CONTRARY VIEWS OF ECONOMIC DIPLOMACY IN THE ARAB WORLD: EGYPT.

SOMETIMES THE COMMONLY ACCEPTED assumptions about a subject can be found to be incorrect by simply checking the basics. For the economic diplomacy of Egypt toward the Middle East, and the Middle East toward Egypt after Camp David, a lot can be learned from simply adding up the trade, remittance and aid data, graphing them over time, and thinking about what resulted.

Some of the more interesting results of the inter-Arab trade of Egypt include the following:

When the Camp David Agreements and Egypt's Peace Treaty were signed the Arab League decided to put an economic and political embargo on Egypt. (See Lavy, 1984 for more details on this.) Trade, aid, loans, joint ventures, and so on were to stop between Egypt and other Arab states. The reality is that the Arab embargo against Egypt was hardly that. The GCC, especially Saudi Arabia, Jordan and most other Arab countries broke the embargo either a few years after it was adopted, or for some, like Saudi Arabia, as soon after it was agreed to abide by it.

The UAE increased trade with Egypt from zero before Camp David was signed to over $30 million in 1986. The chart for the trade of the UAE with Egypt gives a clear signal that the embargo was not in effect for the UAE. It was a slow increase, but an increase nonetheless. Saudi Arabia's imports from Egypt increased from under $50 million in 1979 over $80 million in 1985. Saudi exports to Egypt increased from about $40 million in 1979 to close to $250 million in 1984. Trade with Saudi Arabia hardly shows much of a downturn because of Camp David, except for a small drop in imports from Saudi Arabia to Egypt in 1978-79. Exports from Egypt to Kuwait showed a slight drop in 1978-1980, but by 1981 had already started increasing. There was a significant drop off in imports from Kuwait to Egypt from 1978 to 1982. But from 1982 to 1985 they had increased from about $10 million to about $90 million. Exports to Lebanon increased in 1978 to 1981. Imports from Lebanon, after a slight drop in 1978 to 1979, eapt upward in 19 80 and 1981. Exports to and imports from Jordan pretty much vaporized for 1980-1983. By 1984, however, they to show steady growth for years to come. In the other hand, Libya and Syria shut off imports from Egypt. The only recognizable trade is in imports from Libya in 1983-1988. But that was extremely small. (See charts 1, 2, 3 and 4. IMF, DOTS means IMF, Direction of Trade Statistics Yearbook, various years within this paper.) Unfortunately for Egypt it probably did not profit fully from the trade benefits of the sharp increases in oil revenues in the GCC in the time period 1978 to 1981. It did, however, still gained with increases in trade with the GCC -- contrary to the embargo placed on Egypt by the Arab League.

Step-by-step from 1981 through 1989, when Egypt was allowed back into the Arab League, each and every country in the Arab world, except Libya and Syria, circumvented the embargo. By 1989 the readmission of Egypt to the Arab League was like closing the barn door after the horse had been inside for years.

Another interesting result of some simple addition is that the GCC has been the largest source of foreign income based on trade, economic aid and remittances into Egypt for every year from 1979 to 1996. That is, if we add up remittances, exports to the Arab world, and Arab aid to Egypt from the Arab oil countries (even though Arab aid was about zero from 1980 to 1990) these income sources from the Arab world far outweigh the addition of exports and economic aid from either Western Europe or the USA. Even if we added in military aid (the public data that is) the figures still show that the Arabs have been the largest source of foreign income into Egypt during many of these years.

In some years these Arab sources of income are greater than the combination of aid from, and exports to, the USA and Western Europe. Another interesting side result of this is that the combination aid from and exports to Western Europe are larger than the combination of aid from and exports to the USA. The Arabs are the most important sources of such income, Western Europe is next in line, and the USA is third, on average over the time period 1979 to 1996. (See Chart 5.)

Foreign direct investment, foreign portfolio investment, joint ventures, and services trade are left out of these data because of the extreme problems in getting country-level data for the entire time period. A considerable amount of effort went into developing data sets for these variables, but to no avail. However, these data probably will not change the conclusion that the Arab world has become more, not less, important for Egypt as sources for these types of income since Camp David. Particularly since the Gulf War, Arab investments in Egypt have escalated. Arab tourism has always, except for a brief period after Camp David, been one of the largest sources of tourists into Egypt. Arab investors have been taking large stakes in the Toshka project, as well as in the privatization drive in Egypt. Oil investments, historically the largest foreign investments in Egypt in this time period, have been dominated by western oil companies. Nevertheless, oil companies from the Arab world have also been involved. Some Arab investment stalled, or was stopped, because of Camp David, most notably the Arab joint venture to start a military industry in Egypt and some of the banking investments that were being developed before the peace agreements. Certainly more should be done to analyze these other sources of foreign income. That analysis is beyond the scope of this paper, but is part of my future research objectives.

