EGYPT-ECONOMY: Traders Protest Against New Tariffs

By Cam McGrath Reprint | | Print |

Cam McGrath

CAIRO, Jan 25 2002 (IPS) - Shops in Port Said are open once again after the Suez Canal city was brought to a standstill by violent protests against a controversial government decree that imposed a 500 per cent increase in customs tariffs on imported clothing.

Earlier this month, an angry mob of 1,500 traders in Port Said smashed the windows of government vehicles and stoned the city’s chamber of commerce in protest to a surprise decree that revoked their city’s special duty-free privileges and sharply raised customs duties on imported clothing.

Other merchants closed their shops in protest, while scores of day-trippers visiting the city were forced to abandon their purchases when customs posts outside the city attempted to levy the heavy tariffs.

Egyptian officials said the decree was put into effect to conform with World Trade Organisation (WTO) membership requirements, while simultaneously protecting the local textile and garment industry against fierce competition posed by cheaper items produced in Far Eastern countries.

WTO regulations required the government by January 1, 2002 to lift its strict quotas on imported ready-to-wear clothing items and reduce customs tariffs on dozens of intermediary goods.

Instead of lifting the 15-year ban on imported garments, Egypt implemented a new tariff schedule that reduced duties on production inputs such as thread and fabrics, while imposing a staggering 500 per cent increase in duties on imported ready-to-wear clothing. Domestic textile factory owners hailed the decision. Clothing wholesalers and shop owners objected angrily.

Nowhere in Egypt was this opposition more evident than in Port Said, a city granted special free trade status in 1976 as a reward for its historic struggle against foreign occupation and to help it recover from a string of devastating wars with Israel.

Over the past quarter century the city has become a Mecca for bargain-hunters and up to 70 per cent of the city’s 600,000 people work as traders, primarily selling imported new and used clothing.

“Of course we protested. The government decision threatened to destroy our way of life and throw all of us out of work,” said Mohammed Desouky, a garment wholesaler.

Like thousands of other traders, Desouky closed his shop for several days to protest against the decree. The government gradually softened its stance and agreed to grant a customs waiver on six items of clothing per person per visit, a privilege offered to shoppers four times per year. A newly-imposed 10 per cent sales tax on clothing, however, continues in effect.

The Cabinet agreed to extend the Port Said’s free trade zone status for another five years, but the damage was already done. Many city officials and traders admitted that customers were slow to return even after the amendments.

“The decree was made without warning and many shoppers are afraid to come to Port Said or buy anything because it could happen again,” Desouky said. He added that six items of clothes per person amounted to one or two new outfits each, hardly enough to justify the six-hour round trip from Cairo. The few shoppers at the city’s El-Hai el-Tegari (commercial market) these days are either residents or come from nearby towns.

“The decree has undoubtedly killed this city,” Port Said MP Akram el-Shaer told state-run Al-Ahram weekly. “Most of the companies that opened here do not employ local residents and land is too salty and inappropriate for agriculture. Thousands of people will suffer.”

While anxiety looms in Port Said, confusion reigns at the country’s international airports.

Egyptians returning home from abroad found themselves in heated exchanges with customs officials over the new tariffs. Many left suitcases full of gifts intended for relatives in the customs area, preferring to ship them back overseas rather than pay the exorbitant duties on their contents.

Some authorities maintain that the six-item customs waiver applies to all arriving passengers, while others have assured worried travellers that the law is aimed solely at smugglers.

Mohammed Abu Sheisha’i, head of the Customs Authority, stressed that Law no. 186/86 exempts personal belongings from taxes as long as “they suit their social status” He said arriving passengers were also entitled to bring gifts for their relatives. “No change was made to this law,” he insisted.