RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/90
5 October 2001
(01-4678)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
MAURITIUS
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Mauritius is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Mauritius.Mauritius WT/TPR/G/90
Page 3
CONTENTS
Page
INTRODUCTION 5
I. ECONOMIC DEVELOPMENT OF MAURITIUS, 1995-2000 5
1.1 Main Productive Sectors 61.2 Important trends in B.O.P., debt, exchange and interest rates 9
II. TRADE POLICIES AND PRACTICES 12
2.1 Trade Policy Objectives 12
2.2 Domestic Laws and Regulations Governing the Application of Trade Policies 132.3 Multilateral and Regional Agreements 152.4 Trade-Related Measures 172.5 Investment Measures 172.6 Pioneer Financial Services Scheme 18
III. EXTERNAL ECONOMIC ENVIRONMENT 19
3.1 Implementation of the U.R. Agreement 193.2 External Trade Environment – Implications on some sectors of the economy 23
IV. CONCLUSION 25Mauritius WT/TPR/G/90
Page 5
INTRODUCTION
1. Small with a land area of approximately 1865 sq. kilometres and densely populated
(1.19 million inhabitants in 2000), Mauritius is situated in the Indian Ocean between latitudes 19050’
and 20030’ south and between longitudes 57018’ and 57046’ east, far from its major markets and
suppliers of raw materials.  Until 1970 a monocrop economy, exporting sugar only, Mauritius has
diversified its economy but it still depends heavily on trade to sustain its economic and socialdevelopments.  The manufacturing, tourism, sugar and financial services sectors are the four main
growth pillars of the economy.
2. The country faces a number of challenges emanating in particular as a result of changes
taking place at the international level.  Multilateral trade liberalisation process emboldened by the
advent of the World Trade Organisation has led to a decline in the preferential margins of Mauritiuson its traditional markets and has exposed the economy to global competition.
3. The problem of Mauritius, besides the more demanding external economic environment is
also exacerbated by the vulnerability emanating from the country’s situation as a small island
developing one.  Indeed as a Small Island Developing country, Mauritius is constrained in its
development by a number of factors characteristic of these countries, including:
- remoteness and insularity – Mauritius is located far from its major markets;
- susceptibility to natural disasters.  The Island is located in a region frequently affected by
adverse climatic conditions such as cyclones and droughts;
- limited diversification due to a very narrow resource base and small domestic market;  the
country's production and export bases are heavily concentrated on a limited number of
products;
- access to external capital – the size of the internal market and rising production costs
which are characteristics of SIDs impede capital inflows and consequently limit growth
prospects.
4. The economic development prospects of the country will depend on its ability to adjust to the
changing economic environment through modern isation, technological innovation and economic
diversification.  However, without secure and enhanced preferential access to markets, assistance tomeet adjustment costs and to improve competitiveness, it would be difficult for Mauritius to meet the
challenges of globalisation.
I. ECONOMIC DEVELOPMENT OF MAURITIUS 1995-2000
5. The annual real growth rate of Gross Domestic  Product (GDP) at basic prices rose from 5.6%
in 1995 to 6.2% in 1996 and then fell to 5.6 % in 1997.  GDP growth rose to 5.8% in 1998, fell to
2.1% in 1999 and increased to 8.9% in 2000.  The low figure of GDP growth in 1999 was due mainly
to the severe drought and cyclone experienced by the country.
6. The average annual growth rate over the period 1995-2000 was 5.7% per annum.  The decline
in growth rates occurred in all sectors with the exception of manufacturing and construction.  The
highest annual growth rate in 2000 was attained by  agriculture at 28.4%, followed by the hotels and
restaurants at 11% and the manufacturing sector at 8.3%.  Construction and electricity, gas and water
sectors recorded growth rates of 8%.
7. International trade witnessed an upswing in the total value of trade (imports and exports),
increasing from Rs 61.7 billion in 1995 to Rs 89.8 billion in 1998 and to Rs 95.8 billion in 2000.
Foreign trade recorded an average nominal growth rate of 9.5% during the period 1995-2000.  TheWT/TPR/G/90 Trade Policy Review
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trade deficit deteriorated from Rs 7.0 billion in 1995 to Rs 9.7 billion in 1998, increasing by almost
Rs 3 billion.
