Partnerships and Agreements
Economic relations with the Middle East date back to the founding of the United States, though not always friendly. Egypt, on the other hand, has long been viewed as a strategic partner in the region and relations have been warm for most of the time. Despite short-term fluctuations, bilateral relations have been marked by an upward trend in trade and investment and are evident in the numerous supportive partnerships and agreements. After Egypt signed a peace treaty with Israel, the U.S. sought to reward Egypt through economic stimulus.
Before September 1994, the two major bilateral trade agreements between Egypt and the United States were a Market Access Agreement for Textiles and Clothing signed in 1973 and the Bilateral Investment Treaty signed in September 1982. The signing of the U.S.-Egyptian Partnership for Economic Growth and Development in September 1994 was an important milestone in the two countries' relationship.
In July 1999, Egypt and the United States signed the Trade and Investment Framework Agreement (TIFA) as a preliminary step towards a free trade agreement between the two countries. Proceeding in that same direction, the U.S. announced the formation of Qualified Industrial Zones (QIZs) in Egypt on December 10, 2004. Details of the major partnerships and agreements are as follows:
The mission of the American Chamber of Commerce in Egypt (AmCham Egypt) is to promote the development of commerce and investment between Egypt and the United States. The U.S. has been Egypt's leading single foreign trade and investment partner since the launch of Egypt's Open Door Policy and the signing of the Camp David Accords in the late 1970s.
Egypt and the U.S. have long been amicable partners along open channels of diplomatic relations, mutual security interests, bilateral trade ties, and development aid. Egypt has received an average of $2 billion dollars in economic and foreign military assistance per year from the United States since 1979, just over $28 billion in total. It is the second largest recipient of foreign aid after Israel, stressing its significance to U.S. foreign policy. The liberalization of trade barriers have led to the steady increase of imports and exports for both countries corresponding to the vast economic reforms enacted since 2004. Foreign direct investment and export growth has witnessed upward trends in Egypt contributing to steadfast GDP growth rising from 3.1% in 2002/03 and reaching a high of 7.2% in 2007/08
U.S. policy towards Egypt has focused on maintaining a regional partner in security, strong military cooperation, and supporting the Egyptian-Israeli peace treaty. The United States has helped to modernize the Egyptian military and facilitate economic development, making it a stronger regional force. In recent years as the Egyptian economy has grown, U.S. policy has shifted away from foreign assistance and more towards encouraging commercial ties.
Multiple partnerships and agreements have been established to enhance economic relations, foreign investment has spurred growth and created jobs, and several free trade endeavors have been set into motion stimulating bilateral trade, including adding Egypt as a beneficiary country of the U.S. Generalized System of Preferences (GSP) and establishing the Qualifying Industrial Zones (QIZ).
Egypt is an economic leader in the Arab world. Not only is it a gateway to the Middle East and North Africa region culturally, linguistically, and geographically, it is a regional export hub for companies wanting to break into surrounding countries including MENA, Sub-Saharan Africa, and Europe. Egypt is also the most populous Arab country offering educated, tech-savvy and multilingual labor. Its economy is diversified; it manufactures and exports more than just oil and gas like many of its neighbors. In addition, Egypt is strategically located on the Red Sea and operates the Suez Canal, which offers the United States access to one of the most important water ways in the world crucial for its economic and military interests.
The U.S.-Egypt relationship is characterized by mutual economic and security interests leading the way for cooperation. Bilateral commercial linkages continue to grow with the goal of enacting new agreements that liberalize trade and increase two-way economic streams.
1. Textile and Apparel Agreement
Egypt and the United States have had a bilateral textile agreement in effect since December 1973, known formerly as the Market Access Agreement for Textiles and Clothing, which has been renewed periodically for varying lengths of time. At the multinational level until the end of the Uruguay Round under World Trade Organization, governments bilaterally sought to negotiate textile and clothing trade according to the rules of the Multifibre Arrangement (MFA) between1974-1994.
As part of the WTO Agreement on Textiles & Clothing (ATC), Egypt and the U.S. adhered to the Bilateral Textile and Apparel Agreement of 1995 until the phase out of quotas for WTO members on 1 January, 2005. In accordance with the ATC, the United States notified the Textiles Monitoring Body (TMB) of provisions from Egypt's agreement that have remained in effect today well past the phase out period. The current provision on textiles and clothing can be found under the Egypt ATC 2.17 Notification. Textile products subject to the bilateral agreement are cotton textiles, man-made fiber textiles, wool textiles, and silk or non-cotton vegetable fiber textiles.
2. United States Agency for International Development (USAID)
Following the Camp David Accords in 1979, and in recognition of Egypt's moderating role in the Middle East, the United States Congress ranked Egypt as one of the largest recipients of U.S. economic assistance in the world.
Today, USAID is the single largest donor among 38 bilateral and multilateral donors working in Egypt. The agency's overall program for Egypt is the most comprehensive in the country, reflecting many of the priorities set by the U.S.-Egyptian Partnership for Economic Growth and Development.
