Identifier
Created
Classification
Origin
07CAIRO1407
2007-05-13 14:30:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Cairo
Cable title:  

EU-EGYPTIAN TRADE REGIME COULD CREATE HURDLES FOR

Tags:  ECON ETRD EAGR EG 
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RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHEG #1407/01 1331430
ZNR UUUUU ZZH
P 131430Z MAY 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 5154
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS SECTION 01 OF 02 CAIRO 001407 

SIPDIS

SENSITIVE
SIPDIS

NEA FOR ELA
USTR FOR SAUMS

E.O. 12958: N/A
TAGS: ECON ETRD EAGR EG
SUBJECT: EU-EGYPTIAN TRADE REGIME COULD CREATE HURDLES FOR
US EXPORTS

REF: A. 2006 CAIRO 6894

B. 2005 CAIRO 8937

Sensitive but unclassified, not for internet distribution.

UNCLAS SECTION 01 OF 02 CAIRO 001407

SIPDIS

SENSITIVE
SIPDIS

NEA FOR ELA
USTR FOR SAUMS

E.O. 12958: N/A
TAGS: ECON ETRD EAGR EG
SUBJECT: EU-EGYPTIAN TRADE REGIME COULD CREATE HURDLES FOR
US EXPORTS

REF: A. 2006 CAIRO 6894

B. 2005 CAIRO 8937

Sensitive but unclassified, not for internet distribution.


1. (SBU) SUMMARY: Trade between Egypt and the European Union
has increased dramatically during the last three years,
thanks in part to lower trade barriers under Egypt's
Association Agreement with the EU. However, US-Egyptian
trade has also expanded during that time and continues to
grow robustly. While Egyptian economic growth spurred by the
increased trade will make Egypt a more lucrative market for
US and EU exporters, US export growth could be constrained if
Egypt moves under the association agreement to adopt
standards more favorable to European products than US
products. END SUMMARY.

--------------
Trade expanding with EU and US
--------------


2. (U) Egypt signed an Association Agreement with the
European Union in 2001. The trade provisions of the
agreement entered into force Jan. 1, 2004, continuing
duty-free access to the EU for Egyptian industrial exports
and easing some restrictions on Egyptian agricultural
products that compete with EU products. The agreement
offered EU exporters only gradually improved access to the
Egyptian market. For example, tariffs on semi-finished goods
will expire in 2014, while tariffs on European cars will
remain in effect until 2019.


3. (U) During the last three years, EU-Egyptian trade
expanded by 63 percent from EUR 10 billion in 2003 to EUR
16.3 billion in 2006, according to EU figures. US-Egyptian
trade grew 71 percent during the same period from USD 3.8
billion to USD 6.5 billion (ref A).


4. (U) The value of Egyptian exports to both the US and EU
increased faster than Egyptian imports during that period, as
Egypt narrowed its trade deficit. Agricultural products
accounted for the largest share of the increase in Egyptian
exports to the EU, growing at 80 percent, while oil exports
rose 57 percent and industrial exports 42 percent, according
to a study by the Egyptian Ministry of Trade and Industry
gauging the effects of the association agreement. Even so,
agricultural products still accounted for only 6 percent of
overall Egyptian exports to the EU, compared to 57 percent
for oil and gas.


5. (U) European exports to Egypt in 2004 (the most recent
compilation available) comprised 21 percent for
power-generating equipment, 16 percent for chemicals, 16
percent for transportation equipment, and 10 percent for food
and agricultural products, according to a Ministry of Trade
and Industry official. In contrast, 22 percent of US exports

to Egypt were in agricultural products, while machinery
accounted for 39 percent and manufactured articles 12 percent.


6. (U) Under the association agreement and the EU-Egypt
Neighborhood Policy Action Plan, which the EU and Egypt
adopted in March, the parties have begun to negotiate further
liberalization of trade in agricultural products. Even if
successful, however, the negotiations will not significantly
disadvantage U.S. agricultural products in Egypt. US bulk
commodity exports including corn and soybeans constitute 85
percent of US agricultural exports to Egypt and already enjoy
duty-free access. However, the GOE does assess duties such
as a 20-percent tariff on apples for products deemed as
luxuries, an important growth market for U.S. exporters, and
trade preferences for such European products would make US
products less competitive.

--------------
EU Standards Could Disadvantage US Exports
--------------


7. (SBU) A larger concern for US exporters is that Egypt
will increasingly adopt European standards for its internal
market. The Action Plan calls for a reduction in non-tariff
trade barriers and harmonization of standards between the EU
and Egypt, including "progress on regulatory convergence,
adoption of EU technical norms and standards." Several
Egyptian importers and representatives of US exporters have
warned that could give EU exporters a crucial advantage in
the Egyptian market. In fact, Egyptian importers of kitchen

CAIRO 00001407 002 OF 002


appliances have cautioned FCS that Egyptian regulations now
under development would bar US products from the Egyptian
market.


8. (SBU) However, Barbara Stacher, an EU trade official
based in Cairo, told Econoff that the EU's initial goals of
harmonization of standards are modest -- limited to a few
categories such as electrical appliances and medical
equipment -- and are constrained by a limited technical
capacity in the GOE and divergence in standards among EU
members themselves. She said the GOE has used sliding
standards to protect domestic manufacturers -- for instance,
refusing US cutlery exports because they did not conform to
standards based on an EU model, while refusing EU cutlery
imports because they did not conform to US-based standards.


9. (SBU) Wael Hamid, an MFA official responsible for
implementing the EU agreement, said various Egyptian agencies
have partnered with EU members for technical assistance, such
as the postal service with France, maritime safety with
Sweden, and tourism with Austria. The EU is also providing
EUR 46 million in grants under a Trade Enhancement Program to
increase the GOE's technical capacity for trade facilitation.
(USAID also supports an extensive number of programs to
promote customs and trade reform in Egypt, ref B.)


10. (SBU) Comment: Strengthened EU-Egyptian trade relations
will help improve the business climate in Egypt and promote
Egyptian economic development, benefiting the US and Egypt's
other trading partners. But Egyptian adoption of European
standards could limit the access of US products to this
growing market in coming years. Post intends to convene a
working group chaired by FCS and including private-sector
representatives to monitor the development of Egyptian
standards and ensure that US exports remain competitive.
RICCIARDONE

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