Whither bound, Mauritius?

Changes in global trading arrangements

It can be said that the very foundation of Mauritius has rested and still rests upon international trade.

The people who brought slave and indentured labour to the island did so to foster the scope of trade, not for creating a “rainbow nation”. They made laws and rules so as to contain them, better to exploit the labour in their quest for expanding trade, business and profits.

In the course of time, new international trade rules have come into being. Initially, one set of trade rules constrained the scope for trading internationally when countries and blocks of countries were bent on protecting their own interests by excluding others. With the advent of GATT, the Uruguay Round and currently, the World Trade Organisation, considerable easing of global trade restrictions has taken place over the past six decades. In fact, the gradual liberalisation of trade the world over has worked in favour of Mauritius, giving us access to markets that were foreclosed before.

The trade liberalisation process even gave rise to preferential access for our exports to certain key markets such as the EU and the US. Such preferences were given to promote the economic development of countries which could not compete against others on an equal footing. It must be said to our credit that we took advantage of the benefits from our preferential access to international markets to build up a good internal infrastructure for the country. This helped increase our potential to engage in trade with the rest of the world.

We could have done more to pivot towards us global trade by opening up to multinational companies and enhancing the attractiveness of our port and airport. We could still try to become an international trade economic hub, especially by complementing efficiently growing economic activity in regional countries. In past years, we’ve seen that preferences, like the Multi Fibre Agreement, the EU-ACP Agreement and the AGOA, have been or are in the process of being phased out. The country is now challenged to grow the scope of its international trade without such preferential support at a time the profile of global trading is poised for major change.

Our track record shows that not only did we get into the export of an increasing range of locally manufactured goods with time. We also involved ourselves into the provision of international services. This twin approach helped entrench our outward-orientedness. It is an irreversible and useful direction we have thus taken. Protecting and expanding our export base for goods and services is now critical to our future economic positioning. The need of the moment is to consolidate our trade potential despite all the odds. We have to work together with others more than ever before.

Changes in global trading arrangements

On 20th September 2013, the European Union (EU) and Singapore initialled the text of a Free Trade Agreement; this draft agreement is set to be ratified by the European Parliament. No less than 8,000 EU companies are based in Singapore which is the EU’s 13th largest trading partner and a major destination for EU investments.

On 7th November, Taiwan and Singapore signed up a Free Trade Agreement (FTA). The FTA is expected to eliminate tariffs on 97% of Singapore exports going to Taiwan. There are chances that Taiwan will follow Singapore to wrap up an FTA with the EU in the near term.

On October 18th, Canada announced an agreement in principle on a Comprehensive Economic and Trade Agreement (CETA) with the EU. The CETA will not only slash tariffs and raise agricultural quotas between the two sides. It will also liberalize cross-border investment and trade in services in a manner previous trade agreements have not done. It will open up large government contracts and procurement markets in the trillions of dollars for the two signing parties. It will smooth out differences in intellectual property rules and break down barriers to trade in services by mutual recognition of certifications such as for architects and engineers. It is an important bilateral breakthrough, given that services account for 70% of the GDP of rich countries.

Two other major Free Trade Agreements are under process. They are, firstly, the Transatlantic Trade and Investment Partnership (TTIP) between the US and Europe. The latter two account for half of global GDP. The second FTA currently under negotiation is the Trans-Pacific Partnership (TPP). It has as its members Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. So, who are being left out of these bilateral trade agreements? China, India, Brazil, South Korea, Africa, Russia? This is how it looks.

Meantime, the World Trade Organisation (WTO) which is a multilateral agreement aimed at lowering trade tariffs across the board and fostering international trade, grouping almost all countries of the world, is gridlocked since 2008. There were objections during the discussions by developing countries such as China, India and South Africa against agricultural subsidies, industrial tariffs and non-tariff barriers. Nothing seems to be happening on this front anymore. Its last round, called the Doha Round, is under discussion since the past 12 years.

As the major bilateral FTAs are concluded and implemented, it will become even more difficult for developing countries to set out international trading rules to protect their economies. They will tend to be isolated from the mainstream whereas multinational companies, which are dominant in the advanced countries forming part of bilateral FTAs, will end up making the rules of the game to their advantage.

Whither bound, Mauritius?

There is no denying that Mauritius needs to intensify its trade efforts to keep up employment and growth. We are not big or strategic enough to play a role in the numerous FTAs towards which the world appears to be headed now. We are not also in the proximity of countries forming part of those big bilateral free trade agreements which will most likely sway global trade and its rules. But we need to bear in mind that many are members of the emerging FTAs by virtue of their geographic positioning but also because they have acquired important economic clout in the world economy.

We might help start off a cracking new centre of global economic growth in our immediate vicinity by fostering a higher dose of inclusiveness among potential members. SADC and COMESA are doing their lot but there are hardly many sparks of success flying out over here. Something more impressive need be done in the region. If that were to happen, the region may be considered interesting enough by others to seriously engage in bilateral FTAs with. It calls for exceptional leadership qualities to achieve it.

The question is whether we have the intellectual means to get together big countries like China, India and Continental Africa into a practical and realistic concerted approach to dealing with the sort of isolation being created by various FTAs involving the rich and less rich countries of the world. If we don’t, we should go for it explicitly. Clearly, Mauritius should become sharper and even punch above its weight in order to survive in the new economic order.

* Published in print edition on 15 November 2013