The Political Economy of Interwar Egyptian Cotton Policy

The optimal tariff was a central concern to economists and policymakers in interwar Egypt. The government took the position that Egypt conformed to the small-country assumption in world cotton markets. Using time-series and panel data for the period 1895–1939, this article demonstrates that Egyptian long-staple cotton commanded significant market power in international markets. An optimal export tariff would have encouraged economic diversification and generated huge government revenues, making it possible to finance industrialization plans. However, the burden of taxation would have been shared by Egyptian landlords and British interests. Thus, an optimal export tariff was incompatible with the goals of Egypt's ruling elite, who dictated the orientation of trade policy until the 1950s.