This paper discusses the possible impact of the Egypt-EU Agreement on the textile industry in Egypt and the policies needed to maximize Egypt’s benefits from this agreement. The Egypt-EU Agreement is coming at a time when the textile industry enjoys a high comparative advantage but also suffers from many problems that prevent it from fully utilizing this advantage. The rules of origin suggested by the EU are not compatible with the present status of Egypt’s industry and there are problems that prevent the vertical integration between the different levels of production within the industry.
The paper discusses the options that Egypt has regarding the liberalization of imports from the EU and the prospects for increased foreign investment and technical and financial assistance as a result of the agreement. It concludes that the textile industry needs a transitional period during which the rules of origin will be gradually applied in order to give the industry the chance to deal with its structural problems and raise its productive capacity.