Peter Craig
23 July 2007
Port Louis — The Uruguay Round of international negotiations on trade and commerce stipulated that there would be a phasing out of the Multi Fiber Agreement (MFA) under which quotas were set on individual countries exporting principally to the USA.
In Mauritius there were those who welcomed at that time in the early 1990s an opening of markets. I disagreed. On my advice and with the support of then prime minister, Sir Anerood Jugnauth, Mauritius was one of three (the others being USA and Jamaica) who voted against this phase out. Of course the phase out passed.
Many countries at that time wondered at the position of Mauritius, but today they are rallying to this position as they face extreme competition from low-cost labour countries and in fact have had to create a new organization - through the Istanbul Declaration Organization, of which I was a founder member - to combat the massive surges of textile/apparel from China.
Faced with the fact that the end of the MFA would occur on 1st Jan 2005, what could be done to help the Mauritian textile/apparel industry?
I submitted a paper to the Government of Mauritius to review the US quota system so that it would allow more flexibility and allow Mauritian companies to have a greater share of the quotas to the USA, which had previously almost all been allocated to Hong Kong and Taiwanese companies. This allowed the local Mauritian companies to enter the US market more easily.
At the same time with the development of the Africa Growth and Opportunity Act (AGOA) there were strong incentives for companies to move "upstream", i.e. develop vertically integrated factories with fabric production as well as apparel production. Several major Mauritian companies seized this opportunity and have become, in the words of Arnaud Dalais, "one-stop shops" where buyers can get the design, the fabric and the manufacture in one place.
What happened when the Multi Fiber Agreement ended in 2005?
As expected, the Hong Kong and Taiwanese companies fled the country and it was up to the local traditional patriotic companies to take over, which they did, having been prepared over the years for this eventuality. Yes, there was a dip in exports and employment for a couple of years in 2006-07, which was quite natural due to the exodus of non-Mauritian companies, but the local traditional patriotic companies have taken up the slack and are forging ahead.
But there is a double whammy (excuse the American lingo), which is going to hit the Mauritian textile industry. And it is because of the good intentions of our friends!!! In the USA, Mauritius, through its embassy and lobbyist, Paul Ryberg, is fighting hard to get the derogation for 3rd country fabric as insisted by the Government of Mauritius. With a friendly Democratic House and Senate, this is possible but, now comes the glitch they, our Democratic friends, wish to extend this to all Least Developed Countries (LDCs), which include many of Mauritius' fiercest competitors from Asia.
The Duty Free Quota Free (DFQF) proposed by a great supporter of Mauritius, Rep of Seattle, Jim McDermott, will provide all LDCs , even outside Africa, AGOA 3rd country fabric status so the question is what benefit will occur to Mauritian companies that have invested heavily in vertical integration towards the US market?
Now the second part of the double whammy. The EU, which previously under the Yaoundé, Lome, Port Louis and Cotonou Agreements insisted on a rule of double transformation, i.e. fabric-making and then apparel-making, which helped enormously our apparel and textile to the EU is proposing that there be only a single transformation rule, which would basically mean that all countries can compete with Mauritius using the fabric from China, India, Pakistan, Bangla Desh.
So, the efforts and investments of Mauritian textile/apparel companies to become more competitive and move upstream into vertically integrated units are going to be undermined by the great heartedness of our European friends. Yes, Mauritius got the 3rd country fabric derogation for one year, and only for Mauritius, not for any other country. And I alone know the behind curtain details that went into that and am personally responsible for that derogation.
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