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Looking beyond clothing and sugar

U.S. and Mauritius explore ways to expand trade

From Feb. 5-6, Florizelle Liser, Assistant U.S. Trade Representative for Africa in the Office of the United States Trade Representative (USTR), led a U.S. delegation to Mauritius. They came for the first annual meeting of the U.S.-Mauritius Trade and Investment Council. The meeting is required under the Trade and Investment Framework Agreement (TIFA), a new accord signed last September that will expand trade between the United States and Mauritius.

At the USTR, Ms. Liser directs U.S. trade efforts in sub-Saharan Africa, oversees the African Growth and Opportunity Act (AGOA), and serves as chief U.S. negotiator for a free trade agreement with the five member countries of the Southern African Customs Union. It was her first trip to Mauritius. In this wide-ranging interview, Ms. Lizer expresses confidence that Mauritius can expand its exports to America, but she doesn't believe this new trade can totally replace the jobs lost in textiles and apparel.

Week-End: What were the main accomplishments of these trade meetings?

Liser: We have a really good team of folks developing a really good work plan that has 14-15 elements that cover a range of issues that affect U.S.-Mauritian trade and investment. We discussed a number of those issues at the meeting, and decided there were 3-4 that we would focus on. One area that I'm very excited about is making the linkages between our private sector and Mauritian private sector to explore trade and trade opportunities. We had a very good turnout at sessions held with the Mauritius Board of Investment and Enterprise Mauritius. They had a lot of ideas on ways to enhance these ties, so we will focus on this. We talked about (Mauritian companies) coming to the United States for talks with U.S. companies and then lay the groundwork for U.S. businesses to go to Mauritius. One priority is to identify competitive sectors in Mauritius in terms of exports to the U.S. market. Another priority is coordinating AGOA implementation as it concerns value-added production. One area of interest for Mauritius is looking at U.S. technical regulations on industrial and agricultural standards. This will have an impact on the kinds of agricultural products it can sell to the United States and whether it can be competitive selling industrial products in the U.S. market. We also want to explore what other kinds of agreements we can have between U.S. and Mauritius, using the TIFA to build other agreements. For example, should we explore a bilateral investment treaty between U.S. and Mauritius?

As you see it, what are some of the barriers to attracting more U.S. business investment and trade with Mauritius?

If you don't have frequent, low-priced air service to a place like Mauritius, it makes it very difficult to sell people on the tourism side and the business side as well. The flight from Washington to Johannesburg is 15 hours and 40 minutes, and the flight on to Mauritius is another two and one-half hours, so you've really got to want to do business in a place where you're prepared to fly that far. We think there are a lot of good reasons for American companies to be in Mauritius, given the economic reforms that have been made, and the fact that relative to other sub-Saharan African countries, Mauritius is advanced, with a pretty strong services sector. They are doing good things, and this is why we decided to sign a TIFA. We believe Mauritius sets a very good model for what we'd like to see happening in other places in sub-Saharan Africa. But again, because of where it is geographically and that you have to take a special interest in going to Mauritius, it will be tough to sell to Americans to invest there. We have a tough time getting American businesses to invest in Ghana and, and that's six hours away. I don't mean to be discouraging, but it would be good for Minister (of Foreign Affairs, International Trade and Cooperation) Madan Dulloo, along with other cabinet members, to give thought to what they might be able to do to attract more U.S. interest.

Could the TIFA eventually lead to a Free Trade Agreement (FTA) with the United States, which would open up even more trade opportunities?

The minister (Dulloo) certainly raised this desire, but right now, because of the current situation with TPA (the U.S. president's trade promotion authority) expiring, we have our hands full with a number of FTAs that have not yet gone to Congress for ratification. We're not starting any additional FTA negotiations at this point. When Congress ratifies TPA again, the Bush administration will look at possible new FTA partnerships. Hopefully at that point, we can get the administration to at least think about some of the African countries. Our biggest issue with Mauritius is that the size of trade is relatively small. The other issue is the extent to which sugar and textiles are top exports. The more that Mauritius is diversified in its trade, the more the case can be made (for a FTA). If a country's major exports to the United States are two of the most sensitive (product areas for trade) that we have - the chances of an FTA would be very difficult. I personally hope that the case can be made that FTAs with sub-Saharan Africa will be worth pursuing. Whether or not we can make the case that Mauritius is one of them, we'll have to see.

During your visit, did you get the sense that Mauritius is committed to expand trade links with the United States?