USAID Egypt coordinates its policy reform efforts closely with the IMF and the World Bank to maximize policy impact. In June 1998, the State Department announced that U.S. economic aid to Egypt would be lowered by an annual 5 percent resulting in a decrease of 50 percent by the end of the year 2008. During the period FY1975-2008, cumulative U.S. aid to Egypt has reached $28.475 billion, with another $200 million requested for 2009.
|USAID Program/Project Accomplishments
||Total Assistance 1975-2007 ($bn)
|Democracy and Governance
|Health and Population
See USAID Egypt website for more information.
3. U.S. Generalized System of Preferences Program
The U.S. Generalized System of Preferences (GSP) is a bilateral program that seeks to spur economic growth in the developing world by giving preferential treatment on certain products and goods. It was originally initiated by the World Trade Organization exempting emerging markets from paying the standard duties on certain goods with the multilateral trading system.
The U.S. program offers duty-free entry for more than 4,650 products from 132 beneficiary countries. Egypt was named a beneficiary country at the time of GSP's inception. When GSP was established on 1 January, 1976, it was authorized for a 10-year period under the Trade Act of 1974,GSP was reauthorized in 2006 and later extended through 31 December, 2009. Most recently, GSP, which had expired in 2013, has been extended to December 31, 2017.
Refer to the Office of the U.S. Trade Representative on GSP and the list of the 2007 GSP-Eligible Products for more detailed information.
4. Double Taxation Treaty
The Double Taxation Treaty between Egypt and the United States was brought into force on 31 December, 1981. The treaty consists of 32 articles targeting the avoidance of double taxation on income, the prevention of fiscal evasion with respect to income taxes, and the elimination of obstacles to international trade and investment.
U.S. taxes covered in the treaty include federal income taxes imposed by the Internal Revenue Code, but excluding the accumulated earnings tax and the personal holding company tax. As for Egypt, taxes covered include those on income derived from immovable property, movable capital, commercial and industrial profits, wages, salaries, indemnities and pensions, profits from liberal professions and all other non-commercial professions, the general income tax, defense tax, national security tax, war tax, and supplementary taxes imposed as a percentage of taxes mentioned beforehand.
For full text of the Treaty, visit the U.S.-Egypt Income Tax Convention Also see the Technical Explanation.
5. Bilateral Investment Treaty
The Bilateral Investment Treaty (BIT) between Egypt and the United States was initiated in 1981 to address the "reciprocal encouragement and protection of investments." The BIT was part of the U.S. policy to encourage Egypt and other developing countries to enact trade-friendly macroeconomic and structural policies as part of their overall economic reform and market liberalization. Moreover, the treaty seeks to harmonize an international investment system that promotes global development within an efficient framework. A basic premise of the treaty is that U.S. investments in Egypt as well as foreign investments in the United States "should receive fair, equitable, and non-discriminatory treatment. The parties also agree to international law standards for expropriation and compensation; free financial transfers; and procedures, including international arbitration, for the settlement of investment disputes." The treaty was signed in Washington, DC on 29 September, 1982 with a related exchange of letters signed 11 March, 1985 and a supplemental protocol signed 11 March, 1986.
For further detail, refer to the U.S. State Department Release, Egypt Bilateral Investment Treaty.
6. Memorandum of Understanding (MOU) with the U.S. Department of Defense (DoD)
The Memorandum of Understanding (MOU) between Egypt and the U.S., namely the basic principles for Scientist and Engineer Exchange and Mutual Cooperation in Research and Development, Procurement and Logistic Support of Defense Equipment, was signed in March 1988 and later amended in April 1999. The MOU remains in effect for a 10-year period, automatically extended for successive five-year periods unless written notification of an intention to terminate is provided by one of the governments.
Under the MOU, Egyptian sources are allowed to offer conventional defense supplies and services and compete for procurement by the U.S. Department of Defense (DoD). The DoD offers solicitations and purchase requests for a variety of commodities through any of its agencies, namely the Air Force, the Army, the Defense Information Systems Agency (DISA), the Defense Logistics Agency (DLA), the Marine Corps, and the Navy. Commodities requested would typically include items such as office and library furniture, clothing, and iron items such as pipes and wattle. (For locating opportunities with the DoD go to www.dodbusopps.com
Refer to the Memorandum of Understanding for more information.
7. The U.S.-Egypt Partnership for Economic Growth and Development
The U.S.-Egyptian Partnership for Economic Growth and Development was first announced in 1994 by U.S. Vice President Al Gore, on behalf of President Bill Clinton, and Egyptian President Hosni Mubarak with the goal of promoting economic stewardship and job creation in Egypt while strengthen the mutually beneficial commercial linkages between both countries.
The objective of the partnership is threefold: 1) to enhance economic cooperation through trade, investment, science and technology; 2) to enhance Egyptian Government initiatives to further economic reform, economic growth, and job creation; and 3) to support the growth of the private sector. The partnership operates through the Presidents' Council, the Joint Board on Science and Technology, and the Joint Committee for Economic Growth and Development, with its four subcommittees.
For more information, see the State Department Fact Sheet released in May, 1996.