8. 1997, the sharp increase in trade deficit ( Rs 12.4 billion) was mainly due to imports of
machinery and transport equipment, specially imports of aircraft and marine vessels amounting to
Rs 3.7 billion.  The trade deficit in 1998 was lower than that of 1997 due to nearly 19% increase in
exports value as against about 8% increase in imports.  In 1999, the country’s trade deficit worsenedto Rs 16.6 billion since the growth of exports turn ed negative against a 13.8% growth in imports.  The
trade deficit was Rs 13.7 billion in 2000.
9. The total labour force was estimated at 542,000 in 2000 foreign and local combined,
representing the country’s economically active population for the production of goods and services.
This comprised 527,400 Mauritians and 14,600 foreign workers.  The latter accounted for around2.7% of the total labour force in Mauritius.  In 2000, over 54.8% were employed in large
establishments including central and local Government and 37.4% in small establishments including
the self-employed.  The unemployment rate increased from 5.1% in 1995 to 5.5% in 1996 before
shooting to 5.9% in 1997.  It stood at 5.9% in 1998 and rose again to 6.7% in 1999 and to 8.0% in
2000.
10. In the past five years, Mauritius continued to pursue its commitment to structural reform and
efficient resource allocation with emphasis on manufactured exports, reducing dependence on sugar
and stimulating the services sector.
1.1 Main Productive Sectors
Agriculture
11. The agricultural sector’s contribution to GDP declined from 9.3% in 1995 to 5.8% in 1999.
Employment in agriculture dropped from 70,000 to 51,600 over the same period, decreasing thesector’s share in total employment from 13.7% in 1995 to 10.4% in 1999.
12. Sugar is the main component of the agricultural sector and it will remain so, in the near
future.  Fluctuations in sugar output over the period 1995-2000 were essentially due to weather
conditions prevailing on the island.  Output dropped from 628,588 tonnes in 1998 to 569,289 tonnes
in 2000.  It is expected to be 640.000t in 2001.
13. The sugar industry is still an important economic player, although it has been overtaken by
the manufacturing sector both in terms of export earnings and employment.  The sugar industry plays
a key multifunctional role in rural areas.  In addition, it provides some 20 to 25% of the electricity
demand of the country through the use of bagasse.
14. Mauritius has an ACP quota of 507,000 tons of sugar with the European Union under the
Sugar Protocol and 12,000 tons with the U.S.  In June 1995, Mauritius benefited from an additional
quota of 85,000 tons for the period July 1995 to J une 2001 under the Special Preferential Agreement.
15. Sugar revenue increased steadily from Rs 6.3 billion in 1995 to Rs 8.0 billion in 1998 but fell
to Rs 6.1 billion in 1999.  This was due to changes in output and in the price of exports.  The sugar
price obtained in the European Union, the most im portant export destination, has been frozen since
1990.  The share of the sugar industry in the total GDP was around 7% in 1999 compared to 25% in
the early 1970s and sugar exports represented around 22% of total domestic exports in 1999.Mauritius WT/TPR/G/90
Page 7
16. The Sugar Sector is today at a cross road due to the difficulties it is facing as a result of
developments taking place in the international markets in particular the LAMY initiative.  Already,
the initiative has culminated in a reduction in the quota of Mauritius under the SPS Agreement.  It
should also be emphasized that the freeze in the price of sugar and reductions in support mechanisms
in the context of further liberalization of the agricultural sector in the EU, would have far reaching
implications for the sector.
17. Government, cognizant of its responsibilities, has come forward with a major reform
programme which calls for a reduction in cost of production of 45%, a reduction in the number of
sugar industries, an optimal use of biomass, a more efficient and judicious use of lands and water
resources and the development of R & D to fully tap the benefits of the forthcoming quantum leaps in
respect of biotechnology and cane biomass.
18. The contribution of the fisheries sector to GDP at factor cost decreased from Rs 305 million
in 1995 to Rs 220.5 million in 1999, representing only 0.2% of the country’s GDP for 1999.  The total
estimated employment in the sector was about 5,500 in 1999.
19. Mauritian exports of food and live animals, excluding cane sugar, equalled Rs 1.7 billion
compared to Rs 6.8 billion of imports of same in 1999, indicating a net food import of Rs 5.1 billionin that year.
Manufacturing sector
20. The manufacturing sector comprises sugar milling, all production activities meant for the
export market, the Export Processing Zone (EPZ) and the non-EPZ sector catering for the domestic
market.  The manufacturing sector recorded an average annual real growth rate of 6.0% during the
period 1995 to 2000.
