CONTRARY VIEWS OF ECONOMIC DIPLOMACY IN THE ARAB WORLD: EGYPT.

• Author: Sullivan, Paul

SOMETIMES THE COMMONLY ACCEPTED assumptions about a subject can be found to be incorrect by simply checking the basics. For the economic diplomacy of Egypt toward the Middle East, and the Middle East toward Egypt after Camp David, a lot can be learned from simply adding up the trade, remittance and aid data, graphing them over time, and thinking about what resulted.

Some of the more interesting results of the inter-Arab trade of Egypt include the following:

When the Camp David Agreements and Egypt's Peace Treaty were signed the Arab League decided to put an economic and political embargo on Egypt. (See Lavy, 1984 for more details on this.) Trade, aid, loans, joint ventures, and so on were to stop between Egypt and other Arab states. The reality is that the Arab embargo against Egypt was hardly that. The GCC, especially Saudi Arabia, Jordan and most other Arab countries broke the embargo either a few years after it was adopted, or for some, like Saudi Arabia, as soon after it was agreed to abide by it.

The UAE increased trade with Egypt from zero before Camp David was signed to over $30 million in 1986. The chart for the trade of the UAE with Egypt gives a clear signal that the embargo was not in effect for the UAE. It was a slow increase, but an increase nonetheless. Saudi Arabia's imports from Egypt increased from under $50 million in 1979 over $80 million in 1985. Saudi exports to Egypt increased from about $40 million in 1979 to close to $250 million in 1984. Trade with Saudi Arabia hardly shows much of a downturn because of Camp David, except for a small drop in imports from Saudi Arabia to Egypt in 1978-79. Exports from Egypt to Kuwait showed a slight drop in 1978-1980, but by 1981 had already started increasing. There was a significant drop off in imports from Kuwait to Egypt from 1978 to 1982. But from 1982 to 1985 they had increased from about $10 million to about $90 million. Exports to Lebanon increased in 1978 to 1981. Imports from Lebanon, after a slight drop in 1978 to 1979, eapt upward in 19 80 and 1981. Exports to and imports from Jordan pretty much vaporized for 1980-1983. By 1984, however, they to show steady growth for years to come. In the other hand, Libya and Syria shut off imports from Egypt. The only recognizable trade is in imports from Libya in 1983-1988. But that was extremely small. (See charts 1, 2, 3 and 4. IMF, DOTS means IMF, Direction of Trade Statistics Yearbook, various years within this paper.) Unfortunately for Egypt it probably did not profit fully from the trade benefits of the sharp increases in oil revenues in the GCC in the time period 1978 to 1981. It did, however, still gained with increases in trade with the GCC -- contrary to the embargo placed on Egypt by the Arab League.

Step-by-step from 1981 through 1989, when Egypt was allowed back into the Arab League, each and every country in the Arab world, except Libya and Syria, circumvented the embargo. By 1989 the readmission of Egypt to the Arab League was like closing the barn door after the horse had been inside for years.

Another interesting result of some simple addition is that the GCC has been the largest source of foreign income based on trade, economic aid and remittances into Egypt for every year from 1979 to 1996. That is, if we add up remittances, exports to the Arab world, and Arab aid to Egypt from the Arab oil countries (even though Arab aid was about zero from 1980 to 1990) these income sources from the Arab world far outweigh the addition of exports and economic aid from either Western Europe or the USA. Even if we added in military aid (the public data that is) the figures still show that the Arabs have been the largest source of foreign income into Egypt during many of these years.

In some years these Arab sources of income are greater than the combination of aid from, and exports to, the USA and Western Europe. Another interesting side result of this is that the combination aid from and exports to Western Europe are larger than the combination of aid from and exports to the USA. The Arabs are the most important sources of such income, Western Europe is next in line, and the USA is third, on average over the time period 1979 to 1996. (See Chart 5.)

Foreign direct investment, foreign portfolio investment, joint ventures, and services trade are left out of these data because of the extreme problems in getting country-level data for the entire time period. A considerable amount of effort went into developing data sets for these variables, but to no avail. However, these data probably will not change the conclusion that the Arab world has become more, not less, important for Egypt as sources for these types of income since Camp David. Particularly since the Gulf War, Arab investments in Egypt have escalated. Arab tourism has always, except for a brief period after Camp David, been one of the largest sources of tourists into Egypt. Arab investors have been taking large stakes in the Toshka project, as well as in the privatization drive in Egypt. Oil investments, historically the largest foreign investments in Egypt in this time period, have been dominated by western oil companies. Nevertheless, oil companies from the Arab world have also been involved. Some Arab investment stalled, or was stopped, because of Camp David, most notably the Arab joint venture to start a military industry in Egypt and some of the banking investments that were being developed before the peace agreements. Certainly more should be done to analyze these other sources of foreign income. That analysis is beyond the scope of this paper, but is part of my future research objectives.

On the other hand, even with the embargo, and even with Egypt's lousy relations with Libya from 1979 to 1989 (Vandwalle, 1995), Egyptian remittance workers were let into the Arab oil countries in large numbers. The remittance income increases were likely larger than any aid that may have come from the Arab oil states, that is if Camp David were not signed, in the time period 1979-1989. This is particularly clear if we consider the declining aid budgets of the GCC as the oil prices tumbled in the 1980s. To support this idea even further, remittances to Jordan and Syria, and aid to Jordan and Syria from the GCC were in decline during the 1980s. Aid was in sharp decline after 1981 for both Jordan and Syria. These were the two countries that were to remain in the camp of the confrontational states. (See charts 6, 7, 8, 9.)

Yet, remittances to Egypt were following a positive trend line. (See chart 9.) That is, remittances to Egypt were going against the declining trend line of oil prices and oil revenues in the GCC. Surely, these increases of remittances after Camp David outweighed any losses of Arab trade that may have occurred because of the embargo. (They also far outweighed any Egyptian exports to Israel.) It is almost as if the GCC wanted to subtly make up for cutting aid to Egypt, as agreed to in the embargo, by making sure that remittances to Egypt increased to make up for the aid losses - even in the face of declining oil prices. The Arab world is a subtle place indeed.

The increased trade of Jordan and the GCC with Egypt may also have been more of a signal that they were not exactly against the treaty and a move toward peace, but did not want to state it directly and publicly just yet.

The reaction of the GCC to remittance workers and their families from Egypt after the signing of Camp David was vastly different from their reaction to remittance workers from Yemen, Jordan (Palestinians and others), and the Sudan because of their governments' alleged support of Saddam Hussein. Over 1.2 million of these workers were thrown out: 850,000 Yemenis, 400,000 Jordanians, and 25,000 Sudanese. Aid was cut completely to these three countries by the GCC. GCC trade was also drastically cut with these countries. (See Nazem Abdalla, 1992; OECD, DAC aid data statistical pages at www.oecd.org/dac on the internet; and IMF, DOTS) Please also note that Egyptian exports to and imports from Iraq after 1991 became...