8. Science and Technology Agreement
Egypt and the United States signed a bilateral Science and Technology Agreement in August 1995, which was later renewed for a five-year period in 2001 and 2005. The agreement established a framework that initiates the exchange of scientific results, protects intellectual property rights, grants access for researchers, addresses taxation issues as well as responds to a wide range of issues related to economic development, domestic and regional security. In action, the agreement helps to establish science-based industries, investment in science infrastructure, education, and the application of scientific standards. It provides a forum to begin dialogue on a number of related topics, including the relation of global security to the environment and natural resource management.
The Joint Science and Technology (S&T) Board oversees implementation of the agreement, which took effect as part of the U.S.-Egypt Partnership for Economic Growth and Development. The board agreed that activities under the agreement should focus on biotechnology, standards and environmentally friendly manufacturing techniques, with particular emphasis on private sector participation. Another goal of the board is to maximize benefits of cooperative activities for both countries’ private sectors. The State Department coordinates the work of the Joint S&T Board with several U.S. technical agencies such as the National Science Foundation. In Egypt, the Ministry of Scientific Research and Higher Education is the principal counterpart.
Please refer to the State Department general Fact Sheet on global Science and Technology Agreements. Information on the Joint Science and Technology Funds available on the U.S. Embassy in Cairo website.
9. Trade and Investment Framework Agreement (TIFA)
Egypt and the United States signed the Trade and Investment Framework Agreement (TIFA) on 1 July, 1999 in Washington, DC. The agreement establishes a framework to expand trade while resolving outstanding disputes between both countries. It is a natural step towards negotiating a free trade agreement. The Egypt-U.S. TIFA enhances the bilateral economic relationship between the two countries and seeks to encourage and facilitate private sector contracts. The goal of the framework is to foster growth, create jobs, attract investment, improve technology, and lead to overall development.
The Trade and Investment Framework Agreement is a means to establishing effective protection and enforcement of intellectual property rights, create sustainable policies that support trade and environmental protection, and set up a means for worker rights, protection, and enforcement under the legal framework.
Trade and Investment Framework Agreement Brief by the Egyptian Ministry of Trade and Industry.
10. Investment Incentives Agreement
The Egyptian Ministry of Economy and Foreign Trade, now the Ministry of Foreign Trade and Industry, and the United States government signed a bilateral Investment Incentives Agreement on 1 July, 1999 to encourage economic activity in Egypt. The Overseas Private Investment Corporation (OPIC) is the main institution administering the agreement by providing investment support through insurance and reinsurance, debt and equity investments, and investment guaranties to U.S. companies wanting to do business in Egypt.
Please see the Egyptian Ministry of Foreign Affairs for the Investment Incentives Agreement.
11. Cooperation in Energy Technology Agreement
The Egyptian Ministry of Electricity and Energy and the U.S. Department of Energy signed the Cooperation in Energy Technology on 1 July, 1999. The cooperation agreement allows both parties to exchange information, experience and points of view regarding the development and analysis of energy information, energy regulation and energy planning, and in developing strategies to establish and promote market-based systems in renewable energy, energy-efficiency technologies, and fossil-energy technologies.
The main objective of the treaty is to address how renewable energy, energy-efficiency technologies and fossil-energy technologies contribute to increasing energy diversity as well as addressing environmental concerns and enhancing energy security. implementing regional cooperative energy projects.
For the full treaty, see the Egyptian Ministry for Foreign Affairs, Cooperation on Energy Technology.
12. Joint Statement on Electronic Commerce
Egypt and the United States signed the Joint Statement on Electronic Commerce on 14 October, 1999. The statement established a task force to support the development and spread of e-commerce in Egypt. The task force has identified security, public awareness, and the legal framework as priorities. The Joint Statement sets forth the following broad principles that govern the development and use of electronic commerce: private sector leadership, minimal government regulations and restrictions, government encouragement of self-regulation, duty-free treatment of digital goods of value, and promotion of cooperation among all countries. The statement also addresses topics including privacy, intellectual-property rights, content, and consumer protection.
13. Qualified Industrial Zones Agreement
On 10 December, 2004, the U.S. announced the formation of Qualifying Industrial Zones (QIZs) in Egypt, setting in motion a historic partnership between Egypt and Israel that seeks to foster economic cooperation between the two countries. Under the QIZ, goods manufactured in designated industrial areas in Egypt utilizing Israeli inputs will receive duty-free treatment when imported into the United States.
Articles entering the U.S. under QIZ must be grown, produced, or manufactured in a QIZ and meet the rules of origin requirements. The products must also be substantially transformed in the manufacturing process and directly exported to the U.S. without passing through any other location before arrival at the U.S. border. Value added may be in the form of labor or material components.
Upon entering the U.S., the material and processing costs incurred must total no less than 35%, with 11.7% originating in Israel and 23.3% in Egypt in the original agreement. Today, the percent has been renegotiated so that the component originating from Israel was lowered to 10.5% and Egypt makes up the difference at 24.5%. In addition, U.S. materials may account for up to 15% of the appraised value of the finished goods.