The Export Processing Zone Sector
21. The EPZ sub-sector which recorded double digit growth between 1984 and 1988, grew by an
average annual rate of 6.2% over the period 1995 to 2000.  The value-added at current prices
increased by Rs 5.4 billion over the same period to reach Rs 12.5 billion in 2000.
22. The share of the manufacturing (mainly production of textile and clothing) sector in the
economy has constantly been increasing following the rapid development of the EPZ sector.  EPZexports increased from Rs 18.3 billion in 1995 to nearly Rs 31.2 billion in 2000.  EPZ production is
dominated by textiles and garments which accounted for 88% of total EPZ employment and 86% of
EPZ export earnings in 2000.  The main market of EPZ products is the European Union, accounting
for 67% of all exports in 2000.  Exports to the U.S. increased from Rs 3.9 billion in 1995 to
Rs 7.9 billion in 2000.
23. EPZ activities are highly concentrated in the manufacture of textile products and in terms of
markets.  They are thus prone to various adverse effects on the international market.  EPZ enterprises
face numerous challenges at the dawn of this new century such as demand fluctuations in the U.S. and
European markets, shortage of qualified labour on the local market and maintaining the international
competitiveness of Mauritian products in the context of increasing trade liberalisation.
24. In order to remain competitive, EPZ comp anies have been delocalising their low-cost
activities to neighbouring countries like Madagascar whilst right-sizing their value-added activities in
Mauritius in the past few years and this trend is likely to continue in the future.WT/TPR/G/90 Trade Policy Review
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25. Increasingly, EPZ companies have to adjust to just-in-time delivery systems which places
Mauritius at a disadvantage because it is far from its supply and market sources.  There is also the
need to tap high quality niches where competition is more on quality than on quantity and where
prices are rather inelastic.  This will require massive investment in technology, high fashion, high
design, highly skilled labour and innovative techniques which will enable Mauritius to decrease its
labour intensity.
Services Sectors
Tourism
26. The tourism industry has been one of the most dynamic sectors of the Mauritian economy,
contributing 4.1% to GDP in 1995 and it is expected to reach 5.5% in 2001.  The tourism sector
experienced an annual average growth rate of 9.8% over the period 1995 to 2000.  As at March 2000,the tourism sector provided direct employment to around 18,600 people in the travel and tourism
industry, restaurants and hotels.  The induced and indirect multiplier effect on employment, estimated
by the World Bank to be 2.0, brings employment in tourism and tourism-related sectors at about
37,000 in 2000.
27. Tourism is the second largest gross foreign currency earner after the EPZ sector.  Gross
tourism receipts have grown from Rs 7.5 billion in 1995 to Rs 14.2 billion in 2000.  Tourist arrivals
reached over 650,000 in 2000 and are expected to reach 700,000 in 2001.  Gross receipts are expected
to be of the order of Rs 15.5 billion in 2001.  The share of tourist arrivals from European countries has
constantly been increasing from 57.8% in 1995 to 67% in 2000.  Government is actively promoting
the handicraft sector to increase tourist spending in the country.
Financial Services
28. The international financial services sector such as offshore business, freeport activities, fund
management, stock exchange, insurance, etc has emerged as a vital contributor to the Mauritian
economy.  The necessary synergy among the sub-sectors is being created to meet the increasing
demands of a modern trading environment and to generate more value-added.  With an annual
average growth rate of 10.0% over the past three years, its contribution to GDP will reach an
estimated 8.2% in 2001.
29. The Stock Exchange Act 1988 established a formal stock exchange in Mauritius.  It is
operated and managed by the Stock Exchange of Mauritius Limited (SEM).  The Central Depository
System and Settlement (CDS) System in which all listed companies are registered establishes a fully
computerized depository and settlement service in compliance with G-30 standards.  The promotion
of the SEM from the status of Corresponding Exchange to that of Affiliated Securities Marketrecognises the progress towards international st andards.  The Automated Trading System has been
recently introduced.  The stock market is open to foreign listings and investments by foreign nationals
and institutions.
30. The success of the offshore sector has been built primarily on the opportunities which
Mauritius provides, such as its expanding double taxation treaty network, its strategic location and itsmembership to the main regional trading blocs.  In 2000, the value added generated by the offshore
sector accounted for 2.0% of GDP .
