Post Lome and Post Brexit: Tectonic shifts for Mauritius

We often hear about the need to change the economic model which has served us so well up to now because of changes in the external environment which warrant a totally new approach calling for different skills, culture and leadership.

It is also often claimed and rightly so that failure to confront these changing realities is to a large extent responsible for the present socio-economic stagnation which confronts the country.

In this article we discuss some of the changes which call for paradigmatic shifts in our thinking and vision. These types of changes could, it is contended here, be harbingers of a probable swing in the pendulum towards the emergence of a more balanced world view following the dead end into which the existing dominant regime seems have led the world.

Few will contest the fact that the exit of Britain from the European Union in two years’ time represents a severe blow to the dominant trend of globalisation and the precepts which it carries. The great irony is that it is the Conservative Party in Britain which is now contesting a fundamental edict of their own free market philosophy, namely the free movement of labour across the frontiers of the European Union. The UK, which under Margaret Thatcher had been a lead architect of the new neo-liberal global order, is now refusing to swallow its own bitter medicine. What started as a deliberate decision to quit is now looking more and more like an ouster. This whole episode throws us back to the accession of Britain to the European Union and its most significant impact on the future of Mauritius.

Backbone of “economic miracle”

The Lome Convention, which was signed on 28th February 1975, and the accompanying Sugar Protocol arguably served as the backbone of our famous “economic miracle” by providing the needed predictability and visibility for our main exports – sugar, textiles and garments — for several decades. It was a direct result of the accession of Great Britain to then European Community and was designed to accommodate the former British colonies into the new ambitions of an enlarged European project.

The number of partners from the “Third World” increased from 18 (mostly former French colonies) to 46 African, Caribbean and Pacific (ACP) states. The Lome Convention was first heralded as a path breaking “partnership of equals” harbouring ambitious plans to set up a new global governance regime based on predictable rules and principles that would characterize the new relationship between the Union and the ACP as a bloc. The essence of the new Convention was of course the new trade regime which accorded preferential access to the markets of the Union to members of the ACP without RECIPROCITY in treatment.

Although there have been some justified criticisms to the effect that the partnership did not live up to the expectations and hopes which were raised at the time of its launch, the consensus is that the Lome Convention did help improve economic and social conditions among the ACP countries especially those who enjoyed the benefits of special Lome trade protocols, e.g. the Sugar Protocol for Mauritius.

Unfortunately at the time of the negotiations of the successor agreement, which started on 30 September 1998, the whole new international context had changed drastically. The winds of globalisation and liberalisation had swept the world and the multilateralism driven by agencies like the World Trade Organisation (WTO) made it uniquely difficult for the ACP countries to reach a new deal anywhere as beneficial as the one that was expiring.

This was rendered even more unlikely due to the fact that their partner, the EU, were themselves an active proponent and participant in the setting up of the new global trade regime policed by the WTO. The notions of predictable rules and principles governing the new relationship gave way to the primacy of markets. In the event the fallback proposition for Regional Economic Communities (RECs) based on the abandonment of the principle of “non-reciprocity” between the erstwhile partners, so as to align with the exigencies of the new multilateralism, constitutes the ultimate blow to what had been the defining characteristic of the spirit and letter of the Lome Convention.

While Mauritius is still actively engaged in the negotiation process for the emergence of a new framework based on such RECs, the British exit from the Union is bound to further complicate matters. Britain remains a significant economic partner for Mauritius principally as a market for tourism as well as textile and garments. It is also a major source of foreign direct investments as well as an active player in the financial services industry. Whatever new deal eventually comes out of the present protracted negotiations between the ACP and EU minus the UK will be founded on new rules of the game most unlikely to be as favourable to Mauritius as the previous regime.

New rules of engagement

In line with the new global economic environment, the changes in rules of engagement imposed by the new multilateral regulatory system means that trading relationship based on reciprocity and free trade will prevail. This will constitute a tectonic shift for Mauritius which has practically throughout its history benefitted from one form of trade “arrangement” or the other.

There is an on-going debate about why the level of investments in the country has been constantly declining over the years. It is suggested here that many of the causes of our present economic sluggishness can be traced back to the apprehensions of economic operators in the face of this new emerging economic environment. The cracks in the existing system are becoming ever more obvious and penalizing but there is absolutely no evidence that there is even the beginning of a plan let alone a strategy to deal with this transition.

While there is no doubt that recent governments as well as the corporate sector have been keenly aware of the evolving scenario, there is little sign that this awareness has resulted in any willingness for both sides to find a common strategy to deal with it.

Responsibility for failure cannot be attributed to any one side alone, despite the willingness of each to do so.

Rajiv Servansingh