CAIRO: Egyptian garment-makers may be big fish in this pond, but their Chinese counterparts are whales. Or, if you happen to be one of their rivals, sharks might be more like it.
Egypt’s Customs Authority and the Trade Agreements Department at the Ministry of Trade and Industry are launching a six-month study to consider whether they should impose import stricter duties on readymade clothes – especially those from China – to shield domestic firms, the local press reported this week.
Duties on garments are currently set at 30 percent.
Customs taxes are thorny issues here. While some see them as vital safeguards for local industry, they are at odds in many ways with the policies of openness espoused by Egypt’s economic reformers over the last several years. “I don’t think the local industry would benefit, especially in the medium-term, said Ahmed Khalil, an analyst at Beltone Financial, on the possibility of protective duties. With or without such duties, local firms are not likely to make enough clothes to supply domestic markets, he said.
“The (garment) companies in Egypt are already inefficient, Khalil said. “The efficient ones are companies that export most of their products to the United States through Qualified Industrial Zone agreements, or to the European Union.
Harsher customs taxes could make local firms even more lax, he said. “This is what usually happens when countries impose customs duties, he said. “Protection leads to more inefficiency.
He added that the study is still in its very early stages, and much of it remains uncertain. Officials at the Ministry of Trade and Industry were not available for comment at press time.
In 2005, the textiles and clothing industry accounted for about 27 percent of Egypt’s industrial production and 3 percent of its overall economy.
Many countries use trade barriers to shore up fledgling sectors at home that are not considered strong enough to compete globally. The United States used this strategy to bulwark its industries well into 20th century, with President William McKinley going so far as to call protectionism the “law of nature.
US tariffs culminated in 1930, when Congress passed the record-shattering Smoot-Hawley act, which the Economist recently accused of worsening the Great Depression.
A study published this year by economists Kym Anderson at the University of Adelaide in Australia and Alan Winters at the University of Sussex in the United Kingdom suggested state-imposed trade hurdles and farm subsidies distort trade by at least $300 billion per year.