If you look at the trade numbers over the past few years, it has been on a steady trajectory upwards until this past year, which held steady. Apparel imports to the United States went down, but then we saw that overall trade was able to hold steady because of exports of products like eyeglasses, toys, and fish. But we also saw what will be a new opportunity for Mauritius in apparel. I brought back a pair of jeans being exported under AGOA for (American designer) Calvin Klein in which the cotton came from Benin and Mali. I was so impressed, as this shows the importance of vertical integration. We have seen this in China, where they can make everything they need for the apparel in one place. We haven't seen this vertical integration in too many places (in Africa), so this was a really great sign. When I went to a textile show in Las Vegas last week, they had an international sourcing building with about 35 African producers. At the show, I talked about the fact that Mauritius isn't importing denim, but is making it from cotton from other African countries. That is new and it sets Mauritius up as a model on how to do vertical integration. People in Mauritius are very positive about exports to the U.S. I toured a tuna processing plant that was fascinating. The fish was caught off Mauritius, de-boned and cooked at the factory, frozen and then exported to the United States. Last year exports of tuna under AGOA shot up significantly. That factory was just 18 months old and employs 1,400 workers.

These new developing areas for exports, however, are still small, especially compared to big drop in exports of clothing and apparel. Do you think these new sectors will grow enough to make up for lost apparel exports?

The past two years have been a tough period for a lot of countries in the global apparel industry. Mauritius is not the only one that has struggled to figure out how to stay ahead of the game. The losses are enormous for them, in the vicinity of 30,000 jobs. I don't think they will get back 30,000 jobs but there are several key things that will happen for Mauritius that will help make up for the losses. First, Mauritius has a real opportunity in higher-valued products and niches. For example, they are doing cashmere sweaters, and they've developed niches that some of the other Africans can't do. So I think they'll make up some of the losses with higher-value goods. Second, as the Mauritian apparel and textile industry becomes more vertically integrated, it will be able to recapture or capture some of the U.S. market. Third, I think diversification, moving from apparel to other products like jewelry and fish processing, will help. But will it make up for the losses in apparel in terms of jobs? I don't think it will happen over the short-term. But over the medium to long term, Mauritius will be much better off having a more diversified economy that isn't so dependent on apparel and sugar. Another example is the move to develop biofuels using sugar. Mauritius will get a whole lot more money for biofuels than for sugar at the end of the day. Also, China wants to move into production of more sophisticated things like automobiles, so someone will have to move in and take over the manufacture of lower industrial products, such as washing machines and dryers. I could see that happening in Mauritius. They should be looking to manufacture lower-end electronic appliances. If you can be competitive, you can export to Africa, India and other places in the world. South Africa, for example, is sending us cars and a whole range of manufactured products.

Mauritius is seeking a derogation under AGOA that would allow manufacturers to use so-called "third-country" fabric in the making of apparel that is sold in America. They came close to winning the derogation in the amended AGOA bill that passed Congress in December, and will try again this year. Do you think Mauritius will succeed this time around?

We think that with the new leadership of the House Ways and Means Committee, under Chairman Charlie Rangel, who has helped Mauritius get third-country fabric in the past and is a long-time supporter of AGOA, Congress will be more open to allowing Mauritius to get it.

Will the Bush administration support Mauritius in its efforts to win the derogation?

I don't know that we'll come out with a position, but basically we're working with Congress to see what package we could get through. I had many discussions (last year) about why USTR thought that giving Mauritius access to third country fabric made a lot of sense. Mauritius has invested in other places in Africa. I visited a factory in Mali where there's a Mauritian investor and they are making high quality cotton yarn, which comes back to Mauritius. They are investors in Madagascar, and have been an important part of Africa's vertical integration. So on this basis, it makes sense to give Mauritius some portion of the third country fabric cap. I think we'll go back (to Congress this year) and make a case to do this, and we've encouraged Mauritius to go to Congress and sit down with appropriate people on the House and Senate side and have that discussion.

Will there be another AGOA bill this year?

My expectation is that we'll be fine tuning AGOA all the way to the end, when it is scheduled to end in 2015. This is an important (trade law) to the United States. We want it to work, and we want to expand the country utilization and the product utilization under AGOA.

Are African countries fully benefiting from the expanded trade opportunities of AGOA?

There's a lot of room for improvement, but the law has been undeniably a success. Two-way trade between the U.S. and Africa in six years between 2001 and 2006 has more than doubled. When AGOA started, (sub-Saharan African) apparel was less than one percent in terms of the share of the U.S. apparel import market, and now it is 2 percent. Some people say that's very small, but that doubling from less than 1 percent to 2 percent has created 60,000-70,000 jobs in Africa. Even if Africans are able to capture just a very tiny share of the $14 trillion U.S. market, whether it's in cut roses, cashews, apparel, fish or footwear, jobs will be created and this will help alleviate poverty. Will Africa ever have 25 percent of the U.S. import market or will they ever fully utilize AGOA? Maybe not, but the point is as long as they can continue to expand the export of a widening range of products duty-free to the U.S, it will have an enormous impact on Africa. We've already seen the difference it makes.

a m e r i c a n   s c e n e

WEEK-END --- dimanche 18 mars 2007