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High vulnerability to external shocks does not imply that Egypt’s economy is highly integrated with the world economy. On the contrary, trade openness remains relatively low. Based on merchandise trade, trade openness was 19 percent in 2000, 39 percent in 2005, and 39 percent in 2011. When services are factored in, openness increases significantly—36 percent in 2000, 62 percent in 2005, and 53.3 percent in 2011[1]—reflecting the important role that services play (mainly tourism and transport).

Trade liberalization accelerated in the 1990s, as trade reform was implemented with the inclusion of elements of simplification, reduction of maximum tariff rates, and adoption of shorter lists of exceptions. In addition, there was a gradual shift toward using tariffs instead of traditional nontariff measures.

In terms of multilateral liberalization, Egypt has been a member of the General Agreement on Tariff and Trade (GATT) since 1970  and a member of the World Trade Organization (WTO) since its establishment in 1995, with developing-country status. WTO membership has brought more discipline to Egypt’s trade policy as Egypt also took several actions to adhere to WTO commitments. In the field of services, Egypt has undertaken commitments in 5 out of the 12 main General Agreements on Trade in Services (GATS) sectors (WTO 2005).

Since the mid-1990s, in terms of regional trade liberalization, Egypt has been engaged in negotiating and implementing a number of Preferential Trade Agreements (PTAs) including: the Pan-Arab Free Trade Area (PAFTA) with Arab countries; an Association Agreement with the European Union; the Common Market for East and South Africa with African countries; the Agadir Agreement with Jordan, Morocco, and Tunisia to establish a free trade area (FTA) with European Free Trade Association (EFTA) members; an FTA with Turkey; and an FTA with Mercosur countries.

All the PTAs Egypt has been engaged in are FTAs. It is also engaged in a number of less-than-FTA type of agreements that were signed in the 1990s with a number of Arab countries including Iraq, Jordan, Lebanon, Morocco, Syria, and Tunisia. PTAs have played an important role in compensating exporters for several demand constraints that Egyptian exports used to face. Egypt now has FTAs with almost all of its major trading partners, with the exception of the United States, with which Egypt has signed the Qualifying Industrial Zones protocol. The protocol gives Egypt free access to the U.S. market for some of its major exports according to a special arrangement where Israeli components have to be included. Egypt's PTAs mainly cover trade in merchandise goods. However, liberalization of trade in services has not been implemented in any of them, despite being an integral part of many of the PTAs that Egypt has joined.

Reference

• WTO (World Trade Organization). 2005. “Egypt’s Trade Policy Review.” Document No. WT/TPR/G/150, World Trade Organization, Geneva.