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Wednesday, 21 October 2020

Trade negotiations after Covid-19

Egypt must not let the coronavirus crisis derail it from pursuing trade agreements with bilateral and multilateral partners, writes Magda Shahin

Magda Shaheen , Tuesday 15 Sep 2020
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Who will be responsible for putting us in the picture regarding ongoing and probably behind-the-scenes trade negotiations?

The lack of media coverage of the trade negotiations conducted by the government and the relevant ministries at the bilateral and regional levels, despite the importance of the transparency of such deliberations and negotiations, does not mean that the government is not preparing for the post-coronavirus period.

It is important to pave the way in these new circumstances for an appropriate environment that will see the resumption of open markets. The negotiations have an extremely important role to play in ending the recession we are now facing because of the economic shutdown, a situation in which Egypt does not differ from other countries.

However, these negotiations are also vital in the light of the difficult circumstances that the World Trade Organisation (WTO) is going through and the complete paralysis of multilateral negotiations. The WTO remains the only international mechanism that can enact laws and set agreed rules for trade, especially in the light of the many new issues that have become prevalent in international trade, for example e-commerce and the digital transformation of economies. These are new issues for which no rules have yet been agreed upon to handle them in harmony, instead of each country acting according to its own interests without coordination or regulation.

At such times, the Ministry of Trade and Industry must redouble its negotiation efforts and mobilise its experts and expertise. There are several sets of negotiations that are ongoing, whether within the framework of the African Continental Free Trade Agreement (AfCFTA) or with the EU, the UK, the Eurasian Economic Union, and others. The AfCFTA was due to have become operational by the middle of this year, but to date the first phase of the negotiations have not yet ended. The negotiators continue to debate online rules of origin and the liberalisation of trade in services, including the digital transformation of African economies.

These negotiations have been affected by the many problems experienced on the African continent in conducting virtual meetings. Moreover, in view of the suspension of all physical meetings, due to the coronavirus pandemic, the second phase of the negotiations has not even started, this dealing with issues such as the protection and facilitation of investment, competition policies, and aspects of intellectual property rights.

The AfCFTA negotiations are important to Egypt, and at present we do not know where we stand in them since we handed over the presidency to South Africa at the beginning of this year. The media used to bombard us on daily basis with articles on Africa and the AfCFTA during Egypt’s presidency of the organisation, but these days the AfCFTA is hardly covered in the news.

The Ministry of Trade and Industry should also continue what it started with regard to the negotiations it launched with the United Kingdom at the latter’s request to agree on a free-trade area between the two countries in the wake of Britain’s exit from the European Union. It should also complete the dialogue with the EU in preparation for the start of substantive and serious negotiations similar to those of other Mediterranean countries concerning a Deep and Comprehensive Free Trade Area with the EU, known as DCFTA.

Last but not least, there are the ongoing negotiations at the initiative of Egypt that the Ministry of Trade and Industry started more than three years ago with the Eurasian Economic Union (EEU), which includes five countries, Russia, Armenia, Kazakhstan, Kyrgyzstan, and Belarus, whose populations reach more than 180 million people. These negotiations were planned to be concluded in two years at most; however, there remain obstacles on both sides that must be overcome if we want to benefit from this huge market.

Meanwhile, negotiations with the US have been relegated to the back burner. Egypt has yet to decide whether to follow Kenya’s recent example in negotiating a fully-fledged free-trade area with the United States, or whether it should continue its relatively modest tripartite cooperation, known as the Qualified Industrial Zone (of Egypt, the US, and Israel).

We still fear that the US will exaggerate its demands, especially in the framework of liberalising trade in services, government procurement, and the protection of intellectual property rights, failing to assess the benefits of such an overture for our consumers and the private sector. What we are mainly wary of is the success of the US-Kenya negotiations in preparation for the latter to become the gateway for American goods and services to East Africa and the Common Market for Eastern and Southern Africa (COMESA), as this will be a missed opportunity for Egypt.

 

COMPLEX ISSUES: In these ongoing negotiations, the Ministry of Trade and Industry must carefully consider a number of issues, as the negotiations are difficult and very complex and yet are vital for the realisation of Egypt’s interests and the well-being of its people.

First, the multiplicity of the negotiations that are underway is not a defect. Rather, it is in the country’s interest to facilitate the task of the negotiators and make it smoother to ensure that they are well-versed in all the dimensions of the negotiations and their implications and have a comprehensive view of their course.

As for the second point, it is for the negotiators to be aware that such negotiations are not isolated. Rather, they are continuous and aim to realise the mutual interests of the negotiating countries. Hence, it is necessary to concede that the benefits are not absolute. There is no absolute winner or loser in any set of negotiations, but instead there is always a trade-off of interests and of goals in order to achieve priorities that are heterogeneous and changeable. Reaching an agreement is not an end in itself, as each agreement is usually followed by renewed negotiations to complete, deepen, or expand its scope. Therefore, it is always important to maintain good and collegial relations between negotiators.

Before going into any of these negotiations, we must clearly define our priorities, interests, and demands, in order to allow us to make concessions that are not prejudicial to those priorities and interests. It is natural for interests to differ from one agreement to another. For example, Egypt may wish through the AfCFTA to begin to play its role as a leader enjoying the respect of other African countries, aiming at the advancement of the continent and the well-being of its peoples. This in and of itself would promote Egypt’s interests.

In addition, it is incumbent upon the country to balance its interests in various fields: between the trade in goods and the trade in services, investment, and other vital areas that fall within the first and second phase of negotiations. The negotiators may agree to open the market in the field of goods to the African countries in order to convince these countries to open up their markets for the trade in services, making Africa an open market for financial services, insurance services, healthcare, and other service areas in which Egypt excels.

Our priorities may be completely different for the dialogue with the EU and the desire to update the Association Agreement with it that has now lasted for 17 years since the People’s Assembly approved it in 2003. It is time to think seriously about deepening and expanding the Agreement’s scope beyond just liberalising the trade in goods. Our priorities here may be to benefit from European experience, integrate into regional production chains, and bargain with the EU in allowing Egyptian workers to work temporarily in European countries, as permitted by the WTO Agreement on Trade in Services (Mode 4: Movement of Natural Persons).

As for the negotiations with the UK, Egypt entered these knowing full well that it could not introduce radical amendments until after the end of the transitional period after the end of the UK’s EU membership, whether in January 2021 or later, should the transition period be extended for another two years.

Today, this seems more probable in the light of the slow, even suspended, negotiations owing to the coronavirus pandemic. Our priorities at the start of these negotiations were to expedite their ratification in order to ensure the continuity of smooth trade on the same preferential basis that prevails between Egypt and the EU, as the UK represents 41 per cent of total foreign direct investment in Egypt. The preferred trajectory towards acceleration also stems from our goal of making the UK a trading partner and laying the foundations for tripartite cooperation with the African countries, instead of being preceded by Morocco and South Africa, which did not hesitate to sign agreements with the UK. The question is where are we now concerning this agreement?

In the light of the above, it is clear that our priorities differ according to our interests and goals in relation to each agreement and that transparency and openness within the scope of the negotiations remain of the utmost importance, with these negotiations being primarily pursued in order to serve the Egyptian private sector and consumers.

 

The writer is former assistant foreign minister for international economic affairs.

 

*A version of this article appears in print in the 17 September, 2020 edition of Al-Ahram Weekly

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