31. In less than ten years, the offshore sector has attracted the elite of the multinational banks and
investment companies and is providing extensive in ternational services ranging from asset holding,
international trading, fund management, captive insurance and aircraft leasing.  An Economic CrimeMauritius WT/TPR/G/90
Page 9
and Anti-Money Laundering Bill has also been passed to prevent and combat malpractices and
promote Mauritius as a clean and credible international business centre.  A Financial Services
Development Act has been passed to carry out an integrated form of regulation and supervision of
financial services in Mauritius.
Mauritius Freeport
32. The Freeport sector which was launched in 1992 aims at promoting Mauritius as a trading,
marketing and distribution hub in the region.  Activities carried out in the Freeport are geared towards
the warehousing of goods and their re-export to neighbouring countries, after bulk-breaking and
minor processing.  In 2000, Freeport traffic wa s around 8,000 TEU containers for a turnover of
Rs 9.4 billion.
Telecommunications
33. High quality and efficient telecommunication facilities are offered throughout the country and
the data communication network is the second largest of its kind in the whole African continent.  With
a tele-density of 24% and a 100% digital network, the country is set to offer one of the best
telecommunications facilities in the region.  Mobile telephony subscription is at 120 per 1000 and is
growing at a fast pace.  The SAFE project whereby a submarine fibre optic cable will link SouthAfrica with Malaysia via Mauritius will be operational in October 2001.  This project will provide
high-speed connectivity up to 80 gigabits boosting opportunities for e-commerce for the country.
Internet that was introduced as from March 1996 on a commercial basis today reckons some 35,000
subscribers with well over 150,000 end-users.  The internet service provider (ISP) market is today
open, and new ISP licences are being granted to propagate the use of Internet.  The
Telecommunications Act 1998 makes ample provisi on for the regulation of the Telecommunications
sector.  Under this Act the regulator which is the Mauritius Telecommunications Authority has beenprovided with extensive powers to ensure a fair co mpetition in the sector.  The legislation is being
reviewed in the context of the convergence of Information and Communication Technologies.
Information Technology
34. The Government is pursuing its efforts to create a more favourable climate for foreign
investments; for both the individual and corporate investor.  At the international level the Governmentis using all means, political, economic and diplomatic, to secure market access and investments.  At
the national level the Government is committed to improving the legal and administrative framework
to offer appropriate propriety protection, hassle-free implementation and attractive packages of
incentives.
1.2 Important trends in Balance of Payments, debt, exchange and interest rate
Balance of Payments
35. The overall balance of payments posted a mixed performance during the period under review.
After having registered surpluses in 1995 and 1996, the overall balance of payments recorded deficits
in 1997 and 1998, before posting surpluses again in 1999 and 2000.
36. The current account balance was relatively volatile, recording surpluses in 1996 and 1998,
and deficits in alternate years.  As a percentage of GDP, the current account deficit was equivalent to
about 2.2 per cent when it peaked in 1997.  A recurring feature in the period 1995 to 2000 was the
surplus registered in the services and current transfers accounts, while the merchandise and income
accounts remained in deficit throughout.  The deficit in the merchandise account was to a large extentWT/TPR/G/90 Trade Policy Review
Page 10
attributable to the rapid growth of imports, as a result of the sustained strength in domestic demand,
which outpaced the growth in exports amid a no t too favourable external environment.  The
acquisition of aircraft and marine vessels during the period under review also had an adverse impact
on the merchandise account.  The services account balance invariably posted significant surpluses in
the period 1995 to 2000, mainly due to robust growth in gross tourist earnings.
37. The latter was consistently higher over the period following successful promotional
campaigns, which saw the number of tourist arrivals rise from 422,463 in 1995 to 656,453 in 2000,
and heavy investment on the supply side to upgrade existing, as well as increased room capacity.
Throughout the period, current transfers recorded a net increase on the back of positive net private
inward remittances, while the balance of the income account, weighed down mainly by the interest
payments on external debt, was negative.
