Former Director of the World Trade Organization: Egypt’s crisis in productivity, economic confusion, and the lack of a clear trade policy

By: Shaban Hadia- Habiba Gamal

The world is recently going through a state of confusion in global trade and supply chains, whether because of the Russian-Ukrainian war, or because of the economic conflict between the two largest economies in the world, the United States and China, contrary to the European Union’s approach to impose taxes on polluting industries, and the United States’ direction to impose restrictions on Chinese imports. Whether in the steel industry or solar panels.

All these details led to more global recession and confusion in the markets of most countries, but developing countries, including Egypt, were the most affected, and this was reflected in resorting to foreign loans, which some believe did not and will not solve the economic crisis in Egypt.

To further understand what is happening globally and its repercussions on the local economic situation, “The Green Future” had a special dialogue with Egypt’s former candidate in the World Trade Organization, and one of the international experts who have a great deal of experience in assessing the global trade system, and he is Abdel Hamid Mamdouh – former director of the World Trade Organization. International Trade, currently Senior Adviser to Spalding King and International Law Firm, and Visiting Professor at Queen Mary University of London.

Abd el Hamid Mamdouh believes that Egypt’s main problem is the inability to develop domestic production and increase exports, and this, in his opinion, is due to the lack of a clear trade policy, confusion between policies and objectives, and the inconsistency between the constitution and reality and the procedures and decisions taken, while the constitution stipulates Our economy is a competitive market economy, but the actions, procedures and reality contradict that, and the state is still captive to the institutions of the command economy, in contrast to the absence of competitiveness and transparency and the existence of obstacles that prevent the flow of foreign investment.

As for globally, the situation is more complex, especially since Abdel Hamid Mamdouh, who besides being a former director at the World Trade Organization, is also a visiting professor at Queen Mary University, and provides a lot of advice to negotiators from countries and major companies about international trade procedures and systems, so he sees the global picture clearer. He summarizes it in that the global economic situation and the relationship between the United States and China is a precedent that has not occurred in history, whether in terms of geopolitical confusion and the economic confusion it caused, or in the dependence of both sides on each other economically, and the consequent disintegration of the rules of the international political system and the overlapping of influence. .

Global trade and environmental protection

• What is the role of global trade in facing climate change or protecting the environment?

– When looking at international trade and environmental protection, it must be made clear that international trade is a contributor and not a remedy for environmental issues. Contribution should not be confused with solving environmental problems. International trade will not solve environmental problems. We usually see this confusion in the negotiations of the parties to the World Trade Organization. Some see The role of the organisation is that it protects the environment, and this is wrong, because the role of the organisation and negotiations, even in regional agreements, is to contribute to facilitating trade and the transfer of goods, not to solving the environmental problem, and this contribution has two parts, the first is to work to liberalise and facilitate trade in goods and services that contribute to reducing Carbon emissions, such as reducing customs duties on electric cars, and all commodities with modern technology used to protect the environment, so there should be no obstacles to the entry and movement of such products, especially in the local sphere, and the second part is to agree on rules and policies to protect the environment that do not violate the principles of fair competition, For example, the European Union and the United States tend to impose additional customs duties on imported goods whose production causes high carbon emissions, such as iron and aluminium and fertilisers, but how will the fees be calculated?! A fair methodology must be reached for calculating such a tax without prejudice to the principle of fair competition and non-discrimination between countries in trade. These additional fees, which will be imposed under the pretext of reducing emissions, must be ensured that they are not used for hidden protectionist reasons, because the product is produced in more than one country. system or country and production conditions differ from one market to another, there must be a fair methodology for calculating the value of the additional fees that will be imposed on a product, and we take into account that there will be additional fees for some services that cause high carbon emissions, and in the forefront are transportation and communication services, Whether the transportation of goods or individuals, it must be considered at the international level in a way that protects fair competition, especially with regard to the transportation of individuals in the tourism sector, and this is a market of great importance, especially for developing countries, including Egypt, and these fees despite their legality to protect the environment, but it must be ensured It does not carry hidden protective purposes.

An unprecedented quantum leap

• What is your assessment of the global geopolitical situation and its impact on the movement of trade and the global economy?

– What is currently happening at the global geopolitical level is an unprecedented qualitative shift in history, as it has not occurred since World War II. Global governance was led intellectually, politically, and militarily by the United States of America, until the United States began to withdraw from the arena of global economic cooperation, and the role of leadership in the areas of economic cooperation, including the international trading system, starting with the financial crisis of 2008, and from that time America began to look internally and its competitive relations with Other countries, this coincided with the rise of China as an emerging power, and what is remarkable is that the rise of China was not economic growth in quantitative terms only, but was accompanied by a qualitative development in terms of technology and expansion in the arena of international trade, and this put China in a direct and unique competitive position with the United States Especially since the two parties depend on each other, so this mutual dependence is unprecedented, as China relies on America as its first export market, and America relies on China. As an investment market, China also relies on the United States as a primary source of technology transfer, and this is the main reason for the United States’ anger at the Chinese case, and accuses China of stealing technology.

