Uncertain times are ahead

With the current developments in Europe, we are getting the signals again to beef up the economy, providing it greater resilience

As the results of the EU referendum in UK started rolling out last Friday, it was quickly realised that things will no longer be the same. Those who had campaigned for the UK exit from the EU had won 52% against 48% for the ‘Remain’ camp. Thus came to an end an adventure which began on 1st January 1973 when the UK decided to join what was then called the European Economic Community (EEC), the precursor of modern EU.

As a Commonwealth member state having had a longstanding trade relationship with the UK, Mauritius joined the bandwagon in 1973, transitioning from the Commonwealth Preference Agreement to the Lomé 1 Convention with the EEC. The decision proved to be salutary for us. It fitted into a prevailing worldview of distinct insulated specific groupings of partner countries cooperating for mutual advantage.

We got preferential and tariff-free trade access for our sugar, textiles and other exports to the EU market, thanks to the Lomé Convention that was signed in the wake of the UK’s accession to the EEC. Successor agreements to Lomé Convention were drawn up in the shape of the Cotonou Agreement first in June 2000 and revised in 2010 and which technically is to end in 2020. The Cotonou Agreement underscores economic partnership agreements among the EU and African, Caribbean and Pacific (ACP) states (of which we form part) grouped together in the pursuit of diverse goals such as regional integration, security, social development and integration into the world economy. It’s the reason EU has remained our privileged trade partner, in good times and less good, to this day.

The UK’s vote in favour of quitting the EU puts into question our fundamental trade and economic orientation from now on. If the UK goes its own separate way from the EU – as the referendum vote implies – Mauritius will need to know where it stands vis-à-vis both the UK and the EU. Given this, it will need to identify the levers it should work on so as not to be spurned by both the UK and the EU going their separate ways and finding itself denied market access for its exports except under WTO free-for-all rules.

Obviously, the ACP group will raise its voice – and we are part of the cohort — if it were called upon to pay a high protectionist price following the UK’s separation from existing EU arrangements after the vote of Thursday last. So far, there’s nothing from this side, possibly on the assumption that the ACP-EU link is not threatened.

As far as international trade relations are concerned, it is important that, notwithstanding the UK vote of Thursday last, both the UK and the EU do not lose momentum as active contributors to the global economy. If, as some adversaries of the European Union predict, the EU takes the path of disintegration for failing to pull up its remaining members after the UK exit — for lack of a renewed convincing mission statement backed by facts — it will be a loss for the world. Mauritius would be better off if both EU 27 and the UK espoused a higher economic dynamism after the events of last week.

Disruptive developments of the sort point out the need for us to put up the fight where the real arena is. The arena is a quickly evolving international platform of trade and exchange in which individual countries – some like Russia trying to expand to the Soviet Union of old vying against the West, China establishing dominance over the South China Sea, Donald Trump’s US walling itself, UK going it alone to past glory) — are likely to disrupt a weakened but still working global economy.

From 2000, when the Cotonou Agreement was drawn up, our export dealings with the often overlapping ACP, COMESA and SADC groups, of which we form part, have not been on a fundamentally consolidating path. It is to be hoped that things will improve on this front. In the meantime, our fallback position does not appear so strong in the event the EU and the UK – our principal export markets — did not open up adequately to us, post their divorce.

When the economies of the West slowed down following the crisis of 2007-08, we were warned to go higher up the production chain and to look for alternative workout arrangements with other economies, at least at the regional level. We don’t appear to have given enough attention to strengthen our economic base by so doing. A lot of rhetoric and even disruptive decisions as regards the working of the economy, but no decisive turnaround of our economic apparatus.

With the current developments in Europe, we are getting the signals again to beef up the economy, providing it greater resilience. The situation calls for doing all we can to overhaul the economy’s deeper response to challenges posed than to take advantage of peripheral things like temporary swings in currencies and commodities’ prices.

* Published in print edition on 1 July 2016

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