38. The overall balance of payments, after registering a surplus in 1995 and 1996, recorded a
deficit in 1997 and 1998.  It again posted a surplus in  1999 and 2000.  Foreign direct investment (FDI)
in Mauritius, net of outward FDI, increased stead ily from Rs 262 million in 1995 to Rs 610 million in
1996 and, further to Rs 1,097 million a year later.  In 1998, as a result of important Mauritian
investment in the region, net foreign direct inve stment flows turned nega tive with outward FDI
exceeding inward FDI by Rs 37 million.  In 1999, FDI in Mauritius picked up again to reach
Rs 1,243 million and FDI recorded a net inflow of Rs 1,081 million.  In 2000, FDI in Mauritius
amounted to Rs 7,265 million largely as a result of the partial sales of Mauritius Telecom to France
Telecom and direct investment recorded a net inflow of Rs 6,932 million.
39. Portfolio investment in Mauritius, which reached Rs 3,059 million in 1995, slowed down to a
net amount of Rs 625 million in 1996.  However, this pattern was reversed in 1997 with portfolio
investment recording a net outflow of Rs 1,393 million partly due to Mauritian funds takingadvantage of more attractive investment opportunities abroad.  A year later, aided by Mauritian
disinvestment abroad, portfolio investment recorded a net inflow of Rs 358 million.  In 1999,
portfolio investment recorded a net inflow of  Rs 581 million and in 2000, portfolio investment
recorded a net outflow of Rs 3,274 million largely as a result of redemption of the remaining FRN.
Table 1 below gives a summary of the main components of the balance of payments accounts over theperiod 1995 to 2000.
Table 1
Balance of Payments Summary
1995 1996 1997 1998 1999 2000
Current Account -380 610 -1,874 79 -3,301 -805
Goods -4,182 -5,846 -9,181 -6,335 -13,063 -10,267
Services 2,371 5,166 4,997 4,773 7,744 8,549
Income -332 -789 -372 -637 -594 -747
Current Transfers 1,763 2,079 2,682 2,278 2,612 1,660
Capital and Financial A/c -1,478 776 244 833 -1,440 -1,489
Capital A/c -19 -14 -11 -19 -12 -16
Financial A/c -1,459 790 255 852 -1,428 -1,473
Of which
Reserve Assets -1,895 -859 646 1,476 -4,803 -6,415
Net Errors and Omissions 1,858 -1,386 1,630 -912 4,741 2,294Mauritius WT/TPR/G/90
Page 11
External Debt
40. Total outstanding external debt increased from Rs 23,808 million at end June 1996 to
Rs 27,955 million at end June 2001 representing an average annual increase of 3.6 per cent.  This was
mainly due to increase in the stock of external debt of parastatal bodies as well as the appreciation of
major international currencies vis-à-vis the domestic currency.  Total outstanding external debt of
Central Government declined from Rs 9,159 million at end June 1996 to Rs 6,900 at end June 2001on account of the repayment of the Floating Rate Notes (FRN) amounting to Rs 3,125 million
(USD 117 million) in October 2000.  Outstanding private sector external debt also decreased from
Rs 4,445 million to Rs 3,234 million over the period under review.  Table 2 provides an institutional
breakdown of total external debt.
Table 2
External Debt Outstanding as at end June (Rs million)
1996 1997 1998 1999 2000 2001
Central Government 9,159 9,666 10,752 10,037 9,891 6,900
Parastatal 10,204 11,536 14,997 16,901 15,592 17,821
Private Sector 4,445 4,208 3,946 3,516 3,284 3,234
Total 23,808 25,410 29,695 30,454 28,767 27,955
Source: Ministry of Finance.
Exchange Rates and Interest Rates
41. Between 1995 and June 2001, as shown in Table 3, the Mauritian rupee depreciated against
almost all its major trading partners' currencies, except the South African rand.  The rupee lost
31.2 per cent vis-à-vis the Pound sterling, 37.2 per cent against the U.S. dollar, 19.1 per cent against
the Japanese yen, 8.0 per cent vis-à-vis the French franc, and 4.5 per cent against the deutsche mark.
However, it gained 32.5 per cent against the South African rand.
