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U.S. signs new trade, investment agreement with Mauritius

Saying that Mauritius is a positive model of how trade and investment can fuel economic growth, the United States signed an agreement on Monday to expand trade links between the two countries.

Called a trade and investment framework agreement (TIFA), it sets up a formal mechanism under which both countries can discuss trade issues and identify areas and sectors to further expand mutual trade and investment.

Deputy U.S. Trade Representative Karan Bhatia said that Mauritius has earned the privilege of having this special framework as the island has pursued the "right policies" to expand economic growth and promote democracy.

"The government of Mauritius has an impressive track record on democracy, economic growth, openness to foreign direct investment, economic diversification and expansion of trade," Bhatia said at the signing ceremony, which was held in an elegant room at the Old Executive Office building in Washington, adjacent to the White House.

Flanked by the flags of the United States and Mauritius, Bhatia noted how Mauritius has developed from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial and tourist sectors. He called this "a remarkable achievement."

"My thinking is, let's identify those countries that have demonstrated a real commitment to market-oriented economic reforms and see what we can do to build up trade an investment relationships with them," he said.

Bhatia also acknowledged the role that Mauritius played in developing AGOA, and the benefits the island has accrued from it. "AGOA has sparked significant investment in Mauritius and Mauritian investors have made major AGOA-related investments throughout sub-Saharan Africa, Mauritius serves as an example of AGOA's challenges and success."

The TIFA establishes a framework for the two countries to discuss new possibilities for trade and investment and also to resolve any outstanding trade issues or disputes. One issue that the United States is expected to pursue is intellectual property rights, which is the protection of copyrights on American-made products. Mauritius will likely use the TIFA to encourage U.S. investment in the seafood industry, business outsourcing and financial services. It will also seek a Free Trade Agreement with the United States, as a TIFA is the first step in this process.

Increased global competition

Exports to the United States from Mauritius under AGOA were valued at $152.6 million in 2005, representing 69 percent of the country's total exports to the United States. Trade is mostly in textiles and apparel, sugar, processed diamonds, jewelry, canned and frozen fish and eyewear. But after years of significant increases in total trade, last year's exports dropped 15 percent. This was due to dip in exports of textiles and apparel forced by increased global competition related to the end of global apparel quotas.

The TIFA offers an opportunity to help Mauritius rebuild these lost exports by diversifying into other products for export, said Florie Liser, Assistant U.S. Trade Representative for Africa. "We must work hard to support Mauritius' efforts to diversify and increase its trade and investment," she said.

Madan Dulloo, the Mauritian Foreign Affairs and International Trade Minister, said that the TIFA will have many benefits. The island's economy is "at a crossroads," he said, and expanding trade into the massive and lucrative American market will help the country succeed in its "bold reform program."

That program "embraces market liberalization, free trade, fiscal discipline and a major diversification and structuring of the economy," the minister told the gathering of African diplomats and U.S. government officials. He said the country is modernizing its financial services so that it can serve "the financing needs of a growing free market economy," and is making labor and tax reforms in order to become a "duty-free paradise."

"The TIFA will be instrumental in helping us reach our goals, as one of the main objectives of this agreement is to work toward the removal of trade and investment impediments and identify investment opportunities," he said.

Dulloo invited American businesses to consider Mauritius as an investment destination, saying they will find a country that is committed to a free market economy, democracy and human rights, and has a "qualified, versatile and multilingual workforce."

"Most importantly, Mauritius provides access to the US and Indian markets as well as a large sub-Saharan African market. Given our strategic location in the Indian Ocean, American firms can take advantage of our Freeport to use Mauritius as a gateway and logistic hub to Asia and Africa," the minister said. Foreign investments are being sought in the seafood, tourism, IT and financial services industries.

The ultimate goal, Dulloo said, is to establish a Free Trade Agreement with the United States, which would give Mauritius duty-fee access to the American market for all products. That would not likely happen any time soon, however, as trade promotion authority that gives such accords quick action in the Congress has expired and Congress has not yet renewed it.

In the meantime, Mauritius and the United States will organize several high-level meetings to discuss trade issues, beginning at the end of this year.

The United States has TIFAs with five other African countries: Ghana, Mozambique, Nigeria, Rwanda and South Africa, and two regional blocs, the Common Market for Eastern and Southern Africa and the West African Economic and Monetary Union.

Some progress on AGOA reforms

AGOA is six years old and the U.S. Congress is looking for ways to make it more beneficial to African countries, and more importantly, to head off what African textile leaders say will be the eventual collapse of the African apparel industry.

Progress has been made, but as yet no consensus has been reached as to the best way to achieve this goal.

"The message has been well received" that action is needed to help the African apparel industry, said Trade Minister Dulloo, who has been meeting with officials in the U.S. Congress. "We hope by the end of the year to have legislation in place."

Two bills have been introduced - one in the Senate, and the other in the US House - that contain a package of proposals to the original AGOA law. The amendments would make AGOA more flexible and help African textile producers respond to the end of global textile quotas. Fierce competition since the end of the quotas last year have forced many African textile mills to close, including many in Mauritius.

The bills would encourage the vertical integration of the African textile industries, meaning they would be able to handle the entire production of a garment, from raw material to final product. This would make them more competitive as they would eventually offer quicker, "just in time" delivery of garments.

African textile officials say that AGOA must be reformed quickly because a key provision is set to expire next year. Called the third-country fabric rule, it allows least developed AGOA beneficiary countries to use yarns and fabrics imported from other countries. About 90 percent of garments sold duty-free under AGOA fall under this provision. Mauritius does not qualify for this benefit, but was given a one-year exception. This has expired, however, and Mauritian government officials are appealing for an extension.

The bills now before Congress would replace this fabric rule with a "value-added" approach that would allow African garment makers to continue to use imported yarns and fabrics. This new rule would extend duty-free eligibility to garments made in Africa as long as at least 20 percent of the value of the finished garment is added in Africa. Over time, this value-added requirement would increase to 25 percent in order to encourage more than simple cut and sew operations.

"This will encourage greater use of African-origin buttons, zippers, packaging and ultimately yarn and fabric, which will in turn have a positive ripple effect throughout these support industries, creasing thousands more jobs and anchoring the apparel industry in Africa," said Paul Ryberg, a Washington attorney who is also president of the Mauritius-US Business

Association.

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WEEK-END --- dimanche 24 septembre 2006