On the other hand, even with the embargo, and even with Egypt's lousy relations with Libya from 1979 to 1989 (Vandwalle, 1995), Egyptian remittance workers were let into the Arab oil countries in large numbers. The remittance income increases were likely larger than any aid that may have come from the Arab oil states, that is if Camp David were not signed, in the time period 1979-1989. This is particularly clear if we consider the declining aid budgets of the GCC as the oil prices tumbled in the 1980s. To support this idea even further, remittances to Jordan and Syria, and aid to Jordan and Syria from the GCC were in decline during the 1980s. Aid was in sharp decline after 1981 for both Jordan and Syria. These were the two countries that were to remain in the camp of the confrontational states. (See charts 6, 7, 8, 9.)

Yet, remittances to Egypt were following a positive trend line. (See chart 9.) That is, remittances to Egypt were going against the declining trend line of oil prices and oil revenues in the GCC. Surely, these increases of remittances after Camp David outweighed any losses of Arab trade that may have occurred because of the embargo. (They also far outweighed any Egyptian exports to Israel.) It is almost as if the GCC wanted to subtly make up for cutting aid to Egypt, as agreed to in the embargo, by making sure that remittances to Egypt increased to make up for the aid losses - even in the face of declining oil prices. The Arab world is a subtle place indeed.

The increased trade of Jordan and the GCC with Egypt may also have been more of a signal that they were not exactly against the treaty and a move toward peace, but did not want to state it directly and publicly just yet.

The reaction of the GCC to remittance workers and their families from Egypt after the signing of Camp David was vastly different from their reaction to remittance workers from Yemen, Jordan (Palestinians and others), and the Sudan because of their governments' alleged support of Saddam Hussein. Over 1.2 million of these workers were thrown out: 850,000 Yemenis, 400,000 Jordanians, and 25,000 Sudanese. Aid was cut completely to these three countries by the GCC. GCC trade was also drastically cut with these countries. (See Nazem Abdalla, 1992; OECD, DAC aid data statistical pages at www.oecd.org/dac on the internet; and IMF, DOTS) Please also note that Egyptian exports to and imports from Iraq after 1991 became about nil. This was directly the result of the UN sanctions placed on Iraq, which as a UN member, Egypt has supported, albeit sometimes reluctantly.

Trade has been reestablished between Saudi Arabia and Jordan, but not between Kuwait and Jordan. (King Abdullah of Jordan recently visited Kuwait. This may lead to a reestablishment of economic and other ties between these two countries.) Sudan has also reestablished trade with Saudi Arabia after a couple of years of drastic decline. Saudi Arabia is now one of Sudan's largest trading partners. Kuwait never reestablished trade with the Sudan. Kuwait's trade with Yemen initially dropped precipitously after the war, but has regained somewhat, but not near what it was. (IMF, DOTS) Saudi trade with Yemen has also rebounded. However, almost no Yemenis have been allowed back in to Saudi Arabia to work. Exports to Saudi Arabia, around 150-200 million dollars on average in the 1991-1996 period hardly make up for the massive remittance losses due to 850,000 Yemeni citizens being ejected from Saudi Arabia. The UAE's trade reaction to the Gulf wars of 1990-1991 looks to be minimal. It hardly traded with the Sudan both b efore and after the war, and its trade with Yemen and Jordan increased after the war. (IMF, DOTS)

Most of the GCC aid, however, came from Saudi Arabia and Kuwait. This was drastically cut back, and sometimes cut off, for the Palestinians, Yemenis and Jordanians. (See OECD, DAC statistical data on net ODA by country donor and recipient at www.oecd.org/dac.) Only just recently have the Kuwaitis agreed, seemingly under heavy US pressure, to send some fund to the Palestinians as a follow up to the Wye Agreements.

Palestinians, Yemenis and Jordanians were not only subject to mass expulsions, but also to mass losses of businesses, bank accounts, and other assets and opportunities. (See Sullivan, Paul, "Iraq: The Pivot".) Such things did not happen to Egyptians after Camp David.

