Trade Agreements Under Negotiation
I. Draft Agreements with African Blocs and Countries
West African Economic and Monetary Union (UEMOA): Draft Agreement for the Establishment of a Free Trade Zone
The UEMOA is composed of eight West African member countries (Benin, Burkina Faso, Cote D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo) with a total population of approximately 75 million. The UEMOA forms one of the focal points shaping Egypt’s increased export orientation towards the African continent through the West African gateway, thereby complementing the export promotion strategy in place with COMESA in East Africa and CEMAC in Central Africa, in addition to major countries with considerable weight inside the continent, such as Nigeria and South Africa.
The framework agreement signed between Egypt and UEMOA in July 2004 stipulates that both countries shall decide to reach a free trade agreement within two years starting from the signature date. The Egyptian proposal offered in this regard suggested that tariffs on Egyptian imports from UEMOA will be eliminated as soon as the agreement comes into force, while tariffs on Egyptian exports to UEMOA will be phased out in three years.
In the event of its entry into force, the Agreement will be economically valuable for the following reasons:
1- The UEMOA provides for a concerted regulatory system and integration of trade, economic and monetary policies developed among its members, in addition to its Euro-bound convertible currency.
2- Senegal (an UEMOA member and one of the main four gateways to the African continent) has a storage area for Egyptian products that allows rapid entry of commodities into this market. This also allows for direct sales and helps resolve transport and shipping problems.
3- This market has a massive population estimated at 70 million. It is a price-based rather than quality-based market, which allows a wider window of opportunity for the entry of many Egyptian products, such as rice, onions, garlic, medicinal and aromatic plants, processed agricultural commodities, medicines, cement, ceramics and textiles. This is especially true given that UEMOA member countries depend on exports of raw materials and imports of manufactured products.
4- There are vast prospects for Egyptian investment in areas of mining, excavation, contracting, agricultural and irrigation projects and the textile industry. Through the African Growth and Opportunity Act (AGOA) preferential treatment benefits are granted by developed countries to some UEMOA members. These benefits include access to markets, such as the U.S., and allows garments assembled in some least-developed UEMOA countries to be made from textiles of other countries.
CEMAC Countries: Regional Free Trade Area Negotiations
The CEMAC group (Cameroon, Central African Republic, Chad, Congo-Brazzaville, Gabon and Equatorial Guinea) in Central Africa was targeted to be accessed through the Egyptian export promotion strategy during the forthcoming period to cover all of Africa.
Economic benefits expected to be drawn from this Agreement include:
1- A positive surplus in the Egyptian balance of trade is already in place with the total value of exports amounting to $5.3 million in 2003, while total imports from these countries were estimated at only $820,000. This will give Egypt a preferential position in the event of a free trade area combining the two sides, as represented in the increased volume of Egyptian exports deemed inconsistent with a market potential of a population 30 million. Major exports include: plants, fresh vegetables, soap, plastic, fertilizers, tires, ceramics, tomatoes, oranges, and potatoes. Imports from these countries similarly do not involve risk for the Egyptian local market.
2- Cameroon represents one of the four main gateways for Egyptian exports into Africa, which is in line with the target to establish a permanent warehouse for Egyptian products to act as a launching pad for proceeding into the other markets of the CEMAC member countries.
3- The economic status of CEMAC is very similar to that of the UEMOA in terms of trading patterns with Egypt, in the sense that member countries feature as price-based markets. Moreover, CEMAC formed a customs union adopting a uniform currency, the convertible African Franc.
Nigeria: Bilateral Free Trade Area Negotiations
Egypt has initiated bilateral free trade negotiations with Nigeria, with the goal of obtaining an economic preference due to the following reasons:
1- Nigeria is the economic powerhouse within the Economic Community of West African States (ECOWAS) group and in the West African Region in general, through which Egypt seeks regional integration into Africa.
2- It is a huge market, representing a population of 120 million, and the third largest economy in the African Continent.
3- Investment opportunities are increasing for Egyptian firms to access the Nigerian market, especially in the fields of contracting and communication, given its ongoing reconstruction efforts.
4- All these factors offer an ideal market for Egyptian industrial and agricultural products, especially given that the import structure in Nigeria corresponds perfectly to Egyptian export capabilities.
Tanzania: Bilateral Free Trade Area Negotiations
Egypt recently submitted a draft free trade agreement with Tanzania, in the wake of the latter's withdrawal from COMESA. The Agreement is perceived to be of substantial economic value to Egypt for the following reasons:
1- Tanzania has a population of 36 million, thus forming a vast, vibrant market for many Egyptian products, especially since Tanzania is largely oriented towards highly distinctive commodities, such as machines, textiles, building materials, medicines, fertilizers, chemicals, petroleum products and foodstuffs, all of which Egypt maintains a relative advantage in, in terms of their production and export. Main imports of Tanzania include coffee, kajo, sisal, tea and tobacco.
2- Investment opportunities are available in Tanzania, as a result of its strategic location and population and incentives laid out in the 1997 Tanzania Investment Act.
3- Tanzania is a member country in a number of economic gatherings. It is believed this will help to open a window of opportunity for Egypt to access broader markets, for example, through Tanzania’s membership in the East Africa Community (EAC) and Southern African Development Community (SADC). Tanzania is also party to 11 bilateral agreements. Finally, it benefits from the EU and ACP association programs and enjoys a preferential duty-free status for its exports into EU market.
II. Draft Agreements with Latin American Countries
South American Common Market (Mercosur): Draft Preferential Trade Agreement
Mercosur submitted two draft agreements, a framework agreement and a preferential agreement, with Egypt as a step towards the establishment of a free trade area between the two parties in response to the Egyptian draft. The framework agreement was studied, reviewed and signed in Argentina on 7-7-2004 on the sidelines of the Mercosur Summit meetings and en route to the initial negotiations on the preferential agreement.
The creation of a preferential agreement with the Mercosur is deemed the best option from a practical point of view to access the markets of its member countries as an alternative to a free trade agreement for the following reasons:
1-Egypt has a substantial trade balance deficit with Mercosur, reaching USD 736.8 million in 2003.
2-Mercosur countries have well diversified industrial and agricultural production in , which has resulted in a USD 27 billion trade balance surplus with the rest of the world in 2002.
In the industrial field: the group is considered to be one of the main producers and exporters of cars, planes, iron, steel, and textiles. The textiles industry is particularly strong in Brazil and Argentina. In fact, it constitutes 12% of Brazil’s GDP and employs 3 million people. In addition, Brazil is ranked number three in garments production and number seven in yarns production in the world.
In the agricultural field: Mercosur is one of the most significant producers and exporters of agricultural, processed agricultural, fish, and meat products in the world. Its agricultural exports are a fundamental component of national income and a strategic source of foreign currency. Leading agriculture exports are soya beans, sugar, coffee, orange juice, lemons, cow meat, corn, wheat, fruits and vegetables.
Therefore, the focus of this Agreement shall be on the list of highly distinctive Egyptian commodities, whether agricultural or industrial, with greater potential for access to Mercosurr markets for products such as wooden furniture, marble and ceramics, cement, medicines, medicinal and aromatic plants, chemical and organic materials, cotton, rice, dried vegetables, tomatoes, potatoes, and garlic.
Furthermore, accessing the Latin American market constitutes one of the main purposes of the Egyptian export promotion strategy in its third stage.
III. Draft Agreement with Asian countries
India: draft preferential trade agreement
both parties are aiming to Sign a Joint action plan on trade and technical cooperation between Egypt and India will reinforce the economic and trade relations between the two countries through supporting both sides to create favourable conditions for preferential arrangements, promoting industrial cooperation and stimulating the transfer of new technologies and technological innovation, disseminating the "know how", in addition to exchanging expertise in different industrial fields.
Such plan shall serve to create an appropriate investment climate and facilitate communications between the business communities in both countries.
In addition, to further promote economic and trade co-operation, different bilateral mechanisms shall be established by both sides. First, a Joint Committee, to address any obstacles that may affect trade between the two countries and Second, a standing Joint Study Groups that aim at identifying opportunities for expanding trade and investment, and also studying the feasibility of concluding a free trade area between both countries.
Expectedly, this Joint action plan on trade and technical cooperation between Egypt and India will result in an increase of bilateral trade to the benefit and prosperity of the two countries.
Sri Lanka: draft free trade agreement :
Only one negotiation round was held in Sri Lanka during the period 6-9 April 2003 to discuss the feasibility of having a free trade agreement with Sri Lanka. The negotiations are suspended for the time being.
IV. Draft Agreement with the European Free Trade Area
Russia : Draft Free Trade Agreement
It has been agreed during the fifth round of the joint commercial Russian –Egyptian committee held in Russia in November 2005, to initiate negotiations on implementing a free trade agreement between Russia and Egypt after Russia’s accession to the WTO. consequently, two negotiation meetings were held to discuss the mentioned free trade area and the third negotiation meeting will be held during February 2007.