CECPA and Its Potential Impacts
Rethinking Mauritius-India Economic Relations
The CECPA’s main economic benefits for Mauritius will likely stem from technical assistance and economic cooperation, rather than trade in goods or services.
By Dr Vinaye Dey Ancharaz
Negotiations on the CECPA (Comprehensive Economic Cooperation and Partnership Agreement) started back in 2004 but soon slipped into an impasse because of allegations by India that Mauritius was condoning certain shell companies (i.e. inactive companies used as a vehicle for financial manoeuvres, including illicit ones) that purported to do business in India. And then, out of the blue, the Indian Minister of External Affairs was rushed to Mauritius in February 2021 to conclude the long-drawn negotiations and sign the Agreement.
CECPA – An institutional mechanism to encourage and improve trade between Mauritius and India
One can speculate about the real motives behind such precipitation. Was it in response to the entry into force of the Mauritius-China FTA on 1 January 2021? It could well be the case – for Mauritius is caught up in a power game between China and India. Both countries have been rolling out tit-for-tat strategies as they vie to maintain economic hegemony over tiny Mauritius. While Mauritius should respond to China’s advances with caution, given the sensitivity around the Chagos issue, it can only revel in the competition for influence between two of its closest partners and the world’s biggest economies.
Or perhaps India has suddenly wakened up to Mauritius’ potential as a platform out of which to engage with Africa, as it trails its arch-rival – China – in the scramble for Africa. As an established member of regional groupings such as SADC, COMESA and IOC, and a party to the African Continental Free Trade Agreement (AfCFTA), trading under which also started on 1 January 2021, Mauritius offers unique advantages to Asian countries seeking to expand trade with Africa.
A more likely reason is geopolitical. Mauritius occupies a coveted position in the Indian Ocean and boasts an extensive EEZ, rich in marine resources and, potentially, offshore oil. Most of the world’s superpowers are vying for control over the Indian Ocean, and several have already established a military or strategic presence in the region. India is allegedly eyeing Agalega as a potential military base as it seeks to reinforce its military presence in the Indian Ocean.
Salient features of the CECPA
Contrary to modern-day deep integration arrangements, the CECPA remains rather traditional in its scope and objectives. It has a narrow focus on trade in goods and in services. The Agreement does not include a separate chapter on investment other than through Mode 3 (commercial presence) of Trade in Services (chapter 6 of the Agreement), nor does it address issues related to competition, intellectual property rights (IPR), and e-commerce. A ninth chapter – on General Economic Cooperation – was added later in August 2022.
Trade in goods
Mauritius has a fairly liberal trade regime. In 2023, the trade-weighted average tariff was a mere 1.3%: 3.9% on agricultural goods and 0.7% on industrial products. (These are MFN applied tariffs, that is non-preferential tariffs commonly applied on imports from countries that are not members of a trade agreement.) At 23.5%, the highest MFN applied tariff was on sugar and confectionary. Mauritius has bound duties at 122% for most agricultural products and at 65% for most manufactured goods. These are the ceilings to which tariffs could be raised under exceptional circumstances without violating WTO commitments. In the CECPA, Mauritius has offered further tariff cuts on Indian goods such as spices, tea, plastic products, furniture and automative parts.
India, on the other hand, has one of the world’s most restrictive trade regimes. In 2023, the average trade-weighted tariff stood at 12%, or 65% on agricultural goods and 9% on manufactures. Over 90% of agricultural imports into India attract an MFN applied tariff of more than 25%. The majority of non-agricultural goods feature tariffs in the range of 5 to 10%, but import duties reach 239% on certain items of clothing. India has bound duties at 150% for most agricultural goods and at rates ranging from 40% to 157% for industrial goods.
For any free trade agreement (FTA) to be WTO-compliant, it has to conform to GATT Article 24, among others. This provision requires parties to an FTA to “liberalize substantially all trade”. As far as trade in goods is concerned, this has come to mean that tariffs on at least 90% of imports should be reduced or eliminated. In the CECPA, Mauritius has committed to cut tariffs on 310 products while India would offer preferential market access to Mauritius for 615 products. This includes extensive use of tariff-rate quotas (or TRQs, which allow a pre-determined volume of imports at a preferential tariff but slap out-of-quota volumes with significantly higher tariffs) by both countries. Moreover, the Agreement provides for market access on a rather long list of products (including plastics, aluminium, iron and steel, and articles thereof, and toys) to be negotiated later, without indicating any time frame for such negotiations. No party has revealed the overall magnitude of tariff liberalization, and it is debatable whether it comes anywhere close to the 90% threshold required under GATT Article 24.