It seems that the GCC reacted much more strongly to direct threats to its security and well-being by the other Arab states, than it did to the initiation of Israel into the Middle East economic and political framework. This leads us to another somewhat surprising result. From 1980 to 1988, with just a couple of years as close calls, Israel was Egypt's largest trading partner in the Middle East to the point that Egypt's trade with Israel far outweighed the addition of all of its trade with the entire Arab world during most of these years. (See Chart 10. The Arab world is defined as all Arab countries of the Middle East and North Africa: Morocco, Algeria, Tunisia, Libya, Lebanon, Jordan, Syria, Iraq, Saudi Arabia, Kuwait, the U.A.E., Oman, the Yemen(s), but not the West Bank and Gaza due to data insufficiencies. Trade with the Palestinians, however, has always been a tiny proportion of all of Egypt's inter-Arab trade.) Chart 10B shows rather starkly how important Israel was for Egypt's interregional export mar kets in the 1980-1988 time period. It still remains one of the most important markets in dollars terms.

That is, if the entire Arab world were a trading bloc and Israel another, Egypt chose to trade more with the Israelis than with the Arabs for most of the 1980s. Egypt was the only Arab trading partner with Israel from 1979 to 1991 (Put another way, outside of the Palestinians in the West Bank and Gaza, who are a captured market for the Israelis still, very minor trade with Jordan, and some unregistered trade with Lebanon and other Arab states via Cyprus). If the embargo against Israel were like the Arab embargo against Egypt, then we might have a Middle East Common Market by now.

Egypt's exports to Israel have been mostly oil, as agreed in the Camp David Accords. That is well known. Stepping back a bit, what is not well known is that by 1973 the Sinai was producing about 60% to 70% of Israel's oil needs. Before Israel captured the Sinai in 1967 Israel was producing just 6% of its needs. (Wissa, 1989) As the oil fields and the Sinai were turned back to Egypt in the disengagement agreements in the mid - to late 1970s the Sinai oil was no longer part of Israeli oil supply. Imports of oil into Israel zoomed in 1975-1976, for example. Most of these imports came from Iran, Norway and Mexico. (International Energy Agency, 1989 and UN, International Trade Statistics Yearbook, various years) The Sinai oil was renegotiated back into the Israeli oil supply by the Camp David Accords in a then secret appendix. This appendix remained secret until April 1980, because it was illegal in Egypt to have direct dealings with Israel until that month, when the Majlis passed a law making such dealings legal . (Wissa, 1989)

Initially, Egypt supplied 22% of Israel's oil import needs, about 1/4 of Egypt's oil exports went to Israel in 1982 through 1984. (UN, International Trade Statistics Yearbook, II, various years; Petroleum Economist, various editions; and International Energy Agency, 1989) Oil import needs for Israel by then, and thereafter, have been almost equal to net total domestic consumption needs. From 1984 to 1987 Egypt supplied an average of 25% of Israel's oil import needs, again with about 25% of Egypt's total oil exports going to Israel. In 1986 Egypt supplied about 43% of Israel's oil import needs. In 1989 Egypt supplied about 45% if Israel's oil needs. (UN, International Trade Statistics Yearbook, various years; Petroleum Economist, various editions)

What does that say about the other Arab states' reaction to Egypt essentially fueling Israel? Trade between the Arab states was increasing, on average over time, as Egypt supplied such vital fuel to Israel. Yet, no other Arab state supplied fuel to Israel. The pipeline between Saudi Arabia and Haifa remained unused. The pipeline from Eilat to move petroleum to the rest of Israel remained a vital conduit for Israel's oil, but none of this oil was coming from the Gulf. (For another side of the economic diplomacy equation, remember that some of the fuel from Egypt probably was used to supply Israel's military's energy needs.)

By 1996 Egypt was supplying only 26% of Israel's needs for petroleum. (US, Department of Energy, Energy Information Energy, web page on www.doe.eia.gov/cabs/israel.html; and UN, International Trade Statistics Yearbook, various years) Since 1985 there has been a relative decline in Israel's imports from Egypt (95-98% of which was oil) in dollars terms. There has also been since 1986 a drop in the proportion of Israel's total oil needs supplied by Egypt. The total volume sent from Egypt to Israel has actually remained steady at around 2.2 to 2.4 million tons of oil equivalent, or around 50,000 to 55,000 barrels of oil per day, depending on the weights of the types of oils sent, in recent years. It has increased, however, from the 2 million tons of oil equivalent that Egypt exported to Israel in 1981, the peak year of Egypt's exports to Israel in current dollar terms. (www.doe.eia.gov/cabs/israel.html; UN, International Trade Statistics Yearbook, various years; International Energy Agency, 1989; UN, Energy Stat istics Yearbook, various years)

