Thomas Donohue, president and CEO of the United States Chamber of Commerce (USCC), spoke at AmCham Egypt’s monthly luncheon on January 18 about Egypt-US relations and the need to continue lobbying government to fight off a resurgence of protectionism. The event was held at the Semiramis InterContinental.

Addressing AmCham Egypt members and distinguished guests, AmCham president Taher Helmy described the close strategic ties between the US and Egypt. He noted the growth in bilateral trade over the past several years, and the important role of the qualifying industrial zones (QIZ) agreement signed in December 2004, which gives Egyptian exports duty-free access to the US market provided they contain the required Israeli content.

Helmy invited Donohue and the minister of trade, Rachid Mohamed Rachid, to the stage to sign a memorandum of understanding between the US Chamber of Commerce and Egypt’s Ministry of Trade & Industry. The MoU outlined protocols to maintain the bilateral trade relationship and promote openness.

Donohue then took the podium, delivering a forceful yet humorous speech about the nature of trade relations between the US and Egypt and the necessity of pushing government, particularly in the US, not to abandon the cause of free trade. He praised the Egyptian government’s recent economic reforms and encouraged it to stay the course. He also commended AmCham Egypt on its 25 years of serving the business community and fostering the flow of trade and investment between the two countries.

The USCC head pointed out that there are over 300 US firms operating in Egypt in a range of sectors from energy and engineering to banking, finance and textiles. “Americans realize that Egypt is an important and strategic country, a market of significant size and potential, and a good friend and partner on many fronts,” he said. “Whenever disagreements arise, and they often do, it is essential that we deal with them in the spirit of friendship and partnership built up over the many years of hard work and earned trust.”

Donohue explained that his intention was not to come to Egypt and tell people what they need to change. Rather, he wanted to explain what must be done in the US, and what Egypt can do to encourage and benefit from trade with its largest single trading partner. Donohue identified several areas in which improvement was necessary and would increase national economic strength. He noted the burden of the US legal system on business, but acknowledged that businesses must be monitored, especially in the wake of a series of corporate scandals. “We support aggressive action against fraud and dishonesty wherever it occurs.” However, “we strongly oppose the abusive tactics and violations of due process rights we have recently seen,” he said.

Another area crucial to the economic future of the US is the education system. “The American public education system [has been] famous for many years as failing us and failing many of our children.” About 30 percent of American children never graduate secondary school, he said, adding that the figure is twice as bad for minority students.

The USCC is working with policy makers to improve American public schools. It is also committed to allowing foreign talent to come to the US. “As we work to improve the skills and quality of the American work force, the chamber will also lead the fight for comprehensive immigration reform and sensible visa policies that draw visitors and human talent to our country from around the globe,” he said.

Another challenge the US, and other governments around the world, must face is energy security and global climate change. “Energy is an all-encompassing subject that washes over everything from national security to economic stability to environmental policies to geo-politics,” he said. The USCC is promoting policies that will reduce oil dependence both for security and environmental reasons. Donohue called for people to take a rational, non-ideological view of global climate change. “The argument is over, right or wrong; we’re now in the business of managing the results of it.”

Donohue explained that the mission of the USCC was to “create a more competitive, a more open and more globally-engaged American economy.” The chamber is pursuing five strategies that, Donohue explained, are relevant to all countries, not just the United States. “First, business around the world must do a much better job of explaining in real terms how trade and open markets benefit everyone.” This includes explaining how growth in trade creates jobs, increases income and creates greater access to consumer goods, he noted.

“Second, we are vigorously lobbying against proposals that would restrict the freedom of US firms to source and invest around the world.” Specifically, the USCC is opposing measures to limit US firms purchasing goods and services overseas to reduce cost and add value to their product. Outsourcing has become a favorite target of protectionist-minded critics in the US, but Donohue says this is short-sighted. “American companies should not be punished for operating globally.”

“The third thing we’re going to do is to make sure the US stays open to foreign investment and that other markets remain open to us.” He notes that the US receives $1.5 trillion in FDI every year and that trade and international investments account for one-third of the country’s $12 trillion economy. Security concerns in the US have led to poor policy making and have discouraged FDI, he says, citing the failed attempt of a Dubai firm to purchase US ports last year. 

“Fourth, we must take greater steps to harmonize divergent regulatory systems around the world,” he continued. Over the course of many years of trade negotiations, tariffs have been lowered dramatically worldwide. Many countries have resorted to erecting non-tariff barriers to subsidize their domestic industries at the expense of trade partners. Donohue believes this trend is counterproductive and must be reversed.

“Fifth, the US Chamber is deeply engaged on a global basis in the fight against counterfeiting, piracy and intellectual property theft.” Donohue praised the Egyptian government for taking steps to protect intellectual property rights. Piracy costs US firms about $250 billion a year and is a major deterrent for cross-border investments. He cited a World Bank study which showed that 25 percent of German and Japanese high-tech firms refused to invest in, or partner with firms from, countries with poor IPR protection. Countries with strong anti-piracy policies, on the other hand, have been quite successful in attracting investment, he explained.

Donohue commented on Egypt’s failure to land a free trade agreement with the US. While he was sympathetic to Egypt’s feeling of rejection, he urged the audience to consider the failure in the context of a tense political situation in the US during an election year. “In spite of all of that I think it’s important that the chamber move forward to support a commercially viable FTA between our two countries,” he said, adding that such an agreement was in the best interest of both countries and that it was likely to come through eventually.

Donohue ended on a positive note, saying “American businesses are committed to a stronger US-Egypt-Middle East partnership; one that transcends politics, policies and historical disputes.” He told that audience that “if we rise above such real and imagined barriers then commerce, prosperity, quality of life in both countries will rise, and so too will our level of understanding and friendship.”

During the question and answer session that followed, Donohue entertained questions on topics ranging from the morality of lobbying for big business to his position on Egypt’s new consumer protection law. He spoke in detail about the prospects for the Doha round of trade negotiations, which he saw as largely positive. He argued that while the Doha rounds appeared to be failing, significant progress was being made. “I’ve never negotiated a good business deal, trade deal or labor deal that didn’t fall apart a lot. And if it didn’t fall apart a lot then you’re not being aggressive enough,” he said.

At the end of the event, AmCham Egypt presented Donohue with an honorary membership. Earlier, two AmCham members in attendance were randomly selected to receive free first-class airline tickets to anywhere in the world, courtesy of EgyptAir. Twenty-five free EgyptAir tickets are being raffled off during monthly luncheons in 2007 to celebrate AmCham’s 25th anniversary.