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Strengthening Egypt-UK economic ties

The recent Egypt-UK agreement will help to maintain and expand the trade momentum between the two countries

Sherif Fahmy , Friday 26 Feb 2021
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Views: 2648

On 5 December last year, British Ambassador to Egypt Sir Geoffrey Adams signed an association agreement with Egypt’s Assistant Foreign Minister for Europe Badr Abdel-Ati to strengthen political and trade ties between the two countries.

The agreement will help British and Egyptian businesses and consumers to benefit from continued preferential access to their respective markets in the wake of the UK’s exit from the European Union.

It was ratified by President Abdel-Fattah Al-Sisi on 15 December and is now being fully applied by both countries.

An earlier EU-Egypt agreement establishing a free-trade area, liberalising two-way trade in industrial products, and progressively liberalising two-way trade in agriculture, agri-food, and fisheries was signed between Egypt and the EU in 2001 and entered into force in 2004.

It contained provisions on quotas, the movement of capital, competition, and intellectual property. Egypt is also part of the Euro-Mediterranean Partnership between the EU and a number of other Mediterranean countries that aims to create a Euro-Mediterranean free-trade area (Euromed FTA).

The new UK-Egypt agreement largely replicates the existing EU-Egypt agreement, including by establishing institutional arrangements between the UK and Egypt based on existing ones such as the Association Council that allow for the ongoing management and updating of it.

This means that the substance of the UK-Egypt agreement is broadly the same as the earlier EU-Egypt agreement.

Many of the changes to the latter, such as replacing “EU” with “UK” where applicable, are applied by reading the text of the EU-Egypt Agreement mutatis mutandis, that is by making necessary alterations but not affecting the main points.

This has avoided the need to reproduce every page of the EU-Egypt agreement and has significantly reduced the volume of text required.  

Where more substantive amendments were required to ensure smooth operations in a bilateral context, or where the UK and Egypt jointly agreed that the principle of mutatis mutandis would not deliver adequate certainty over rights and obligations, detailed amendments were included in the annexes to the UK-Egypt agreement.

For example, in the part of the agreement saying that origin will remain a key driver for regional supply-chain enhancement, the designation of UK exports shifts from “EU” originating to “UK” originating, and EU content will, unless specific provision is made in the new UK continuity trade agreements, no longer count towards meeting the origin requirements for preferential treatment for either party.

This change will have implications for goods traded between the UK, the EU, and Egypt.

To address these implications and to provide maximum continuity for business, the UK-Egypt agreement provides that EU materials can be recognised, that is cumulated, in UK and Egyptian exports to one another.

Furthermore, EU processing can be cumulated in UK exports to Egypt. The cumulating arrangements are set out in detail in articles 3 and 4 of Title II of Annex II to the UK-Egypt agreement and are subject to satisfying certain conditions specified in it.

The UK’s exit from the EU could create more opportunities for Egyptian exports, if businesses are able to take advantage of what will be a significant but temporary disconnection between the EU and the UK.

The UK will be seeking to find competitive alternatives to some EU products, particularly in the short to medium term.

For example, fruit, vegetables, seafood and meat are the most affected goods in the food industry. Data shows that 40 per cent of food in the UK is imported, and some agricultural crops and dairy products were among commodities that the British media warned could be in short supply in British markets after the country’s exit from the EU.

Britain relies on European trade for most of its onions, mushrooms, tomatoes and salad and for a critical portion of many other vegetables and fruits. Such shortages will result from logistical challenges affecting imports from the EU.

Delivery companies seem to be avoiding bureaucratic procedures at UK ports in record numbers at present, with companies from Germany and France rejecting delivery contracts to the UK. It is estimated that the flow of freight through the ports could be reduced by between 20 and 40 per cent, while trucks travelling in either direction could be delayed by up to two days, which represents a big problem for fresh and frozen foods.

This provides Egyptian food exporters with the opportunity to compete in the UK market since they could help to bridge this gap, considering that Egyptian agricultural exports grew during the first seven months of the year, and more importantly that agricultural products are already among Egypt’s top exports to the British market.

Large British retailers such as Marks & Spencer have had trouble getting their fresh salads and other prepared foods across the English Channel to their stores in France, leaving some shelves bare in Paris.

The Egyptian textile industry has another great opportunity to grow its exports to the UK as the Egyptian government is already planning to quadruple textile and garment exports by 2025.

Agricultural products and textiles each represented 15 per cent of Egyptian exports to the UK in 2017, according to the Observatory of Economic Complexity and the United Nations International Trade Statistics Database.

The manufacturing industry sector in the UK has also been severely impacted in terms of disruptions to supply chains, which could lead to the lower competitiveness of firms in the sector.

For manufacturing companies that import intermediate goods, non-tariff barriers on imported intermediate goods will accumulate, causing potential delays in the whole production process and possible malfunctions of machinery since some machines stop working if any delay happens. This is all represented in extra costs.

Manufacturers that operate with just-in-time models expect to suffer supply shortages due to a lack of deliveries from the EU into the UK, and they will need to adapt their operations to account for new contingencies and delays.

The Egyptian business community must start immediately leveraging the benefits of the agreement, which could potentially reflect positively on trade between Egypt and the UK.

 

The writer is general manager at N Gage Consulting.

 

*A version of this article appears in print in the 25 February, 2021 edition of Al-Ahram Weekly

 

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