Between 95% and 97% of Egypt's interregional exports in oil now goes to Israel. Tiny bits go to the UAE, Morocco, Tunisia, and Turkey. (Arab Republic of Egypt, CAPMAS, Annual Bulletin of Foreign Trade, various years) In the 1990s petroleum has been about 50% of Egypt's intra-regional trade. During the 1980s petroleum was about 80% of Egypt's intra-regional trade. (Recently fresh and frozen vegetables have taken the place of petroleum.) (ARE, CAPMAS, various years; Yeats, 1996)

Consider the importance of Israel in Egypt's intra-regional trade in oil. Consider also the importance of oil in Egypt's intra-regional trade. It is then no wonder that Israel was by far Egypt's largest trading partner m the Middle East during the time period 1980 to 1992. It is clear from these considerations why the period 1981 to 1988 it was a larger market for Egypt than the entire Arab world combined.

There has been a relative drop off in Israel's importance for Egypt's interregional trade since 1981. Much of this may be due to the declining price of oil. It may also be due to the return of Egypt to the Arab League in 1989. The effects of this event however are clouded and mixed in with the effects of the Gulf Wars of 1990 and 1991, and their follow through. (See charts 1,2,10 and 10B in particular.)

Fifty-five percent of Egypt's intra-regional trade now goes to Saudi Arabia. Its second and third largest exports markets are Syria with a 15% share, and Libya with a 12% share in intra-regional exports. (IME, DOTS; Yeats, 1996) Remembering that Syria and Libya were the two countries that most strictly adhered to the Arab embargo of Egypt we can see here not only the importance of politics in inter-Arab trade, but also, possibly, the potential importance of a comprehensive peace, both Arab-Arab and Arab-Israeli on trade. The importance of peace has also been partly supported by the large trade that Egypt has had with Israel.

Even so, it would help greatly if the trade between these two countries involved the private sector more. Most trade between Israel and Egypt is government to government. This trade is also unstable in the products that are exported from one to other - excepting the apparent stability in volumetric terms of oil. From year-to-year non-oil exports from Egypt to Israel often shift radically in product mix and dollar amounts. The same can also be said for the exports from Israel to Egypt--which is highly diversified, but tiny, much smaller than Egyptian exports to Israel. About .5%, at most, off all Egyptian imports have come from Israel. (IME, DOTS; ARE, CAPMAS; Handoussa, 1994)

Another interesting result? When we add up exports to Israel and to the Arab world we get about 22% of all Egyptian exports in 1981, an average of about 17% of all Egyptian exports from 1983-1990, and about 25% of all Egyptian exports in 1992. Thereafter, they drop to between 16% and 22% of all Egyptian exports. So much for the theory that the Middle East is not important for Egyptian trade. (IMF, DOTS)

Moreover, before 1979 Egyptian total exports to the Middle East accounted for only 3-5% of all Egyptian exports. If anything, the peace treaty with Israel has pushed Egypt more into the Middle East economic orbit. (IMF, DOTS)

On the import side, Middle East imports into Egypt were just about 1.5% of all Egyptian imports in 1979, by 1984 they were close to 4.5%, and have had fairly steadily at between 3 and 4 percent of all Egyptian imports since then. Most of these imports in the post-Camp David era came from the GCC, Saudi Arabia mostly. Imports from Arab North Africa had been miniscule before Camp David, and even less after it. They were really not that significant until the increase in imports from after 1989. Even after that, they were mostly less than 100 million. Most of these imports have been from Libya. (See Charts 11, 1, 2, 3, and 4.)

On the export and import sides, as well as on the side of other sources of income into Egypt, clearly Egypt has become more, not less, a part of the Middle East economy since 1979. The rather weak nature of the Arab embargo of Egypt supports this. The importance of Egypt's trade with Israel in its overall trade, since 1979, also supports this. Both of these sides of the trade equation, and the history of remittances sent to Egypt form the GCC, lead to the overt conclusion that Egypt has been economically, as well as a politically, pivotal for the Arab states, especially the GCC. This is manifest in the revealed preferences of the GCC as shown in the trade in remittance data. What they say and what they do seem to be very different on many occasions. Simply put, Egypt has been far too important to embargo, but the peace treaty was far too important to be quiet about.

The oil price, considering those large percentages of trade that went to Israel, and that almost all of the exports to Israel were oil, is a major explanatory variable in interregional trade until 1986. About 80% of all of Egypt's interregional exports were oil in the early 1980s, almost all of it going to Israel. The oil price is also a major explanatory variable for overall exports of Egypt from 1979 to 1986 for similar reasons -- about 60% of all exports of Egypt, in US dollar terms, was oil in the early 1980s. (Economist Intelligence Unit, Country Profile: Egypt, various years; ARE, CAPMAS; Yeats, 1996; ARE, National Bank of Egypt, Annual Report, various years) (See charts 12 and 13)

After 1986, other factors seem to take over more importance in explaining intra-regional trade patterns. These include, inter alia: the reinitiation of Egypt into the Arab fold, Arab trade agreements with Egypt (either overt or covert), and the Gulf War and its effects. The economic reform and structural adjustment programs happening in Egypt, including trade liberalization schemes like the Executive Regulations for the Administration of Imports and Exports, or the ERAIE in 1991, have had some impact. (Kheir El-Din, 1992)

There have also been some impacts from in many economic reform programs in the economies of some of Egypt's trade partners, such as Jordan, Syria, Saudi Arabia and Israel. The economic reform and structural adjustment program in Israel seems to not have had much of an effect on trading patters between Egypt and Israel. The one in Jordan may have helped make its trade with Egypt more diversified. The reform program in Syria has had many roadblocks, particularly internal. These roadblocks have likely slowed any real progress this program could have made with Syrian trade with Egypt. An economic "reform" program in Saudi Arabia in recent years has likely led to a diversification of trade between the two countries, especially with the initiation of trade in petrochemicals and manufactures. (ARE, CAPMAS) (See also Economist Intelligence Unit, Country Profile on these countries, especially after 1991.)

The decline of the Egyptian pound over numerous devaluations since 1979 seems to have had very little effect on either intra-regional trade or total trade. The cautious and slow movement of Egypt from a rather confused multiple exchange rate system to a unified exchange rate in the 1980s may have muddled the situation. However, even if we look at the trade-weighted average of these multiple exchange rates, the effects of the devaluations on export promotion and import control seem almost non-existent. That has a lot to do with the mostly moribund, and even declining productivity and competitiveness of the Egyptian public sector firms and the somewhat Byzantine and counterproductive Egyptian trade law. (See chart 14.) (See also Khier El-Din, 1992 and Handoussa, 1994.)

Also, politics seems, in many ways, to have run economics in the Middle East. This can be seen in the initiations of the ERSAP programs in the Arab world, and in Egypt in particular, with much prompting from USAID, the World Bank, the IMF, and others. This is seen in the differing reactions of the GCC to the signing of the Camp David Accords and the Peace Treaty with Israel by Egypt. It can also be seen in the GCC's reaction to the alleged support of Saddam Hussein in the Gulf War by Jordan, Yemen, Sudan and the Palestinians. It has been paramount in the restarting of trade of Egypt with Libya and Syria in particular. The trade of Egypt with Iraq, Jordan and all of the other Arab states also seem primarily determined by politics on many occasions. This is so not only for the restarting of trade after an embargo, but also in the determination of the size of that trade to a great extent.

Even in some of the less extreme circumstances, outside of embargoes, boycotts, wars, diplomatic rows, etc., one could trace the high and low points of Egypt's trade with even specific Arab countries, and with Israel, by looking at Egypt's diplomatic relations with those countries (and, for Israel, the oil price). Interestingly, the revenue effects of the drop in the oil price on the GCC countries seemed to not be a major explanatory variable in GCC trade with Egypt. When the GNP of the GCC was dropping so rapidly between 1981 and 1986, GCC imports from Egypt increased. (See chart 1.)

A very interesting example of the political variables explaining trade relations can be found in an analysis of Egyptian-Saudi trade in the early to mid 1980s. Egypt's exports to Saudi Arabia, on average over time increased (against the countervailing force of the decline in the price of oil) as Egypt did some of the following in the early to mid-1980s: Egypt helped Iraq out in its war with Iran by exporting food, weapons and labor to Iraq. Egypt exported over $500 million in arms to Iraq in the early 1980s. (US, Arms Control and Disarmament Agency (ACDA), various years; and Deaver, 1996) Egypt stated often in the early 1980s, as the war with Iran was on, that it would help defend Saudi Arabia against foreign aggression (as it did in 1991). Egypt publicly supported the founding and development of the GCC. Egypt supported the sale of AWACS to Saudi Arabia in 1982. Egypt put on the full-court press to get the point across that even though the other Arab states have "cut them off", they will not be cut off from the Arab world. They also made it plain that the signing of the treaty with Israel was not a sign of Egypt's resignation from its leadership and support roles in the Arab world. Egypt also made a point that it intended to support the Palestinian cause. Even Arafat showed up in Cairo in 1984 -- while the embargo was on. (Middle East Contemporary Survey, various years, especially 1980, 1982, and 1984).

Well, unfortunately for those who like to boil things down to relative prices, comparative advantage, and analyses based on rather restricted economic theories and models, these methods of analysis are sorely lacking for evidential backup. There has been a lot more than that happening in Egyptian-Arab relations and Egyptian-Israeli relations than just relative prices, dynamic comparative advantage, and general equilibrium frameworks based on the usual unrealistic assumptions these models often contain.

For lessons learned that might help in the development of the so-called Middle East Market, of even the Arab Free Trade Area (AFTA), one might look back at the manifold complexities of the interregional economic relations of just one country, Egypt, and multiply those times 15 to consider some of the other Arab state and Israel. One gets a rather seriously complex set of permutations and combinations of possible outcomes based on economic diplomacy, internal and international political and economic policies of each country, diplomatic relations amongst these states, and so forth, as well as relative prices, comparative advantage, and many of the usual economic variables.

Often it seems that in the Arab world trade can sometimes boil down to the following question: Who is my enemy and who is my friend, or who kind of fits in between those categories in a rather subtle, behind the scenes way?

This has clearly been the case of GCC economic diplomacy. This is important because the GCC has by far the largest proportion of the income of the Arab world. In 1980, total GNP of the GCC was $225 billion. The rest of the Arab world had a total GNP of about $153 billion. The GCC 's GNP was 60% of the GNP of the entire Arab world. Saudi Arabia's was 41%. In 1989, the total GNP of the GCC was $154 billion. The rest of the Arab world was $170 billion. So, then, the GCC 's GNP was 47% of the GNP of the entire Arab world. Saudi Arabia's was 26%. In 1996, the GNP of the CC was $232 million. The rest of the Arab world's GNP totaled was $200 billion. The GCC controlled 54% of the GNP of the Arab world. Saudi Arabia had 30%. (The World Bank, World Tables, various years; The World Bank, World Bank Atlas, various years; UN, ESCWA, Survey of Economic and Social Developments in the ESCWA Region, various years) (See charts 1,2,3 and 4.)

The GNP of Israel was $32 billion in 1980, $52 billion in 1985, and by 1996 it was $92 billion. That is, it has been consistently less than the GNP of the Arab world and, certainly of the GCC. But, the importance of Israel in the trade of Egypt is not so much based on economic might measured in GNP amounts, but by the agreements forged at Camp David, and Israel's needs for oil. The "and" in the last sentence is important. Egypt is not the cheapest producer of oil in the world. That accolade goes to Saudi Arabia, which has the lowest costs for production in the world.

Well, certainly income, and power, economic diplomacy, wars, and peace and so on have a lot to do with the story of Egypt and interregional economic diplomacy since Camp David. But these variables, and others, often show some striking results. For examples: As the income of the GCC was dropping in the 1980s, GCC imports from Egypt increased and GCC remittances to Egyptian workers increased -- as the imports from Syria and Jordan and the remittances to Syria and Jordan were dropping. The trade of Egypt with most Arab countries was increasing after a lag of a couple of years, or even less, time during the embargo against Egypt agreed to in the Arab League. Peace between Israel and Egypt saw an increase in income from the Arab world relative to the US and Western Europe. It seems that Egypt was far too important to the Arab world to let Camp David and pure profit making get in the way.

Israel, a country with a GNP much lower than the combined GNPs of the Arab states, has been the largest single export market for Egypt in the Middle East for most of the years since Camp David. Until 1988 it was a larger export market than the entire Arab world combined.

The Arab states welcomed Egyptian labor after Camp David. Such remittance labor seems to have more than made up for the potential losses in aid from the Arab oil states because of Camp David. The outward, full-court press, Egypt put on in support of Arab causes, particularly GCC causes, helped increase its exports to the Arab countries, even in the face of the embargo of the Arab League.

Indeed, the Arab world is a complex and subtle place. We can learn much from the past and, possibly, apply those lessons learned toward future problems. Furthermore, as has been shown in this paper, much can be learned by simply taking the time to add up the relevant numbers, looking at the resulting charts, and challenging the generally accepted assumptions.

Paul Sullivan is Professor of Economics at the National Defense University, Washington, D.C.

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