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Clothing Tariffs Put Imports Out of Reach for Many Egyptians - 2002-01-04

The cost of imported clothing in Egypt is about to rise beyond affordability for many Egyptians. The government has imposed tariffs that would triple and even quadruple the cost of imported clothing.

Between $222-$311 represents the extra tariff cost for each imported, ready-made men's and women's suit sold in Egypt.

This week the Egyptian government announced higher tariffs in an effort to discourage imports. The government is doing this in hopes of boosting domestic industries hard hit by a steep economic downturn.

The announcement caused thousands of merchants to take to the streets in protest in the Mediterranean city of Port Said, saying it would hurt the city's economy. Port Said is a designated free-trade and industrial area. Riot police were called out but protesters dispersed without incident.

In Cairo, Egyptian Finance Minister Medhat Hassanein said the tariffs are designed to support national industry. The government hopes to improve the export performance of Egypt's garment industry while limiting competition from abroad.

Egypt has limited foreign competition by imposing strict quotas on foreign clothing. But under an agreement made with the World Trade Organization (W-T-O), Egypt was to completely remove its quotas on imported ready-made clothing this month.

However, Egypt's External Trade Minister Youssef Boutros-Ghali said the government, "will not rush into lifting the ban" that applies past the quotas, saying it will remain in effect until further negotiations with the WTO have been concluded.

Economist Abdel Fattah el Gebaly, with the al Ahram Center for Political and Strategic Studies in Cairo, says imposing higher tariffs is how governments often circumvent the lifting of import quotas. "This is what we call the 'tariffication' of bans. That is, you work out the tariff rate that would limit the importation of clothing as a substitute for the old regime of controlling trade," he said.

Mr. el Gebaly acknowledges that reducing competition almost always creates a disincentive to improve quality, but he says the Egyptian government is trying to create an economic balance for domestic industries. "It is true that restricting competition, in principle, does not really force local producers, or producers anywhere, to excel," he said. "But, at the same time, if you have producers who are facing difficult productive conditions, such as having to pay more for finance than what their competitors pay abroad, then the issue of competition should be raised in a slightly different context."

The Egyptian economy experienced a sharp decline following the September 11th terrorist attacks in the United States. Tourism dollars - a significant source of revenue for the country - have all but evaporated and tens of thousands of workers have lost their jobs.

Traditionally, Egypt raises and lowers tariffs at the beginning of each year. This year, while tariffs rise on imported clothing there will be sharp tariff reductions on such items as medical supplies.

Tariffs on raw materials for oil and gas industries and items used in the tourism sector, such as diving gear, were also reduced.