Table 3
Bilateral Exchange Rates of the Rupee (period average)
1995 1996 1997 1998 1999 2000Jan-June
2001
USD 17.9120 19.8518 21.2012 24.1642 25.3470 26.4179 28.5186
GBP 28.2451 30.9888 34.7188 40.0203 40.9579 39.9911 41.0562
FRF 3.5889 3.8717 3.6236 4.1022 4.1162 3.719 3.9021
DM 12.4935 13.1584 12.1956 13.7530 13.8044 12.4732 13.0867
ZAR 5.0033 4.6944 4.6625 4.4495 4.2033 3.8688 3.6378
JPY 19.2223 18.2902 17.5973 18.5838 22.4324 24.5852 23.7507
ECO/EU 23.248 24.934 24.012 27.228 27.001 24.396 25.617
42. This was largely due to the re-orientation in the Bank's monetary policy, which aimed at
imparting greater stability to the exchange value of the rupee through a substantial increase in nominal
interest rates.  As a result rupee-denominated asse ts became more attractive – for instance, the yields
on short-term Government of Mauritius Treasury Bills, which had hovered within a range of 9.36 to
9.87 per cent on average between 1995 and 1998, rose significantly to 12.69 per cent in 1999.  The
Bank also took measures to mop up excess liquidity in the domestic money market by setting
Treasury Bills over-the-counter to the public and non-financial corporations.  The hike in nominal
interest rates in 1999 in conjunction with the decl ining domestic inflation rate, amid falling interest
rates abroad, resulted in a higher interest rate differential in favour of the Mauritian rupee to majorWT/TPR/G/90 Trade Policy Review
Page 12
currencies.  The period average interest rate on sh ort term Treasury Bills in Mauritius for the years
1995 to 2000 and for the six months ended June 2001 are given below.
Table 4
Short-term Treasury Bill Rate (Period Average) (per cent)
1995 1996 1997 1998 1999 2000 Jan-June
2001
Mauritius 9.80 9.46 9.36 9.87 12.69 10.82 9.91
Source: Bank of Mauritius.
II. TRADE POLICIES AND PRACTICES
2.1 Trade Policy Objectives
43. The major thrust of economic and trade policy in Mauritius is the establishment of a thriving
competitive modern society with a high level of economic growth, situated within a dynamic
international environment, providing opportunities to all Mauritians with the ultimate objective of
increasing the standard of living and improving the quality of life.
44. This objective is expected to be achieved to a considerable extent through a liberal economic
and trade policy.  The strategy of openness, underpinned by outward looking trade policies and
practices is aimed at allowing Mauritius to become a competitive trade partner and to integrate itself
in the world trading system.
45. In this respect Mauritius intends to initiate actions both on the local and the external fronts as
appropriate.  On the internal front the thrust of policy making will be on the consolidation andexpansion of the industrial and services bases through:
- a business environment in which individual firms can build on their competitive
advantage and not shelter from competition;
- addressing systematic problems and impediments to industry development and
development of the services sector;
- building competitiveness by adopting appropriate policies in the area of education,
training, human resource development, industry relations and taxation;
- adoption of a coordinated approach between industry and the environment to ensure
sustainable development;
- improvement in infrastructure, acquisition of up to date technology and technology
support to the industrial and the services sectors;
- improvement in the flows of FDI, in its industries and services sectors;  and- development of clusters and industrial diversification.Mauritius WT/TPR/G/90
Page 13
On the external front, policy formulation would be aimed at:
(i) consolidating the trade relations of Mauritius with the EU under the Cotonou
Agreement and in the context of the Economic Partnership Agreement yet to be
negotiated;
(ii) consolidating the trade relations of Mauri tius with the U.S., especially in the context
of the Africa Growth and Opportunity Act;
(iii) participating actively in the work of the World Trade Organisation.  While on the one
hand the WTO philosophy of free trade would influence trade policy formulation in
the goods and the services sectors, the concerns of Mauritius as a small vulnerable
Island Developing Country would also be flagged so that provisions are made to
effectively address these concerns;
(iv) playing a more prominent role in regiona l blocks with a view to expanding the
economic space of the country through the adoption of a regional industrial
development strategy;
(v) adopting a more proactive approach to trade on non-traditional markets.
2.2 Domestic Laws and Regulations Governing the Application of Trade Policies
Consumer Protection Act (Price and Suppliers Control) Act 1998
46. Exports are governed by regulations made by the responsible Minister under “The Consumer
Protection Act (Price & Supplies Control) Act 1998” .  Exports of almost all items are conducted
freely except for a few controlled items for which export permits are required prior to effecting
exports.
Legal Metrology Act
47. The Act was passed in 1985 to make better provision for the assizing of instruments, weights
and measures and the protection of the public in relation to the sale of articles by weight or measure.
48. The Act and allied Regulations were last amended in 1994.  The Legal Metrology (prepacked
commodities) Regulations also came into force in July 1994.