Is this dependence and overlap according to American whim and will, or was it imposed on it because of the power of the Chinese dragon?

– America is based on a market economy, and whoever takes the decision is companies, as companies are looking for gain whatever it is, and China was refusing its share of the added value or the gain that it gets in return for the gains of American technology companies that it achieves as a result of investing on the land of China, and from here it began to set a condition for transferring Technology as a basis for accepting American companies on its soil, so the United States sees this as an arbitrary condition.

Equilibriums that did not exist before

• Is this a return to the Cold War?

No, because the Cold War brings us back to the Soviet Union and America, and there was no direct economic link between them, and it was a direct confrontation and the disappearance of either of the two poles did not represent a crisis for the other, but now the disappearance of either side (America – China) has repercussions for the other side, because There is a hidden relationship between the two parties. China is the largest buyer of US government debt, with about $1.1 trillion, “US Treasury bonds,” which is equivalent to 4.6% of the US debt. If China sells this debt (US Treasury bonds), then a crisis will occur for both parties and the financial market. These are balances that did not exist before, as the relationship is unprecedented in the history of mankind, especially since this resulted in a major geopolitical crisis. The United States has a concern not because China is heading to be a super economic power – it has a lot to do to be the first economy in the world – nor because the dollar is threatened as the currency of the economy. The world and the international reserve currency – because this also has a long time ahead of him – as evidenced by the fact that with the start of the Russian-Ukrainian war, some said that it was the beginning of the end for the dollar, but the value of the dollar increased, and also the restrictions that were placed on Russia benefited from it, so it rose The increase in the value of the dollar led to an increase in the output of Russian exports, which is based on the export of natural resources.

The current crisis has made the United States concerned that the distance between it as number one in the world and between number two in the world has shrunk a lot at a rapid pace that has never happened before, and the United States wants to slow down this Chinese rush towards the front, and therefore it began to view China as a threat not only on the economic and industrial level. And even on the geopolitical level, America sees that China considers the results of the Russian-Ukrainian war to be applied in Taiwan, and the United States considers Taiwan a symbol of political influence in the Asian periphery, so “the chess board has begun to change,” and this causes concern to the United States, and America began to see that the situation The economic and its effects depend on the geopolitical situation, and this is an important and negative change within the framework of the international system, because the trend since World War II is that the global political arena is stable, and the more the level of economic cooperation is raised, the more prosperity will be raised for the peoples of the world, and it will be easier for the peoples of the world to coexist, and the United States was The United Nations devotes diplomatic efforts and invests a lot in promoting economic principles and investment cooperation in a way that brings prosperity to all and supports political stability, and this was based on I have American economic and political interests, but China has caused turmoil to the American administration and its plans to deal with many global issues, in addition to the global financial crisis that started mainly from the United States. Political and economic, such as the Belt and Road project, and other projects that are apparently economic but serve Chinese political interests, and link them with the participating countries as political and economic influence. Therefore, the United States is looking for compensation opportunities such as heading towards Africa, and this justifies the timing of the American-African summit.

An ideal situation for Arab countries

• How can the Arab and African countries benefit from this confusing situation globally in achieving their interests?

– This is an ideal situation for Arab and African countries, in that they maintain balances, do not rely on any of the parties absolutely, and work to define their interests by dealing with everyone without complete submission or leaving their fate in the hands of one of the parties, and the principle of competition and the search for increased local production And cooperate with everyone to benefit from any initiatives or projects in the interests of their countries.

• Are the Arab and African countries ready to invest the opportunity?

Preparedness is an inevitable thing for our self-interest first, because we will not be able to serve our interests unless we know and define them first, and know our goals in order to work to achieve them. inside so that we can deal with the outside.

Egypt’s problem is in the inconsistency of policies

• What do we, “Egypt”, lack to benefit from the global climate and the changes that are taking place on the economic and political tracks?

The most important problem facing us is the inconsistency of policies, so we must be consistent with our principles. The constitution stipulates that we are a market economy based on competitiveness, and here the vision for economic and social development is based on this economic identity, and everything related to the employment of available resources and all the policies that follow (financial-monetary-agricultural-commercial), it is not appropriate for us to want to attract investments without having an investment policy and a trade policy and how we apply it, and we reject in trade policy the liberalisation of services here that is not consistent with identity.

What do we mean by trade policy and is it different from general economic policy?

