Egypt's trade and investment relationship with the United States deepened over the last thirty years after Egypt signed a peace agreement with Israel. Since that time the two countries have sought ways to increase their economic and trade ties, notably through the various partnership and agreements. At the beginning of the 1990's, negotiations for a free trade agreement were a topic of discussion but no comprehensive conclusions could be reached. Egypt and the U.S. finalized a Trade and Investment Framework Agreement (TIFA) in 1999. After the failure to reach a FTA bilaterally, the U.S. shifted to giving regional trade agreements priority, such as the 2003 Middle East Free Trade Area initiative (MEFTA). It did, however, conclude free trade agreements with Israel, Jordan, Morocco, Bahrain, and Oman. Further FTA negotiations with the UAE and Egypt were put on hold in 2005 and 2007 respectively.
Nevertheless, in the pursuit of a free trade framework, Egypt has made strides to open its economy through various reforms and, in essence, has laid the ground work for a free trade agreement in the future by focusing on each part of modernizing its economy. Furthermore, Egypt-U.S. trade operates within two initiatives designed to increase Egypt's exports to the U.S. The first is the U.S. Generalized System of Preferences (GSP), a preferential treatment program where certain products are eligible for duty-free entry to the U.S. under specific qualifications. The second is the Qualifying Industrial Zones (QIZs), a one-way free trade agreement that combines Egyptian and Israeli components in manufactured goods from designated industrial zones that enter the U.S. duty-free.
In the absence of greater trade liberalization measures between Egypt and the U.S., other trading partners have been sought. Currently, Egypt joined the Pan Arab Free Trade Area agreement (PAFTA) under the Arab League in 1997; it became a member of the Common Market for East and Southern Africa (COMESA) in 2001; it finalized the EU-Egypt Partnership Agreement, signed in 2002; it joined the Agadir Agreement, a FTA between Mediterranean countries (Egypt, Jordan, Morocco, and Tunisia), signed in 2004; it negotiated the Egypt-Turkey Free Trade Agreement in 2005; and Egypt concluded numerous bilateral trade and preferential treatment agreements with additional Arab countries. The above denotes that trade ties with the EU and MENA region have grown in the last ten years relative to Asia and the United States. Nevertheless, the U.S. remains a vital trade partner sharing a robust trade relationship with Egypt.
The United States is one of Egypt's largest single trading partners with a volume of trade reaching USD 6.3 billion in 2015, down 20% from 2014 levels and representing approximately 2.1% of Egypt's GDP.
Egypt's Exports to the U.S.
Egypt's export basket is considerably diversified, unlike many other countries in the Middle East and North Africa region who export predominantly oil and gas. This factor indicates that the Egyptian economy has great growth potential in a variety of sectors. In 2015, Egypt exported USD 1.4 billion worth of goods to the U.S. The predominant exports to the U.S. were apparel, textile furnishings, food and kindred products, fertilizers and other agricultural chemicals, and minerals, ores and nonmetallic mineral products.
The GSP Program
The U.S. Generalized System of Preferences (GSP) is a program that provides preferential duty-free treatment for more than 5,000 products from 165 beneficiary developing countries. The GSP program was initiated on January 1, 1976, and authorized under the Trade Act of 1974.
After expiring on July 31, 2013, the GSP program was inactive until Congress renewed it effective July 29, 2015, retroactively applying to all GSP-eligible imports that entered the U.S. during the lapse. The current program is authorized until December 31, 2017.
Egypt has been a beneficiary country under GSP since its initiation and yet GSP accounts for only 4.3% of Egypt's total exports to the U.S. and 0.37% of total exports in 2015, as over 80% of Egypt’s exports to the U.S. are not eligible for GSP treatment. GSP-eligible exports grew by 3.5% in 2015, totaling USD 67.1 million, compared to the 2014 levels of USD 67.1 million.
Egypt's Imports from the U.S.
Egypt ranks second in Africa and 43rd worldwide for imports originating from the United States. Egypt imported considerably fewer petroleum and coal products, agricultural products and transportation equipment from the U.S. in 2015, which decreased from 2014 levels by 58%, 57% and 26%, respectively. The U.S. export basket to Egypt was still dominated by transportation equipment and machinery, chemicals and food and kindred products at 10%. The U.S. exported USD 4.7 billion worth of goods to Egypt in 2015, shrinking by 27% from 2014 levels.
Additional Trade Statistics Resources:
(Updated May 2016)
According to the U.S. Department of Commerce the stock of U.S. FDI in Egypt stood at USD 21.3 billion as of 2015, representing 33.2% of U.S. direct investment in Africa. In 2015, Egypt was the largest recipient of U.S. direct investment in Africa, and second in the Middle East, after the UAE. The U.S. is among the top 10 largest foreign direct investor in Egypt.
Apache Corporation, a large global independent oil and gas exploration and production company based in Houston, Texas, entered Egypt in 1993 and is now the largest American investor in the country, with investments totaling over USD 16 billion. Apache holds over 4.8 million gross acres in the Western Desert. The company also operates in the USA, Canada, United Kingdom and Australia. In 2016, Apache expects a total investment of around USD 1 billion, directing 50% toward ongoing operations and 50% toward new capital investments. Other American petroleum companies with operations in Egypt include ExxonMobil, Hess, Halliburton, IPR TransOil, and Merlon International."
The stock of U.S. capital excluding petroleum production and refining totaled USD 2.3 billion as of end of February 2016, distributed across 1,190 companies. American non-petroleum firms are active in most economic sectors in Egypt, with manufacturing companies holding the largest share of 39% of the U.S. non-petroleum capital in Egypt. Large U.S. investors in these sectors include 3M, American Automotive, American Standard, Bristol-Myers Squib, Cargill, Coca-Cola, Colgate-Palmolive, Dow Chemicals, Edison International, Energizer, General Electric, General Motors, Gillette, Heinz, Hundz Soil, Johnson & Johnson, Merck, PepsiCo, Pfizer, Procter & Gamble, and Xerox.
Financial services is the second largest sector after manufacturing for U.S. investment in Egypt, accounting for 34% of the U.S. non-petroleum capital in Egypt. AIG, American Express, BNY Mellon, Citigroup, Coldwell Banker, MetLife, and Visa are all participants in the financial services sector. The U.S. has significant presence in other service sectors as well. Alcatel-Lucent, Cisco, Hewlett-Packard, IBM and Microsoft all operate in the telecommunication and information technology sector. The Egyptian fast-food market is dominated by U.S.-based franchisors including Baskin-Robbins, Burger King, Chili’s, Cinnabon, Cold Stone Creamery, Dairy Queen, T.G.I. Friday’s, Hardee’s, Hard Rock Café, KFC, Little Caesars, McDonald’s, Outback Steakhouse, Pizza Hut, Starbucks and Ruby Tuesday.
Leading Sectors for U.S. Business in Egypt in 2015
- Architecture/Construction/Engineering Services
- Electricity Power Systems
- Medical Equipment and Supply
- Oil & Gas Equipment
- Renewable Energy
- Safety and Security Industry
- Water/ Wastewater Resources
Source: U.S. Commercial Service
(Updated May 2016)