Intellectual Property Rights
Patents Act of 1875 as subsequently amended up to 1983
49. The Patents Act provides for the issue of patents, which confer on the patentee sole and
exclusive privilege by himself, executions, administrators or assigns to make, or use the invention in
Mauritius and to authorise others to do so.
The Trade Marks Act 1868 as amended up to 1993
50. The Trade Marks Act provides for the registration, renewal, transfer, cancellation, assignment
and publication of a mark.WT/TPR/G/90 Trade Policy Review
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51. A Central Industrial Property Office has been established since 1994 for the administration of
patents and trade marks.
The Customs Act and the Customs Regulations
52. The Customs Act 1988 defines the legal regulations for the import and export of goods and
lays down the framework for the ad ministration of the department.  It is regularly amended through
the Finance Act to strengthen the provisions against fraud and fiscal evasion and, also, to facilitatetrade.
53. In 1999, the Act was also amended to provide for the introduction of the WTO Valuation
Agreement.
54. In 1997, amendments were made to the Regulations for the operations of computer system
using EDI application.
The Customs Tariff Act 1969
55. No major amendment has been made to the Act.  Amendments to the schedules of the Act
which provide for the rates of duty are effected through regulations made by the Minister.  The
Department is at present applying the 1996 version of the Harmonised Commodity and Description
System.
Rules of Origin
56. To benefit from preferential tariff treatment, goods originating in a scheduled territory must
be covered by a certificate of origin issued by a Chamber of Commerce or visaed by a Government
Authority in that Scheduled territory, specifying that the final process of manufacture has taken place
therein and that it contains at least 50% of labour, material and other manufacturing cost originating in
that scheduled territory.  Imports from COMESA , SADC and IOC require a proper Certificate of
Origin in accordance with the Rules of Origin crite ria set out in the respective Protocols to enjoy
preferential treatment.
Trade Facilitation
57. Mauritius has streamlined its Customs clearance procedures by adopting the Single Goods
Declaration.  It has also introduced Electronic Data Interchange (EDI) technology which permits
speedy removal of goods within Trade Net and EDI application linking businesses and the publicsector.
The Excise Act 1994
58. The Excise Act 1994 which replaced the Excise Act 1947 provides for the levy of an excise
duty on a few selected items, namely alcohol and spirits, cigarettes, motor cars and petroleum
products, both at importation and on local manufacture.
The Industrial Expansion Act 1993
59. The Industrial Expansion Act 1993 lays down conditions for the operations of enterprises
holding the Export Processing Zone Certificate, Pioneer Status Enterprise Certificate, Industrial
Building Enterprise Certificate, strategic local enterprise certificates and registered small and medium
enterprises, and duty free treatment of equipment and materials.Mauritius WT/TPR/G/90
Page 15
60. Following the enactment of the Mauritius Accreditation Service (MAURITAS) Act No. 23 of
1998, consequential amendment was brought to Section 40(3) of the Industrial Expansion Act 1993
by deleting paragraph (b) with regard to the National Accreditation System.
61. Two Regulations have also been made with respect to the Industrial Expansion Act 1993:
(a) GN No. 18 of 1998 to increase the aggregate CIF Value of production equipment
used by small and medium enterprises from Rs 5 million to Rs 10 million.
(b) GN No. 146 of 1999 to amend the Third Schedule of the Industrial Expansion Act.
The Freeport Act
62. The Freeport Act 1992 which lays down conditions for the operation of Freeport activities has
just recently (17 July 2001) been replaced by new legislation.  The new Freeport Act redefines the
respective roles and responsibilities of the regulatory body and private stakeholders, strengthens thesupervisory provisions and lays the foundation for ensuring a level-playing field in the sector.
Value Added Tax
63. A Value Added Tax (VAT) was introduced in Mauritius on 7 September 1998 in replacement
of the Sales Tax on goods.  The law relating to VAT is contained in the Value Added Tax Act 1998
and the Value Added Tax Regulations 1998.  The VAT is a broadly based ad valorem  tax which is
chargeable on the supply of goods and services in Mauritius including the Island of Rodrigues; and on
the importation of goods and services into Mauritius.  The tax applies to supplies made by a taxable
person in the course of furtherance of any business unless they are specifically exempted by law.
There is a single rate of tax of 12 per cent.
