Reengaging Egypt : Options for US-Egypt Economic Relations

President Barack Obama has given high priority to launching a new Middle East initiative and reviving peace talks. Special envoy George Mitchell has been tasked with forging a new US policy that contributes to regional stability and economic development. The time is ripe for the United States to supplement its diplomatic strategy with a Middle East economic development strategy. Enhancing economic relations with Egypt is an essential component of such a strategy. In this study, Barbara Kotschwar and Jeffrey J. Schott assess the commercial relationship between the United States and Egypt and recommend constructive initiatives in the areas of services, trade facilitation, and development cooperation to enhance the economic partnership.

Kotschwar and Schott argue that reengaging Egypt will require an economic strategy that builds upon but goes beyond past bilateral initiatives. The "traditional" approach of negotiating a free trade agreement (FTA)-on the backburner since late 2005-is not a practical option in the near term, given the lingering effects of the global economic crisis and the continuing divisions in US trade politics. However, an FTA should remain on the medium-term bilateral agenda. In the interim, the authors suggest other actions that could be implemented sequentially or concurrently: (1) measures to liberalize bilateral trade, including expanding the qualifying industrial zones program, modernizing the bilateral investment treaty, and negotiating a bilateral services trade agreement; (2) measures to facilitate trade, such as customs reform and modernization and new intellectual property legislation; and (3) reforms designed to improve Egypt's business environmentand Egyptian participation in programs funded by the Millennium Challenge Corporation. Revitalizing US-Egypt economic relations would open new trade and investment opportunities, help anchor and advance Egyptian reforms, and create important precedents for new regional initiatives.

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