fertilizers, chemicals and wooden products (Table A.10 in Appendix 2). This suggests that even in these promising sectors, Egypt is not exploiting its full trade potential, which raises questions around other factors that may hinder the development of these exports sectors.

Again, we compare the products in which Egypt is undertrading to those that are subject to increased global demand. The growth of world demand has been calculated as follows: we compute the annual growth rate of the world demand measured by the sum of world imports of each product. Products then fall into one of the following two categories: (i) products characterized by a high world demand (when the growth rate of world demand is greater than the median one) and (ii) low world demand (when the growth rate of world demand is greater than the median one). This classification shows that 13 products in which Egypt has a comparative advantage are undertraded despite being subject to high demand at the global level. This group, representing around 27% of Egypt’s exports, embodies the lost opportunity for Egyptian exports. These include dairy products, oil seeds, animal or vegetable fats and oils, salt, lime and cement, inorganic chemicals, plastics and articles thereof, articles of stone, iron and steel. Egyptian exporters are also under‐trading 17 products that are highly demanded by the Rest of the World (around 23% of total exports) but where Egypt does not have a comparative advantage (such as meat, cocoa and cocoa preparations, articles of iron or steel, miscellaneous articles of base metal, electrical machinery and equipment). For a detailed list of these products (see Table A.10 in Appendix 2).

# _5.2.Explaining Trade Performance_

The gravity model analysis of Egypt’s trade patterns suggests that Egypt’s actual trade falls short of the expected levels for several markets and products, while bilateral trade flows exceed the predicted value for others. This provides important insights on additional factors (not considered by the gravity model) that may either facilitate or impede bilateral trade. We discuss below three major factors related to the supply and demand‐sides, in addition to trade policy factors that may explain both under‐ and over‐performance.

# _5.2.1 Supply‐Side Factors_

Supply‐side factors are related to the ability of Egyptian products to compete in the global markets. As explained above, the concept of revealed competitive advantage (RCA) captures this competitiveness and can also be tracked over time. Changes can occur over time in the pattern of comparative advantage across countries and industries, with many reasons, including trade and economic policies, adoption of modern technologies, and knowledge transfers, explaining these changes. We analyze the evolution of Egypt’s revealed comparative advantage between 2001 and 2016 and divide them into four distinctive groups (see Figure A1 In Appendix 2).

- _Products with maintained comparative advantage:_ these are some traditional products (a total of 25), which can then be divided in two sub‐categories. First, those whose RCA increased (14 over 25 products such as edible vegetables, edible fruit and nuts, oil seeds, sugars, preparations of vegetables, fertilizers, soap, articles of apparel and clothing accessories, articles of stone, plaster, cement and glass and glassware) and those whose RCA decreased (11 over 25 products such as animal or vegetable fats, mineral fuels, mineral oils and products of their distillation, inorganic chemicals; cotton, other vegetable textile fibers; paper yarn, some articles of apparel and clothing accessories, other made‐up textile articles; ceramic products, iron, steel and aluminum). Whereas an increasing comparative advantage shows that Egypt can maintain its competitiveness in the first category, the second one points out the decline in the competitiveness of Egyptian exporters who were not able to keep their market shares over this period.

- _Products whose comparative advantage in 2001 has vanished in 2016:_ Although small in terms of number, such products represent a loss in Egypt’s trade performance and market share. This is the case for coffee, tea, cereals and rubber.

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