WORLD TRADE  
ORGANIZATION  G/STR/Q1/EGY/2 
24 May 2005 
 (05-2091) 
Working Party on  
State Trading Enterprises Original:   English 
 
 
 
STATE TRADING 
 
Replies to Questions posed by the UNITED STATES1 
concerning the New and Full Article XVII Notification of  
EGYPT2 
  
 The following communication, received on 23 May 2 005, is being circulated at the request of 
the Delegation of Egypt. 
 
_______________ 
 
  The Government of Egypt (GOE) would like to refer to the questions posed by the Government of the United States pursuant to Ar ticle XVII of GATT 1994 (G/STR/W/42) concerning 
the activities of the Alexandria Cotton Expo rters’ Association (ALCOTEXA).  Under 
Article XVII:4(c), any Member, which considers that its interests are being adversely affected by the operations of a state trading enterprise in another Member, has the right to request information from 
the latter about its operatio ns related to the GATT. 
 
Exclusive or Special Privileges Granted to ALCOTEXA 
 Question
 
 
1. The United States has reason to believe that the GOE grants ALCOTEXA the following 
exclusive or special privileges in the cotton trade: 
 
(a) To limit or restrict to ALCOTEXA member s the right to practice or engage in the 
cotton trade in Egypt;  
 
Answer  
 
 The right to practice or engage in the cott on trade in Egypt is not limited to members of 
ALCOTEXA. Law 211-1994 establishing ALCOTEXA only constitutes the legal framework within 
which exports of cotton from Egypt take place. It  must be noted that any person fulfilling the 
membership conditions set forth in Law 211-1994 is entitled to become a Member of ALCOTEXA 
and engage in export of Egyptian cotton. 
 
                                                      
1 G/STR/W/42 
2 G/STR/N/4/EGY G/STR/Q1/EGY/2 
Page 2  
 
 Question
 
 
(b) To determine the sales price and other te rms and conditions for the sale of all cotton 
exported from Egypt;  
 Answer
 
  ALCOTEXA does not set the sale price and othe r terms and conditions for the sale of cotton 
exported from Egypt.  Sales prices and other selling terms and conditions are determined on a 
transaction-by-transaction basis through negotiation between exporters of Eg yptian cotton and their 
customers. ALCOTEXA does not intervene in the sa les negotiations. On the basis of market-driven 
considerations, exporters of E gyptian cotton and their customers negotiate the selling terms and 
conditions through exchange of deta iled bids. Once an agreement is f ound, its terms are specified in a 
contract. Contracts are then registered with AL COTEXA. This matter is considered a regulatory 
procedure taken by the Association in order to ensure that both parties uphold their contractual 
commitments. The general selling terms and condition s, i.e., the Cotton Export Selling Guidelines, are 
determined by ALCOTEXA members in order to safe guard the interests of contracting parties.  
 
Question
 
 (c) To approve all bids submitted to Egyptian  cotton export firms prior to their acceptance 
and the finalization of contracts; 
 
Answer
 
  ALCOTEXA does not have the authority to approve  or reject bids submitted by its members. 
 
Question
 
 (d) To require that all transactions for the sale  of cotton abroad be concluded in accordance 
with ALCOTEXA’s “cotton export sales conditions”; 
 Answer
 
  The Cotton Export Selling Guidelines are determ ined by the members of ALCOTEXA at the 
beginning of each season. The selling guidelines speci fy the commitments of the contracting parties, 
including invoice currency and delivery and pa yment terms, identified in order to assist 
ALCOTEXA’s members in their negotiations an d sales. The Cotton Export Selling Guidelines 
primarily serve to secure the interests of contracting parties by increasing legal certainty and transparency.  
Question
 
 
(e) To mandate that all contracts registered with ALCOTEXA are final 
 
Answer  
  ALCOTEXA is not mandated to ensure that contracts registered with it are final. Under 
Law 211-1994, exporters of Egyptian cotton are requi red to register final contracts and not primary 
contracts with ALCOTEXA. This requirement is ai med at ensuring the accuracy of the information 
collected by ALCOTEXA on exports of Egyptian cotton.  
  G/STR/Q1/EGY/2 
 Page 3 
 
 
 Question  
 (f) To require all disputes to be arbitrated by ALCOTEXA.  
 
