The European Union (EU) is pushing ahead with plans for a ‘Deep and Comprehensive Free Trade Area’ with Egypt, despite criticisms of the process from NGOs and the European Parliament for its potentially destructive effects on both employment and economic sovereignty.
A Free Trade Area agreement between the EU and Egypt has already been in place since 2004. The Deep and Comprehensive Free Trade Area (DCFTA) is a more extreme version first proposed by the European Council in 2007. Moves towards such an agreement stalled during the last years of the Mubarak government, but negotiations have resumed under the new EU-Egypt Task Force announced by European Commission President José Barroso and Egyptian President Mohamed Morsi last September. DCFTAs aim to remove all barriers to trade and foreign investment through such means as privatization and disallowing state subsidies to industry or preferential taxes.
According to Kinda Mohamadieh, Programs Director of the Arab NGO Network for Development: ‘The EU continues to push a model of trade and investment liberalization that has proved unsupportive of the development needs of its partner countries, and that could override national democratic transition if maintained or deepened.’ He argues that ‘[such] liberalization can limit the policy tools available to Arab governments for building strong, competitive service sectors, as well as limiting the nature, function and objectives of the services and the governments’ right to regulate them in order to achieve a development outcome. It pushes liberalization further in areas that are not well regulated yet, such as financial services, in a way that weakens the governments’ abilities to protect these sectors from external shocks.’ The European Parliament has similarly criticized the European Commission for its approach to investment agreements such as DCFTAs.
There are concerns about the effect the agreement could have on jobs. Indeed, the European Commission’s own Sustainability Impact Assessment of the DCFTA proposals found that they are likely to have a negative impact on poverty, employment and development. As Mohamadieh puts it: ‘The study identifies, among the potential social impacts, a significant rise in unemployment, particularly following the liberalization of trade in industrial products and agriculture; and a fall in wage rates associated with increased unemployment, as well as a significant loss in government revenues, with resulting social impacts through reduced expenditure on health, education and social support programmes.’ In addition, he says, poor households will be more vulnerable to fluctuations in world market prices for basic foods.