There are several products of export interest to Mauritius on which India offers preferential TRQs. They include fruits (pineapples and lychees), prepared or preserved tuna, speciality sugar, beer, fruit wine, and rum (Table 1). Other products subject to substantial tariff cuts are soap, washing and cleaning agents, travel goods and handbags, watches, clocks, sunglasses and industrial diamonds, and medical instruments. As usual, however, the devil lies in the details. Many products in which Mauritius is reputed to have a comparative advantage are excluded (that is, they continue to be subject to MFN tariffs). Among them are fresh or chilled tuna, refined sugar, mineral or chemical fertilizers, denim, and jewellery (Table 2).
Table 1. Products of export interest to Mauritius covered by CECPA
| Product | TRQ Tariff-Rate Quotas |
Applied MFN tariff |
| Pineapples | 1,000 tons at 10% | 30% |
| Lychees | 250 tons at 10% | 30% |
| Tuna, prepared or preserved | 7,000 tons at 0% | 30% |
| Speciality sugar | 40,000 tons at 10% | 100% |
| Beer | 2 million litres at 25% | 100% |
| Wine | 5,000 litres at 50% | 150% |
| Rum | 1.5 million litres at 50% | 150% |
| Watches, clocks, sunglasses, industrial diamonds | 0% (in 10 years) | 10% |
| Medical instruments | 0% (in 3/10 years) | 7.5% |
| Soap | 5% (in 5 years) | 10% |
| Washing, cleaning and degreasing agents | 0% (in 10 years) | 10% |
| Travel goods, ladies’ handbags | 5% (in 5 years) | 15% |
Table 2. Products of export interest to Mauritius excluded in CECPA
| Product | Applied MFN tariff |
| Albacore and yellowfin tunas, fresh or chilled | 30% |
| Refined sugar | 100% |
| Mineral and chemical fertilizers | 5% |
| Denim | 25% |
| Jewellery, articles of gold, silver, pearls, etc. | 25% |
The rules of origin (which determine whether an exporting country could claim that a given product was ‘substantially produced’ in its territory for it to qualify for preferential tariffs under a trade agreement) follow the best international practices and are quite flexible. They are product-specific and generally require either a change in tariff heading (‘single transformation’) or value addition ranging from 30% (in the case of cotton woven fabrics) to 40% (for pharmaceutical products), or both. The rules of origin allow for bilateral cumulation, that is, if Mauritius uses raw materials or inputs imported from India in the production of a good, it can account for them as if they originated in the country itself for the purposes of determining the value addition.
Trade in services
Both countries have undertaken significant commitments in the services sector. Mauritius will provide improved market access to India in over 120 service subsectors while India has committed to liberalizing some 94 subsectors. The Agreement includes separate annexes on financial services and telecommunication services – a testament to the importance of these subsectors to both countries. There is also an annex on the movement of natural persons, which represents Mode 4 of Trade in Services. For the sake of completeness, note that Mode 1 refers to ‘cross-border supply’ (e.g. call centres), Mode 2, ‘consumption abroad’ (e.g. tourism), and Mode 3 ‘commercial presence’ (e.g. Indian banks operating in Mauritius). The Agreement provides for the mutual recognition of qualifications and experience.
Just as the regime for trade in goods, Mauritius boasts a services sector that is more open to trade than is India’s. Moreover, Mauritius has imposed few restrictions or conditions on Indian service providers and professionals, and where they exist, they are meant mainly as prudential measures, such as those aimed at protecting investors and depositors, and ensuring financial stability, in the case of financial services. Notably, Mauritius has committed to imposing no labour market or economic needs tests, or similar procedures, as conditions for the temporary entry of natural persons (i.e., Indian professionals). Conversely, in its horizontal commitments, India has specified numerous limitations on market access and national treatment. These include numerical quotas in respect of visas for skilled Mauritian professionals, limits on foreign equity participation, and economic needs tests for service providers in the financial sector.
