt’s imports reaching $361 million.
“Bilateral trade under the EFTA could soar to $500 million this year, out of which Swiss exports would grow by 30 percent, Rachid told a joint press conference on Tuesday.
“This FTA gives Egyptian exports huge competitive advantages.and bilateral trade could leap to $1 billion within the next four years, he said.
The ministry’s latest statistics show that bilateral trade between Egypt and Switzerland grew to $412.6 million in 2007 up from $361.3 in 2006.
Swiss exports to Egypt reached $389.5 million, while Egypt’s exports amounted to $23.1 million.
In the first nine months of 2008, bilateral trade jumped to $549.8 million, out of which Swiss exports constituted $442.3 million and Egyptian exports $17.4 million.
“Egypt’s exports to Switzerland have been limited in quantity, and that’s why the FTA agreement was signed. The agreement was signed in 2007, and therefore we expect it would take some time to see growth in figures, said Rachid, adding that Egypt’s exports to Switzerland could still grow this year despite the economic crisis.
Egypt’s main exports to Switzerland include fruits, vegetables, edible oil, nuts, cereals, as well as apparel and clothing accessories. Swiss exports are mainly pharmaceutical products, machinery and mechanical appliances, organic chemicals, watches and medical instruments.
“We see potential for more trade ties under the FTA, Leuthard stated. “Because Switzerland is a net importer of food, this presents a great opportunity for Egyptian exporters to benefit from zero tariffs implemented since August 2007.
Hit by the financial crisis, Egypt expects both imports and exports to fall by about 20 percent in value terms this year, after rising 30 percent a year for the past three years, Rachid said in Davos.
The most populous Arab country sells 60 percent of its exports to the United States and Europe, but that figure is down from 85 percent four years ago, and Egypt is continuing to diversify into other markets in Asia, the Gulf, Africa and even Latin America, where demand is holding up better than in developed countries.
The deepening economic crisis, and the failure to complete the WTO’s long-running Doha round on freeing up global commerce, have raised fears in Davos that countries will block imports from their trading partners so as to protect jobs at home.
Several leaders warned that such protectionism – if it led to tit-for-tat retaliation – would intensify the crisis, as happened in the 1930s during the Great Depression.
Rachid expressed concern on Wednesday at the way countries were rolling out stimulus and bailout packages to defend local industries and called for a more coordinated approach.
Countries such as Egypt and Switzerland favor bringing ministers together before the next summit of G20 rich and emerging countries in London in April, which wants to settle on clear actions for tackling the economic and financial malaise.
“Apart from the sunny weather in Davos, everything else was dark and gloomy due to the [ripple effects] of the global financial crisis, Rachid said. “In the US and parts of Europe, the picture is still very bleak, and it is going to cost the world economy some significant pain in the next months to come.
“Optimistic people say that by the end of this year, the world will start moving into some positive territory. Pessimistic people say it will last two to three years.
He added that companies should currently take all right measures to restructure their businesses to tackle the crisis. “Reduce prices and explore new markets.to increase your market share.
According to international press, Rachid recently said that Egyptian economic growth might slow to less than 4 percent this calendar year because of declines in direct foreign investment and revenue from tourism and the Suez Canal.
“In the next couple of months we will see the bottom of the current trend, Rachid said in a recent television interview with Bloomberg News in Davos.
The economy may contract in one or two quarters this year and economic expansion in the fiscal year ending June 30 may be 4 percent after growth of more than 7 percent for the past three years, he added.
“Last year’s 7.2 percent growth rate will not be achieved this year.but we are very persistent to remain in positive territory, he said on Tuesday. “Our goal is to remain one of the fastest growing emerging markets because we believe that our economic growth is vital to create jobs for people and improve levels of income.
Both Rachid and Leuthard stressed on the importance of adhering to international intellectual property rights that aim to shield businesses against piracy as well as consumers against counterfeit products.
“Actual implementation and advancement of intellectual property rights are key in increasing investment and modernization of Egypt’s economy at the national level, Leuthard said.
“If we neglect it [intellectual property rights], the result is a reduction of research and development and willingness of companies to develop innovative products, she explained, adding that reinforcement of intellectual property rights would provide sustainability and allow growth of business community.
Rachid agreed, saying that implementation of intellectual property rights would protect creativity and promote investment.