Answer
 
 
 Under Egyptian Law, exporters and purchasers of  Egyptian cotton have the right of referring 
their disputes to the judiciary at all times. The authority granted to ALCOTEXA to settle disputes 
between exporters and purchasers of Egyptian cotton through arbitration is only aimed at ensuring a 
swift and simplified settlement of disputes concerni ng cotton types, grades and contract terms. The 
authority of ALCOTEXA is not exclusive. Contr acting parties which have referred an issue to 
arbitration retain the right to resort to the judiciary subsequently.   
Question
 
 
2. Please elaborate upon the requirement that all cotton export sales contracts must be 
registered with ALCOTEXA, and the a pproval process for such contracts. 
 
Answer  
 As mentioned above, exporters of Egyptian cotton are required to register definitive contracts 
with ALCOTEXA. Exporters are required to regist er their contracts with ALCOTEXA in order to 
enable the latter to ensure that th e information issued by it is accurate , to increase transparency and to 
prevent fraud.   
Question
 
 
3. Please explain whether ALCOTEXA members have exclusive rights to purchase from 
Egyptian cotton producers for export market s and from Egyptian cotton producers for 
the domestic market. 
 
Answer  
 
 Under Law 211-1994, exporters of Egyptia n cotton must be members of ALCOTEXA. 
However, as explained above, since membership of ALCOTEXA is not restricted, the right to export Egyptian cotton cannot be considered as exclusive. Law 211-1994 does not grant any privileges to traders purchasing Egyptian cotton for export or for the domestic market since the terms and 
conditions of the purchases are similar in both cases.  
 
Question
 
 4. Please identify and explain any other excl usive or special privileges of ALCOTEXA or 
its members in the cotton trade.    
 
Answer
 
 
 As mentioned above, Law 211-1994 does not grant ALCOTEXA or its members any 
exclusive or special privileges in  the trade of Egyptian cotton. Export contracts are negotiated and 
concluded directly between the parties con cerned without any intervention from ALCOTEXA. 
 G/STR/Q1/EGY/2 
Page 4  
 
 Question
 
 
5. Please identify and provide citations to the specific legal authority that the GOE has 
used to grant the exclusive or special privileges to ALCOTEXA and its members. 
 Answer
 
 
 ALCOTEXA and its members do not enjoy any exclusive or special privileges. The 
operations of ALCOTEXA are organised under La w 211-1994 in accordance with Egyptian Law.  
 
Operation of ALCOTEXA and Status as an STE  
Question
 
 
1. Please elaborate upon the Management Co mmittee that has the power to manage 
ALCOTEXA and handle its affairs, including the authority and the role of the 
Committee in setting cotton export prices and conducting the export policy described on 
ALCOTEXA’s web page.  Please explain the manner in which the members of the Management Committee are selected.  Also, please describe the manner in which the 
GOE exercises control over ALCOTEXA, including through the Management 
Committee.  
 Answer
 
  Pursuant to Article 14 of Law 211-1994, th e Management Committee is responsible for 
implementing the decisions of the General Assembly and issuing instructions on financial, technical 
and management affairs. As mentioned above, th e Management Committee plays no role in the 
determination of cotton export prices since these are freely determined by the buyer and sellers. 
  The Management Committee consists of not less than 6 but not more than 12 members. All members of the Management Committee, with th e exception of the Chairman of the Advisory 
Department of the State Council and two members a ppointed by the competent Minister, are elected 
by the General Assembly. Membership of the Ma nagement Committee is limited to a maximum of 
3 years. 
 
