There is no need to demonstrate how vital it is for Mauritius to engage in international trade. Our total imports are almost double the level of our annual exports. This creates a trade deficit of Rs 80-90 billion per annum. Our object should be to reduce this substantial deficit, not necessarily by cutting down on our imports.
Part of the imports constitutes the basis on which our numerous shopping malls are working today: most of the goods sold over there are imported from other countries. One way we could bring a better balance in our international trade is by increasing the volume and range of our exports despite a growing level of imports. Even though the prevailing international economic situation does not permit us to do so immediately, one thing we could have done was to increase our export trade capacity.
This capacity rests on the country’s ability to produce more goods for external markets. Some would say that, given our resource limitation (both human skills and materials), it is not evident how we could do that. Countries which succeed do not emphasize their constraints: they do all they can to overcome them. We should follow suit.
Could we increase market-related local skills that go into products for which there is sustained demand at the global level? That means a focussed reorientation of our skills towards what the international market demands. It could happen if we worked together with other countries/partners which have an edge on the global market.
Countries – in situations similar to ours – which have progressed in this direction, have favoured the implantation of increasing numbers of multinational corporations in their economic space. A learning process ensued and helped grow the trade capacity of such countries. The right policies and cost advantages given to the multinationals raised their domestic scope for international trade, e.g., Singapore, Hong Kong, etc. We haven’t been going along this road.
What about the absence of material resources on which to base the sought-for additional export capacity? Once a country has the basic ingredients to support a larger production base – human skills, access to technology, cost-effectiveness, access to potential markets, logistics, shipping facilities – it can go for the material resources that go into production by importing them from outside sources. Most of the great manufacturers and traders of the world have recourse to this practice. China does not produce all it needs. Not only does it go to Africa, Russia, Australia, and so forth for mineral and energy resources that go into its production. It has even gone to Brazil to produce the soya beans it needs.
When the need arises, a country finds its way to get the raw materials to support its exports. We do so already for our textile and garment manufactures. We ought to extend the scale and range of such outsourcing for all production possibilities we can favourably host in Mauritius. A strong business leadership can bring up these two factors – a conducive domestic environment for multinationals to take an interest in us as a part of their extended production base, easy and cost-effective access to materials needed for such export production.
The Trade Network
We’ve thrived in the past on our historical trade connections – Britain and France. With global trade liberalisation, we managed to get across to other countries, exporting non-agricultural products to non-traditional export destinations such as Spain, Italy, Madagascar, South Africa and so forth. This is because the World Trade Organisation (WTO) and many governments adopted more liberal trade policies than in the past.
What our past experience in this respect shows is that, given the efforts we make to penetrate new markets, we can make it to exporting to a larger number of countries. One should not hesitate to bring in partners from other countries to set up an efficient local production base that can go out to export to other countries. This could go along with the import of labour having the required skills to man the newer lines of production if we don’t have enough of it on our own for the time being or if it makes eminent economic sense to do so. Good trade names and brands also matter to reach out to external markets.
A number of our export activities are already based on import of know-how, market connections and employment of local and foreign labour by investors who have groomed up domestic enterprises involved newer areas of activity. It is a process we may need to multiply several-fold if we want to avoid being caught up in a situation in which our imports keep dominating by much whatever we are able to export each year.
Dynamic engagement at the international level
It is true that when Western markets showed a lesser appetite for our exports due to a downturn in their economies, local policy makers stressed the importance of regional markets in Africa to compensate ourselves for the shortfalls in our traditional markets. Companies have made some inroads. Many African economies are indeed poised for higher than their historical rates of growth. They could offer us new avenues to export our production, even though it is not quite clear how we will define our edge in capturing such markets compared to other global competitors who are also in the race.
The edge is critical towards new market penetration and it usually comes through successive technological improvements in production. The identified markets should also grow at a sustained pace. We saw South Africa – a new market we tapped – going into recession only recently and that could dim prospects of trade development. But there are other markets. Is not the Middle East a rich market to which we could also go? We need to be first in the most promising spots in the first place to take advantage when their demand is pulled up by their higher economic growth rate.
Countries which find themselves in the economic condition of having to secure export markets have resorted to various arrangements. Take, for example, the ASEAN group which have joined together around a common effective preferential tariff ten regional member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) in a mutually supportive and effective economic, political and trade association. So long one has an effective large trade fall-back position such as this to foster mutual trade and economic interests, one can weather a lot of external economic storms, such as the one we are seeing since 2007-08.
In view of the fact that the global trade liberalization policies as advocated by the WTO are blocked from time to time because WTO cannot negotiate achievable bits and pieces on the international trade agenda by avoiding the known extremely controversial trade issues, it’s a long way out before one could get to a harmonized free world trade regime. The latest such block happened not later than last August 1st, 2014.
So, what do countries do to surpass a process like the WTO that refuses to materialize? They get into more promising bilateral or multilateral regional trade deals favouring members. If the constituent members also happen to be the biggest markets of the planet, others which don’t form part of the deal are excluded and face stiffer competition. Investors will look at a country’s profile from this angle before engaging with it : do its trade agreements have enough scope for them to settle down in it and engage advantageously in international trade from the place?
If the scope created by such arrangements is obvious, enterprises will come in large numbers and one can then become a hub for international trade. It is for reasons such as this that Singapore, for example, has signed up 19 bilateral and multilateral Free Trade Agreements, including with the US, Europe, China, Japan, India and Australia. Is it surprising that not less than 8000 European companies have a base in Singapore?
It requires a lot of focus and dynamic attention to simply marshal our trade portfolio. There are many other economic chapters clamouring equally for our urgent attention. They also invite us to deal with insight as in the case of the challenging international issues for our trade. It can be said that we are not running short of real-life, tangible concerns facing our country’s future to prioritize over other less important issues. Once we muster enough vision to take them on, we’ll be left with little time to deal with the less important ones in the shaping of our destiny.
* Published in print edition on 5 September 2014