Potential impacts
Both Mauritius and India have signed a variety of free trade agreements with individual countries or groupings. FTAs represent an attempt to liberalize trade selectively – bilaterally or regionally – rather than multilaterally, and the motives behind them are usually more political than economic. Not surprisingly, therefore, the economic impacts of the CECPA – on trade, investment and movement of professionals between Mauritius and India – may be rather small and eclipsed by non-economic considerations. The CECPA has now been in operation for about 4 years – a period too short for any meaningful analysis. Such analysis is further complicated by the fact that detailed data on Mauritius-India bilateral investment and services trade is not available.
Goods trade
Notwithstanding the above limitations, examination of merchandise trade between Mauritius and India reveals a slight increase in both imports and exports since 2021 (refer to Figure 1 in the first part of this article, published last Friday), and the Mauritian authorities confirm that exports to India under the CECPA (that is, exports accompanied by a valid certificate of origin delivered by the MRA) are on the rise. However, only time will tell if this increase represents additional trade or simply exports that were previously on an MFN basis but are now reported under the terms of the Agreement.
The government of Mauritius is upbeat about the CECPA, and its potential to boost Mauritius’ exports of both goods and services into the large yet elusive Indian market. However, such optimism should be taken with a pinch of salt. Take, for example, the prospect of exporting 40,000 tons of speciality sugar to India at an in-quota tariff of 10% (representing a margin of preference of 90%). This raises several questions. First, where will this additional volume come from given that raw/special sugar production has been on a steady downward trend, declining by 40% between 2014 and 2023?
Second, even if the market for speciality sugar exists in India, will Mauritius want to export to India? The Mauritius Sugar Syndicate reports that speciality sugar exports under the CECPA have been “challenged by the price control in place for Indian sugars” (MSS Annual Report 2023-24). This suggests that an export potential may not materialize if the price received for the product is not internationally competitive, or if exports are hindered by other non-tariff barriers.
Finally, is there an effective market for Mauritian special sugar in India? Mauritius has traditionally exported its special sugars to Europe and the US, and Asia has accounted for just 8% of exports in recent years. India is a huge consumer of refined sugar, and keenly protects its domestic sugar industry, with tariffs on sugar imports reaching 100%. Mauritius can only hope to carve out a small niche for its speciality sugar in the traditional Indian market by raising awareness of its brand through an aggressive marketing campaign.
The same can be said of the potential to export substantial quantities of tuna and, especially, beer, wine and rum under the ‘generous’ TRQs offered by India under the CECPA. Exports of Mauritian rum and spirits have increased exponentially since 2006, and the large Indian market looks attractive, in theory. In practice, while the Agreement provides a quota of 1.5 million litres of rum, the applicable tariff of 50% may be prohibitive. Mauritian rum is not cheap to begin with and, so, it is inconceivable that the product will be competitive after adding a 50% tariff to the CIF price. Beer and wine may suffer the same fate. Beyond tariffs and prices, these products must win over Indian consumers accustomed to local varieties. That is the bigger challenge facing Mauritian exporters.
Moreover, the CECPA excludes several products of export interest to Mauritius (see Table 2). Denim and jewellery, in particular, presents good potential, but these products attract MFN tariffs of 25% and 20%, respectively, and India is itself a competitive producer of them, making it difficult for Mauritian exporters to make a dent into the Indian market. Conversely, products like medical instruments, watches, clocks, sunglasses and industrial diamonds, soap and detergents, and travel goods appear as low-hanging fruits. Mauritius has an established comparative advantage in these goods and is already exporting some medical instruments to India. This is where the Mauritian government and exporters should focus.
Table 3 shows Mauritius’ top exports to the world and to India in 2023/24. The data suggests a low degree of concordance between Mauritius’ exports to the world compared to India. As noted, Mauritius has mainly exported scrap metals and waste to India in recent years. However, medical instruments, which are among Mauritius’ biggest exports to the world are also an emerging export to India. The CECPA offers duty-free treatment on this product, which could spur its exports to India in the future.
