Note, however, that certain industries had large increases in their ERPs relative to the late 1990s. Although the level of tariff protection on the final product declined, the levels of protection on the inputs fell even more, so that the effective protection on the industry increased. The example of textiles (except garments, which are not reported separately) is notable (see Annex Table 1). With the 1998 tariff levels, this product was protected at an average tariff of 36%, and the tariff fell to 30% in 2009. But some of the inputs in 1998 were protected at a high rate as well (e.g., nonwoven fabrics at 28% and fabricated textiles n.e.c. at 39%), these tariffs falling to 5% by 2009. So the ERP on this textile industry rises from 84% to 229%! So while the consumer benefits from the price decline in the final product on the order of about 6 percentage points, the returns to domestic value added in the industry increases by 145 percentage points!

For many industries there were declines in ERPs, some significant, over the past decade, due to the decline in output tariffs relative to input tariffs. Consider the case of motor vehicles: there were significant declines in the tariffs of the inputs, falling from a range of 20 to 30 percent to a range of 5 to 10 percent (with the exception of tires, with a 20 percent tariff). But the product tariff - which is the one that matters for the consumer - also decreased significantly from 35 to 10 percent. The reader should note that this ERP is relevant only for relatively inexpensive cars, because expensive cars are not manufactured in Egypt. Consumers of expensive automobiles still face nominal tariffs of 40 percent, up to 135 percent.

In two private sector industries in Table 4a, fertilizers and cement, the ERPs with 2009 tariffs decline and turn slightly negative. That is the decrease in output tariffs for these important inputs for other industries (agriculture and construction) fell considerable. Fertilizers (HS 31s) enter the country with a zero tariff, but use tradable inputs with positive tariffs. Similarly, cement (HS 25s), the most representative material for construction being Portland cement, can be imported at a 2 percent tariff, but again makes use of other tradable inputs with higher tariffs. Not adjusting for energy subsidies, the tariff profile alone stimulates the consumption of these products by making domestic prices practically at import parity, but discourages to some degree the production of the product by raising the cost of tradable inputs. The result is a slight disprotection or taxing of these industries reflected in negative ERPs. We shall see in the next section discussing Table 5a, where we examine the sectors “fertilizer” and “cement” as classified in the input-output matrix, that these two sectors without any interventions – importantly energy subsidies – would have negative value addeds; their economic survival appears to be dependent on energy subsidies.

One should also note in Table 4a the special case of industry 2102, manufacture of containers, paper boxes, etc., which has very large ERPs due to the large share of tradable inputs, which makes the denominator of the ERP formula very small. Small changes in tariffs can cause large proportional changes in value added and large swings in the ERP. Interestingly, using the 1998 tariffs, the unprotected value added of the industry would have been negative, and so industry only existed due to the tariff profile at the time. With the 2009 tariff profile, the industry still has a cost of tradable inputs relative to output value that represents 92 percent at border prices; that is, at border prices there would be apparently very little value added. At current prices, after interventions, CAPMAS reports for 2007 that “paper pulps, paperboard carton industry” has a value added of about 22 percent of gross value of output. The industry appears to 12