Egypt - Foreign Trade

Foreign trade

From 1840 to 1930, Egypt had a free trade system, based on the conventions that were imposed by the European powers. The conventions limited tariffs to 5 percent--later 8 percent--on most imported goods. This system constituted a serious obstacle to the country's industrialization. In 1930 Egyptian authorities, in their quest to establish an industrial base, were able to determine their own import duty levels, setting them at 6 to 8 percent for raw materials and up to 15 percent for manufactured goods. Another step toward more independent decision making in the foreign trade domain occurred in 1947 when the government decided to leave the sterling standard and move away from trade with Britain.

As with other aspects of the economy, foreign trade came under government control gradually in the 1950s and then decisively in 1961. From that year until Sadat's infitah, all exports, imports, prices, and payments were handled by public organizations and enterprises. The government, however, did not have an entirely free hand in running foreign trade. It had to operate within the constraints of domestic supply and demand and under the compromises reached with bilateral trading partners. The private sector also could still export fruit and vegetables and a few other items.

The state monopoly on trade was eased in the 1970s. Initially, private firms were permitted to import some commodities under particular conditions. Then, in 1976 the government holding company that had controlled foreign trade was abolished, and the private sector was able to trade in most goods, with a few exceptions, such as cotton. The government, especially under Mubarak, offered investment incentives that included fewer restrictions on imports and exports of commodities by the private sector. The government also extended the multirate exchange system, in part to facilitate foreign trade transactions. But the multiple exchange system created statistical difficulties, and foreign trade accounts could be more consistently examined if expressed in dollars or Special Drawing Rights (SDRs) of the IMF.

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