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Thursday, 13 September 2018

New tariffs take hold, gov’t says they don’t violate WTO agreements

**#1 New import tariffs have taken effect: Customs authorities at ports and airports across the country began yesterday to implement a decision signed off overnight Tuesday by President Abdel Fattah El Sisi to raise import tariffs everything from clothing to electronics and pet food, according to the Finance Ministry. The story is dominating headlines in the domestic press today.

More than 2k capital goods and raw materials will see duties rise out of a total of 5,791 items reviewed, Customs Authority chief El Sayed Negm noted, according to Reuters. The decision sets a 20% tariff on all imports by hotels and tourism businesses and raises duties on items including clothing, electronics, and pet food to 40%. Some categories of goods, including juices, saw duties jump to 60% from 20%. You’re also going to pay extra for having something repaired abroad: Send something out for maintenance or to have it fixed and you’ll be hit with a 10% levy.

Staple goods unaffected: The Finance Ministry was quick to note that staple goods are not impacted by the new duties — and that the decree reduced or eliminated tariffs other goods, including meds for chronic diseases and production inputs used by companies that assemble products domestically. The tariff changes also favour “greener” modes of transportation: Vehicles powered by natural gas will see duties fall 35%, while electric vehicles will be exempt from import duties.

The tariffs favour domestic manufacturers and will curb imports. “The amendments come as part of an effort to encourage local industry and urge citizens to forgo non-essential goods. They will help improve the state’s revenues,” said Radwa El Swaify, head of research at Pharos Securities Brokerage.

No WTO violation: The new tariffs are not in violation of any of Egypt’s trade agreements and were drafted with World Trade Organization policies and standards in mind, Finance Ministry customs affairs adviser Magdy Abdel Aziz tells Al Masry Al Youm. Moreover, the measures are in line with changes to the Harmonized System Code — a global standardized system of classifying traded goods to determine their customs duties — which underwent its regular five-year review by the World Customs Organization in 2017, according to Finance Minister Mohamed Maait.

Why now? The threat of outflows of hot money amid the EM Zombie Apocalypse has policymakers looking at ways to curb demand for FX, likely including leaving interest rates on hold (whereas earlier this year, the expectation was for further rate cuts). Add in a recent charge that the central bank is quietly guiding the exchange rate, and the rationale for the tariffs looks clear to us.

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