The world is characterised by globalisation and globalisation takes different levels. The economy is global and operates through supply and production chains, which means that there is an increasing amount of overlap and exchange, and cross-border transactions have become essential and must be facilitated for the growth and prosperity of local industries. A foreign investor does not come and build factories, unless he knows How does it import its production requirements and how it export its production? This means that the trade policy has a priority and must be clear with specific mechanisms, and the trade policy here is growing. The concept of trade here is no longer just commodity trade, but a trade in goods and services, and it includes services such as stock exchanges, banks, sea, air and land transport, Tourism is one of the most important sectors of service trade globally, and it is growing in a country like Egypt, which has resources, natural wealth, and antiquities that are unparalleled in the world, and services trade has become almost 70% of the global gross national product, and trade policy must be consistent with investment policy, so it is not correct Attracting foreign investment. In the field of trade in services, we refuse to liberalise some services, especially since services are based on investment. For example, for years I have been asking in Egypt what our trade policy is, and the response is, “To reduce imports and increase exports.” This is not a policy, but a goal. The concept of trade policy is how to achieve these goals and in what way. To reach the goal, we must look at the economy in a deeper way, especially in our current economic conditions. The basis is how to increase production, to increase resources and increase exports to start things in a positive direction.

private sector and increase production

• Your assessment of the current Egyptian economy or procedures, and what is the role of the private sector in the economy?

We say once again, we go back to the constitution, which states that we are an economy based on competitiveness. This means that the primary role in production is borne by the private sector, so how do we promote or return the private sector to play its role to increase productivity? This is achieved on three basic principles, first, removing barriers, second, establishing a framework for positive incentives, and third, ensuring fair competition.

The removal of obstacles is that the investor does not want to face obstacles at any stage of his work, because the obstacles increase the cost and burden and have a very negative impact on the return on investment, and also result in unpredictability. A need that runs faster than a frightened dollar!”). The logic of any decision is clear and public. Transparency means that there is a dialogue with the concerned authorities and the private sector, and the investor sometimes has a role in setting these rules, and the path that leads to them is transparent.

Secondly, the incentive system, and the tax system stimulates production and is applied in a manner that is fair and according to the government’s strategy. There are certain activities that the state or government wants to promote or increase in a certain period, so incentives are put in place for them, and some activities see that they are not priorities, and here the tax burden is distributed in a way Serve priorities, strategy and goals.

Thirdly, ensuring fair competition, and we have a competition law that is actually applied to ensure fair competition for all, between what is owned by the private sector and what is owned by government institutions, dealing with everyone equally, and the final product is the result of fair competitive relations, and here we reach the best product, the lowest cost, and choices The broadest for the consumer, and all these rules applied by the systems that want to compete or advance economically are taken into account, so we must have a clear vision and fair commercial and competitive policies, as commercial politics is one of the pillars of successful economies, especially since Egypt has more than 60% services and has It varies and increases, but the objective estimate reaches more than 60%, taking into account that most of the Egyptian economy is informal and undisclosed.

An unstable economy

• In your capacity as a visiting professor in foreign universities and you live outside Egypt for long periods and come into contact with global economic and commercial bodies and sectors, how does the world view Egypt economically?

– The world looks at Egypt as economically confused and sometimes sympathetic, despite the political stability that it has enjoyed in recent years, but it has not resulted in economic stability yet, and there are multiple opinions on the way to exploit resources, some believe that Egypt should have invested more in productive assets, With interest in investing in infrastructure as a basic task of the state, it is not possible to attract investments while the infrastructure is crumbling, but to what extent is this investment because there are other strategic priorities that must be taken into account.

• Specifically, what is the problem with the Egyptian economy? Is what we are in because of the directives and interventions of international lenders such as the International Monetary Fund?

– The main problem of the Egyptian economy is production, and the accumulated debt crisis results from the fact that these loans were not directed enough to increase production or productive projects.

– The International Monetary Fund, when it gives money, moves to save countries, and wants to see the extent of the state’s ability to pay off this debt, because this side does not tell us how to live our lives, and does not interfere in the details of the state, nor how to be productive, and the fund deals with monetary and financial policies and does not It deals with developmental policies, and this mistake is what made us blame the IMF for policies or directions that are not within its competence, as it is not its role to solve all our economic problems, it only gives some directions to ensure how to achieve sustainable debt repayment, related to financial policies to improve the situation, such as floating the exchange rate For example, to provide an opportunity to increase exports, make your products more competitive, and reduce imports.

• But our crisis is in the flotation, so why do the Fund and the donors insist on floating the pound, which every time causes economic problems, an increase in prices and confusion in the state?

– The flotation here harms everything that is imported only, and it is only linked to foreign commodities, and the increase in exports depends on a lower local currency price, and it is only the importer whose prices are raised, but the rise of all commodities, as is the case now, means that the problem is in the absence of production, because the fund here does not It interferes with productivity, as this is the responsibility of the government and the concerned authorities. When it is directed to cancel subsidies because it is intended to reduce the deficit, it does not interfere at all in any institutional modifications, especially since we have so far managed the economy with the institutions of the directed economy.