Anchoring Reform with a US-Egypt Free Trade Agreement

The relationship between the United States and the Muslim/Arab world has deteriorated since September 11, 2001. The United States is widely perceived as targeting Arab nations for their oil, especially in the wake of the war in Iraq. Measures are needed on both sides to build a more peaceful, prosperous Middle East. A free trade agreement with Egypt could be an instrument toward achieving this goal. If the United States were to select its FTA partners based on relative political importance in their regions, Egypt would top the list among Arab states. This study considers the key economic and political characteristics of Egypt as a potential FTA partner. It examines the benefits and challenges in pursuing bilateral negotiations with Egypt, examines the Bush proposal for a regional arrangement, and assesses the impact of a prospective FTA on other trading partners, on the Middle East/Arab world, and on the multilateral trading system. If an FTA with Egypt materializes, the gains can be substantial to all parties involved.