This paper discusses the possible impact of the Egypt-EU Agreement on the textile industry and ready-made garments in Egypt. It shows that Egypt has good export potential to EU markets. It also highlights that although trade liberalization resulting from the implementation of the GATT and the EU partnership agreement will increase Egypt’s access to external markets, it will increase competition in the domestic market, especially for textiles and ready-made garments.
The main conclusion is that the Egyptian textile and clothing exports are constrained by internal factors rather than by external ones. Therefore, reform should focus first and foremost on increasing the efficiency of the industry by changing the product mix in favor of products with higher value added, by reducing unit costs through improved quality control and better labor standards, and by allowing firms in the spinning industry to choose the least cost input mix of cotton yarns. With respect to the business environment, the paper emphasizes the importance of adopting measures to reduce the administrative barriers and modernizing infrastructure.