Time To Build New Bridges

We’ll need to go to places that can grow and increase their purchasing power in the near term

A Comprehensive Economic and Trade Agreement (CETA) was scheduled to be signed up between Canada and the EU on Thursday (yesterday).

The aim was to remove most trade tariffs and to facilitate investment between the two sides. Wallonia, one of the provinces of Belgium (a confederacy of seven provinces) disagreed with the proposal, making it impossible under the Constitution for Belgium, one of the 28 EU member states, to sign up the agreement.

Wallonia believes that the Agreement would have disadvantaged its farming sector and it therefore rejected it, not even attending the final meeting called by the Belgian Prime Minister on Monday last to find a solution. While the majority of Belgium’s provinces were in favour of CETA, it was enough for one of its provinces to object to it and, possibly, thus bring to an end discussions EU and Canadian officials have been holding since 2009. This entails rejection at the level of the EU of the almost closed deal since one of its member states cannot sign it up whereas the requirement is for all of them to sign up.

We are not directly affected by this development. As far as Europe is concerned, it will be recalled, our preferential sugar export price was scaled down in past years while the sugar export quota will be fully phased out next year. In other words, as it happened years ago with the dismantling of the Multi Fibre Agreement for our textiles, our exports to the EU will be in direct competition with other global producers, including potential EU exporters. In our case, the EU authorities informed us that their action was being taken in the context of a free-for-all trading regime in the world – i.e., market preferences should go.

But the recent CETA development shows that, even under an Economic Partnership Agreement (EPA), along with other ACP countries, it will become tougher for us to negotiate and obtain an approved trade and investment deal with a grouping such as the EU. In the absence of consensus among the EU member countries, one may be held back for long before trade and investment opportunities open up to us over there. We don’t need to neglect however avenues for further cooperation which an Economic Partnership Agreement with the EU can yield but events show that the going will be tough.

Already, there are views in the EU and outside, after this recent play-out, that the near-finalised Transatlantic Trade and Investment Partnership (TTIP) involving the facilitation of trade and investment between the EU and US, will hit against similar resistance, possibly on both sides of the Atlantic. This is because huge numbers of persons affected by prevailing low global economic growth increasingly believe that they are victims of a conspiracy hatched by multinational companies which are the real actors behind such agreements. Fears are now alive that the UK will find it terribly hard to reach a productive deal with the EU when it invokes its formal exit under Article 50 of the Treaty on European Union March next year.

Given dire forebodings of the sort regarding trade deals between countries and groups of countries, Mauritius would need to figure out a strategy which can durably uphold our trade, which is vital to our economic well-being.

Data show that Mauritius exported goods worth $ 2,565 million in 2011; in 2015, goods exported amounted to $ 2,457 million, lower. We also export services: $3,215 million worth in 2011 and $ 2,654 million in 2015. Thus, we exported altogether goods and services worth $ 5,780 million in 2011 falling to a lower total of $5,111 million in 2015. We also import goods and services from other countries. In 2011, we imported goods and services for a total of $ 7,577 million and in 2015, for a total of $ 6,968 million. As a result, our imports of goods and services exceeded our exports of the same (i.e. deficit) by $1,797 million in 2011 and by $ 1,857 million in 2015.

The principal point to note is that our exports of both goods and services, taken together, are not showing signs of significant progress in the past five years. As we have seen, it is proving increasingly difficult to reach out to export markets, given the resistances people in other markets are putting against any such attempts by outsiders. Add to this the gloomy international outlook acting to depress demand by consumers in other countries.

Nevertheless, the challenge before Mauritius is to make inroads into markets for increasing our exports. The end of the commodity cycle boom in past years is frittering away purchasing power from our immediate neighbours in Africa, with several of whom we are bound by trade and investment partnership agreements. In the circumstances, it is only by developing a good edge in the production of both goods and services that we can reach out to our potential next door markets. We cannot afford to decline below the level of efficiency we’ve reached already if we want to remain attractive for doing business with them.

Are we present enough over there to drive exceptional deals to get ourselves going? Are we domestically making the necessary efforts to strengthen our economic and other capacities towards serving external markets? Are we cutting an edge?

Resistances to trade coming up in such places like the EU and the US, which we’ve been used to in the past, makes the case for Mauritius not to neglect the possibility to build alternative new bridges not far from home. Mozambique, Tanzania, Somalia and Kenya are poised to explore recently discovered gas and oil finds in their territories, which may herald a new-found prosperity in these places. We’ll need to go to places that can grow and increase their purchasing power in the near term.

Anil Gujadhur