Egypt's trade and investment relationship with the United States has deepened since Egypt signed the peace treaty with Israel in March 1979. Though military-to-military ties were the original grounds of bilateral relations, the two countries have sought ways to increase their economic and trade ties, notably through various partnerships and agreements. At the beginning of the 1990s, negotiations for a free trade agreement were a topic of discussion, and Egypt and the U.S. finalized a Trade and Investment Framework Agreement (TIFA) in 1999. After the failure to reach a free trade agreement (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.
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 FTA in the future by focusing on each part of modernizing its economy. 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 trade 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 FTA that combines Egyptian and Israeli components in manufactured goods from designated industrial zones that enter the U.S. duty-free.
The U.S. remains committed to assisting the ongoing economic reforms in Egypt and working with the Egyptian government to help overcome the economic challenges facing the country. In December 2017, a bilateral Trade and Investment Council was convened to discuss ways to further expand economic activity between the two countries.
In the absence of greater trade liberalization measures between Egypt and the U.S., other trading partners have been sought. Egypt entered the Greater Arab Free Trade Area (GAFTA) trading bloc, also referred to as the Pan Arab Free Trade Area (PAFTA), in 1998, and 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, an FTA with Jordan, Morocco, and Tunisia, signed in 2004; and it negotiated the Egypt-Turkey Free Trade Agreement in 2005. In 2010, Egypt signed a preferential FTA with Mercosur, the South American trade bloc consisting of Argentina, Brazil, Paraguay and Uruguay; following Argentina’s ratification in July 2017, the FTA went into effect in September 2017. Egypt also became a member of the African Continental Free trade Area (AfCFTA), which entered into force in May 2019. With 41 ratifications to date, the AfCFTA effectively created a single continental market for goods and services for 54 of the 55 member states of the African Union, excluding Somalia. Egypt ratified the agreement in April 2019 during its presidency of the African Union. The AfCFTA covers a market of 1.3 billion consumers with an aggregate GDP of USD 3.4 trillion and will mostly benefit countries with large manufacturing bases such as Egypt, Kenya and South Africa.
Egypt has concluded numerous additional bilateral trade and preferential treatment agreements with additional Arab countries. Trade ties with the European Union and the Middle East and North Africa (MENA) region have also grown in the last 10 years relative to the United States. In 2018, Egypt began FTA negotiations with the Eurasian Economic Union (EAEU), which includes Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. The agreement is expected to raise the trade volume between both sides to USD 15.7 billion (from USD 4.7 billion in 2020) and boost Egypt’s exports to EAEU countries to USD 1.9 billion. Bilateral talks have been ongoing, with ministerial-level negotiations in 2021. Egypt signed an FTA with the United Kingdom post-Brexit, which entered into effect on January 1, 2021.
The U.S. is Egypt’s second-largest trading partner after China, with a total trade volume of USD 9.1 billion in 2021. This accounted for 2.4% of Egypt’s GDP in FY 2020/21 and 7% of MENA-U.S. merchandise trade in 2021. Regionally, Egypt was one of the largest trading partners for the U.S: In 2020, it was the fourth largest trading partner by volume in the Middle East and the largest in Africa. Egypt accounted for 5% of all MENA exports to the U.S. in 2021 and 9% of the region’s imports from the U.S. For the U.S., Egypt was its 50th largest trading partner by volume in 2021, and the U.S. continues to be a net exporter to Egypt.
Source: U.S. Census Bureau
Egypt’s trade deficit with the U.S. slightly declined by 4% in 2021 to USD 2.5 billion (from USD 2.6 billion in 2020). Exports to the U.S. grew 50% YoY to USD 3.3 billion, with petroleum exports increasing 60% YoY to USD 773.9 million. Non-oil exports performed almost as well as petroleum exports, registering a 47% YoY increase to USD 2.5 billion during 2021.
Global supply chains and trade activity began to recover in 2021 after the COVID-19 pandemic. Total MENA trade with the U.S. grew 28% to USD 122.6 billion, compared to USD 95.7 billion in 2020. Egypt still registered the fourth largest trade volume with the U.S. during 2021, following Israel, Saudi Arabia and the United Arab Emirates (UAE).
The bulk of Egypt’s exports to the U.S. continue to be textiles and apparel, which made up 45% of the total export basket and were valued at USD 1.1 billion in 2021. Other top exports were iron and steel products, which rose 54% from the previous year to USD 173.5 million. Exports of plastic products also grew 109% YoY to USD 173.2 million, accounting for 7% of the 2021 export basket. Fertilizers also saw notable YoY rises of 125% in 2021. On the other hand, tobacco and glass products exports fell 89% and 14% YoY, respectively to USD 42.2 million and USD 50 million.
Source: U.S. Census Bureau
Egypt’s top imports from the U.S. during 2021 were seeds and grains reaching USD 1.4 billion and represented 25% of total imports. Vehicles, aircraft and other transport machinery took up an additional 22% of the 2021 import basket on the back of ongoing upgrades to Egypt’s transportation infrastructure. Total food imports increased 10% YoY during 2021 to just over USD 1.8 billion due to a 385% and 38% increase in imports of cereals and dairy products, eggs and honey respectively.
Source: U.S. Census Bureau