Legislation under preparation
64. A number of legislation has already been drafted and is currently being finalised for adoption
by the National Assembly.  These are:
(i) The Industrial Property Bills which englobe patents, trademark, industrial design,
layout design of integrated circuit;
(ii) The Competition Bill;
(iii) The anti-dumping, safeguard and countervailing measures Bill.
2.3 Multilateral and Regional Agreements
GATT and the WTO
65. Mauritius joined the General Agreement on Tariffs and Trade in 1970.  In 1994, it signed the
Marrakesh Agreement and became a founding member of the World Trade Organisation.
Regional Agreements
The ACP-EC Partnership Agreement
66. Mauritius was a signatory to the Lomé Convention between 70 African Caribbean and Pacific
(ACP) States and the EC which lasted for 25 year s and which ended in 2000.  The Lomé Convention
proved to be an essential instrument in the economic development and industrial diversification of theWT/TPR/G/90 Trade Policy Review
Page 16
country as it provided duty and quota free acce ss to the EU Market.  A new EU/ACP Partnership
Agreement has replaced the Lomé Convention and provides for the rollover of the Lomé trade
preferences for another eight years.  Subsequently a WTO Compatible Economic Partnership
Agreement yet to be negotiated between the ACP and the EU will operate as from the year 2008.
Abuja Treaty on African Economic Community (AEC)
67. The Abuja Treaty, of which Mauritius is a signatory, came into force in 1994.  The treaty
provides a framework to achieve regional integration at continental level by consolidating the over
fifty national economies into a single common market through a phased approach spanning over
34 years.  The first phase which aimed at strengthening the existing regional economy lasted for a
period of five years and ended in 1999.  The treaty has now entered its second phase which will last
for eight years.
68. The focus of this phase will be on the gradual elimination of tariff and non-tariff barriers and
the setting up of FTA's region wise.
COMESA
69. The Common Market for Eastern and Southern Africa (COMESA) was established in 1994 as
a replacement to the former Preferential Trade Area (PTA) which had existed from the earlier days of1981.  It has at present 20 members.
70. A Free Trade Area (FTA) now operates in th e COMESA region as from October 2000.
COMESA also envisages the establishment of a Comm on External Tariff by the year 2004.  So far the
rates of duty proposed are as follows:
- Raw Materials – 5%
- Capital goods – 0%
- Intermediate goods – 15%- Final goods – 30%
The lOC
71. Mauritius is a founding member of the Indian Ocean Commission (IOC), created in 1984.  It
also comprises the Comoros Islands, France through Reunion Island, Madagascar and the Seychelles.
The EU is the major funding partner in the various projects/programs of the IOC.  The IOC, with the
financial support of the EU, has established  a  regional  project,  "Programme  Regionale Intégré de
Developpement des Echanges" (PRIDE) with a view  to dynamising intra-IOC trade and providing
support to the private sector.  Accordingly, the four IOC Member-States belonging to the ACP group,
are committed to eliminate tariff and non-tariff barriers on reciprocal basis.  So far, Mauritius and
Madagascar are already applying 100% tariff reduction between themselves.
SADC
72. The SADC Protocol on Trade was signed in August 1996 by 11 member states, including
Mauritius.  In broad terms, this protocol aims at  the establishment of a Free Trade Area (FTA) within
a period of eight years from its entry into force.  The Protocol became operational in February 2000
with effective tariff phase down as from 1st September 2000.
73. In this context members have agreed to reduce their tariff on a linear basis taking into account
the different levels of development of members.  Liberalisation is being carried out on the basis of theMauritius WT/TPR/G/90
Page 17
variable geometry approach.  Tariffs on about 85% of intra-SADC trade will be liberalised within a
period of eight years (i.e 2000 – 2008) whilst the remaining 15% will be eliminated around year 2008
to year 2012.
IOR-ARC
74. Mauritius is a member of the Indian Ocean Rim Association for Regional Cooperation
(IOR-ARC) which is a platform of economic cooperation among countries of the Indian Ocean basinat inter-continental level.  However, the IOR- ARC has not yet elaborated a framework for tariff
liberalisation.  It is currently focussing on the development of the business sector and on trade
facilitation projects.
GSP Schemes
75. Mauritius is a beneficiary of the generalized system of preferences (GSP) Schemes of
Canada, Finland, Japan, New Zealand, Norway, Sweden, Switzerland, USA, the EU, the Republic of
Bulgaria, Czech Republic, