Reengaging Egypt: Options for US-Egypt Economic Relations

by Barbara Kotschwar, Jeffrey Schott

Overview

The success of the United States' Middle East strategy depends importantly on the future course of US-Egypt economic relations. Deepening bilateral commercial and investment ties can pay both commercial and political dividends as the Obama administration refocuses US strategy in the Middle East. While the United States and Egypt have long been close partners, revitalizing US-Egypt economic relations will spur innovation and productivity gains, open new development opportunities in Egypt through expanded trade and investment, and create important precedents for future regional initiatives. In this study, the authors first assess the two countries' current commercial relationship and then provide concrete suggestions for enhancing and expanding specific areas of the US-Egypt economic relationship, such as market access, services, trade facilitation and development cooperation. Ultimately, the study sets out several promising avenues for strengthening economic ties.

Product Details

ISBN-13:	9780881325058
Publisher:	Peterson Institute for International Economics
Publication date:	10/15/2009
Series:	Policy Analyses in International Economics
Sold by:	Barnes & Noble
Format:	eBook
Pages:	128
File size:	4 MB

About the Author

Barbara Kotschwar, former research fellow, was associated with the Peterson Institute for International Economics from 2007 to October 2015. Her research focuses on trade, investment, and regional integration. Recent projects include comparative analyses of Latin American experiences with free trade agreements, Chinese foreign direct investment (FDI) in Latin America, an assessment of Mexico's economy, and studies on commercial relations between the United States and Middle East and North Africa (MENA) partners.

Jeffrey J. Schott joined the Peterson Institute for International Economics in 1983 and is a senior fellow working on international trade policy and economic sanctions. During his tenure at the Institute, Schott was also a visiting lecturer at Princeton University (1994) and an adjunct professor at Georgetown University (1986–88). He was a senior associate at the Carnegie Endowment for International Peace (1982–83) and an official of the US Treasury Department (1974–82) in international trade and energy policy. During the Tokyo Round of multilateral trade negotiations, he was a member of the US delegation that negotiated the GATT Subsidies Code. Since January 2003, he has been a member of the Trade and Environment Policy Advisory Committee of the US government. He is also a member of the State Department's Advisory Committee on International Economic Policy.

Table of Contents

Preface ix

Acknowledgments xiii

1 Introduction 1

2 Current State of Trade and Investment Relations 9

Evolution of US-Egypt Trade Initiatives: From Aid to Trade? 10

Egypt's Market Reforms: Enhancing Access and Bolstering Competitiveness 23

Remaining Challenges: The Future Agenda 38

3 Moving Forward: Options to Enhance Economic Relations 45

Enhancing Market Access in Goods: Expanding the QIZ 46

Stimulating Services Trade through a US-Egypt Services Trade Agreement 58

Modernizing the Bilateral Investment Treaty 67

Cooperation on Trade Facilitation Measures 72

Cooperation to Enhance Egypt's Trade Capacity: Infrastructure, Education, and Beyond 82

4 Summing Up 97

Appendix A Comparison of US Bilateral Investment Treaties with Uruguay and Egypt 105

Appendix B Do Bilateral Investment Treaties Increase Foreign Direct Investment? 111

References 117

Timeline of Key Events in US-Egypt Economic Relations 123

Index 131

Tables

1.1 Selected indicators for countries in the Middle East and North Africa 4

2.1 US trade and investment with MENA countries, 2008 11

2.2 US and Egyptian trade relations with MENA countries 14

2.3 Top 25 US imports from Egypt entering under the GSP program in 2008 16

2.4 US imports from Egypt: QIZ and total imports, 2005-08 21

2.5 Top 20 US imports from Egypt, 2000-08 24

2.6 US exports to Egypt, 2000-08 28

2.7 Egypt's top export destinations, 2000-08 32

2.8 Egypt's top sources of imports, 2000-08 33

2.9 Doing Business rankings for MENA countries, 2009 39

2.10 A. T. Kearney Global Services Location Index, 2007 40

3.1 Top 20 developing-country US apparel suppliers: Labor costs andmarket access, 2008 48

3.2 Egypt's revealed comparative advantage (RCA) index by HS section, 1996-2007 52

3.3 Top 20 US imports from Egypt produced under qualifying industrial zones, 2005-08 56

3.4 US imports of men's or boys' trousers, bib and brace overalls, breeches and shorts of cotton, not knitted or crocheted, 2004-08 57

3.5 Reliability and availability of infrastructure services: Electricity 63

3.6 Reliability and availability of infrastructure services: Telecommunications and water 64

3.7 US direct investment position abroad (historical-cost basis), 2008 68

3.8 Greenfield investment in Egypt from the European Union and the United States, 2003-08 70

3.9 Logistics Performance Index (LPI), 2007 74

3.10 Customs constraints 76

3.11 Transparency indicators 81

3.12 Egypt's scores on MCC indicators, 2005-08 85

3.13 Millennium Challenge Compact countries and projects 87

3.14 Infrastructure indicators, 2009 89

3.15 Education indicators, 2009 92

3.16 Gender equity in education indicators, 2009 93

Figures

2.1 US exports to and imports from Egypt, 1998-2008 10

2.2 US economic assistance to Egypt, FY2000-FY2009 12

2.3 US imports from Egypt: Role of GSP and QIZs, 1989-2008 18

2.4 US textile and apparel imports from Egypt, 2000-08 22

2.5 Egypt: Foreign direct investment stock and flows, 2000-07 35

2.6 Egypt: Foreign direct investment flows in the petroleum versus nonpetroleum sectors, 2004-08 35

2.7 US foreign direct investment position in Egypt (historical-cost basis), 1994-2007 36

2.8 Egypt's trade as a percent of GDP, 1990-2007 37

2.9 Egypt: Annual GDP growth, 1990-2009 37

2.10 Inflation in Egypt, 1990-2009 42

3.1 US imports from Egypt, 2000-08 47

3.2 Intellectual property protection in MENA countries, 2009 79

Box

2.1 The qualifying industrial zones (QIZ) program: Jordan's experience 19