Table 3. Mauritius’ top export products to the World and to India in 2023/24
| World | India |
| Wearing apparel, knitted and unknitted (18.6%) | Ferrous waste and scrap (42%) |
| Fish and fish preparations (14.5%) | Instruments and apparatus for optical, medical use, etc. (16.3%) |
| Sugar and confectionery (12%) | Aluminium waste and scrap (9.5%) |
| Precious and semi-precious stones and metals (7.4%) | Orthopaedic appliances (9.4%) |
| Live animals (4.9%) | Copper waste and scrap (5.5%) |
| Knitted fabrics (3.4%) | Recovered paper and paperboard (2.3%) |
| Instruments and apparatus for optical, medical use, etc. (3.4%) | |
| Plastic products (2.4%) |
Services trade
Both Mauritius and India are net exporters of commercial services. Mauritius is an inherently services-oriented economy. Services exports, which are dominated by travel and tourism, accounted for 69% of total exports (of goods and services) in 2023. Given the country’s competitive advantage in the services sector, Mauritius is hopeful that the CECPA will unlock new opportunities for services exports to India.
With a score of 0.29 on the OECD Services Trade Restrictiveness Index (STRI), India’s services trade regime is more restrictive than any OECD countries’, but globally, this is not a bad performance. At the subsector level, financial services and telecommunications feature relatively low STRI, so any market access advantage offered by the CECPA would be limited. Moreover, India is itself a major exporter of telecommunications services globally while Mauritius’ prospects to increase financial services exports to India may have been dented by the amendment to the Double Tax Avoidance Treaty in 2016. In other words, just like trade, the prospects offered by the CECPA in the services domain are likely to be in India’s favour.
One service area where Mauritius can clearly benefit is Mode 4: Movement of natural persons. Mauritius is already host to thousands of Indian workers in the construction and manufacturing sectors. This trend will only accentuate as labour shortages intensify in the years ahead. Hopefully, the Agreement broadens the scope for Indian professionals also to come to work in Mauritius in IT-enabled services, such as software development, fintech and AI.
Final word
The impacts of the CECPA on the partners’ economies merit further research. Yet, our analysis so far indicates that the Agreement’s benefits will be rather limited and biased in India’s favour. Mauritius’ exports to India, both of goods and of services, are virtually inexistent. While the CECPA will provide preferential access to a variety of Mauritian products, it appears that the potential to penetrate the Indian market is slim. Thus, in the short term, the CECPA may amplify the already-large trade deficit that Mauritius has vis-à-vis India.
However, over time, the trade relations between Mauritius and India can become more balanced if Mauritius focuses on the few export products that offer quick wins. These include medical instruments, soap and detergents, travel goods and accessories, and industrial diamonds. A targeted marketing stint by the Economic Development Board to promote the Mauritian label in India should, thus, be a priority. Finally, the TRQ for Mauritian rum is unexploitable given the in-quota tariff of 50%. Mauritius should renegotiate this TRQ in a future review of the Agreement.
Mauritius’ scope to export financial and telecommunication services under the CECPA is also limited. Conversely, Mauritius can benefit from Indian investments in modern services and can tap into India’s large pool of professionals where they are most needed.
Ultimately, the CECPA’s developmental impacts on the Mauritian economy are unlikely to come from the areas that this article has focused on, namely trade, whether in goods or in services. They are more likely to arise from technical assistance and economic cooperation, which occupies a full chapter in the Agreement. Mauritius should leverage India’s expertise in biotechnology (breeders’ rights, high-yield seed varieties, pest- and climate-resistant crops, etc.) and sustainable agriculture to enhance crop productivity and food security. The blue economy has been neglected over the past ten years as the Ministry in charge of this sector focused on artisanal fishing. Mauritius can surely benefit from India’s advances in the blue economy sector and, in particular, learn from its Blue Strategy. Technical assistance and staff exchange should help in the diffusion and adoption of best practices between the two friendly nations.
Isn’t it paradoxical that an Agreement that took over 16 years in the making is of such little value to Mauritius? But a bad deal should not be left to get worse. While the CECPA has clear legal provisions in the chapters on trade in goods and trade in services, the language on economic cooperation leaves room for hope. Mauritius should make chapter 9 of the Agreement its prime focus.
Mauritius Times ePaper Friday 21 March 2025
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