 The Government of Egypt does not exercise any control over ALCOTEXA since all decisions 
are either taken by the General Assembly or th e Management Committee. The Government delegate 
is invited to attend General Asse mbly and Management Committee meetings but has no vote. He is 
only authorised to present his opinion on matters  examined by the General Assembly or the 
Management Committee.   
Question
 
 
2. Please explain the reason the GOE has no t notified ALCOTEXA as a State Trading 
Enterprise, in accordance with the Understa nding on the Interpretation of Article XVII 
of the GATT 1994. 
 
Answer  
 
 ALCOTEXA has not been notified under Article XVII:4 of the GATT 1994 or under the Understanding on the Interpretation thereof because it is not a state tradin g enterprise within the 
meaning of the Understanding. Neither ALCOTE XA nor its members influence through their 
purchases or sales the level or direction of imports or exports. As mentioned above, members of  G/STR/Q1/EGY/2 
 Page 5 
 
 
 ALCOTEXA are not subject to any direct or indirect state interference when exporting cotton from 
Egypt and ALCOTEXA does not trade Egyptian cotton.  
Pricing and Sales Determinations Made by ALCOTEXA 
 
Question
 
 
1. Please explain ALCOTEXA's pricing policies,  including how it determines the export 
prices for Egyptian cotton. 
 Answer
 
  ALCOTEXA does not determine the export price of Egyptian cotton. As mentioned, above, 
prices are freely determined by buyers and sellers of Egyptian cotton. ALCOTEXA’s function is limited to promoting the trade of Egyptian cotton. As mentioned above, prices are determined by 
exporters and importers of Egyptian cotton thr ough negotiation and are dependent on offer and 
demand. Prices are also dependent on the world cott on situation and the variety of cotton. Since the 
liberalisation of the cotton trade, the Government of Egypt does not intervene, directly or through 
ALCOTEXA, in the determination of export prices.   
Question
 
 
2. Please provide the legal citation to any requirement that ALCOTEXA make its sales 
solely in accordance with commercial co nsiderations, and elaborate upon such 
requirement.  If there is no legal requi rement, please describe how the GOE ensures 
that ALCOTEXA’s sales are made solely in accordance with commercial considerations, 
including whether this is accomplished th rough purchase, sale or cost data.  
 
Answer  
  ALCOTEXA is not engaged in the trade of cotton. Since the liberalisation of the cotton trade, traders are not restricted in their exports of Egyptian cotton. Neither the Government of Egypt nor 
ALCOTEXA control exports of Egyptian cotton.  
 
Question
 
 
3. Please elaborate upon how the GOE and AL COTEXA ensure that foreign and domestic 
buyers have equal opportunities to purchase Egyptian cotton.   
 
Answer  
  The Government of Egypt and ALCOTEXA do not intervene in the negotiation and 
conclusion of contracts concerning the trade of Egypt ian cotton. Trade of Egyptian cotton is subject to 
market conditions. Since domestic and export sales of Egyptian cotton are not restricted, Egyptian 
cotton can be sold at similar conditions on the e xport and domestic markets. The availability of 
Egyptian cotton is dependent mostly on the situati on on the Egyptian and world cotton markets. Apart 
from ensuring that the general competition rules a pply, the Government of Egypt does not intervene 
in the cotton trade.  
 G/STR/Q1/EGY/2 
Page 6  
 
 Question
 
 
4. Please elaborate upon the subsidies that the GOE provides to domestic cotton mills 
based on the purchase of Egyptian cotton.  Also, please explain the subsidy program, 
including the method for determining the leve l of subsidy and indicate whether foreign 
buyers of Egyptian cotton are eligible to receive the subsidy. 
 
Answer  
 
 Egypt does not believe that this question is  justified under Article XVII:4(c) of the 
GATT 1994 since it does not concern state trading enterprises.  
 
__________