Measuring and analyzing the effectiveness of customs policy in reducing the trade deficit in Egypt

The Egyptian economy suffers from a chronic and increasing trade deficit in goods, but it has been observed that the value of the deficit increased significantly during the period (2011-2015), which is clearly due to the increase in the value of Egyptian imports during that period. There is no doubt that this deficit has contributed significantly to the severe decline in the value of the local currency, as well as a significant increase in inflation rates, which has negatively affected the standard of living.
Since the increase in the value of imports is one of the important reasons behind the increase in the trade deficit, the Egyptian government has adopted a package of measures to try to curb imports. Among these measures is the increase in customs tariff rates on a selected group of Egyptian commodity imports, including Decree No. (184) of 2013 issued in the Official Gazette in Issue (12) dated March 12, 2013, and the subsequent amendment by Decree No. (25) of 2016 issued in the Official Gazette Issue (3) on January 26, 2016.
Reviewing the history of customs amendments in Egypt, it is noted that the trade policy in Egypt, with regard to customs tariffs, has worked over past decades to ease customs restrictions in implementation of Egypt's international obligations in the field of trade liberalization. However, the recent two amendments have adopted a policy contrary to what has been previously stated, according to the change in economic conditions in Egypt during that period. This research aims to test the impact of these decisions on reducing the deficit in the trade balance of goods, by analyzing the impact on the quantity of imports of goods that were subject to the increase in customs tariffs, to demonstrate the effectiveness of using customs policy in restricting imports, especially with regard to luxury goods.
The problem of the research lies in investigating the effect of increasing customs tariffs as one of the tools of trade policy on reducing the trade deficit, by reducing the value of imports, through reducing their quantity, in light of the interrelated effects of both price and income elasticity of demand for luxury goods, the role of trade agreements concluded by Egypt, and customs exemptions, and the resulting trade diversion effects. Therefore, these transmission variables provide a source of skepticism about the inevitability of the effect of customs tariffs on the quantity of imports of luxury goods.
The importance of the research lies in the fact that it provides a scientific analysis that can be relied upon when making economic decisions related to trade policy tools, and determining the effectiveness of economic policy tools in achieving their intended objectives, as well as predicting the side effects of these decisions on other related economic variables.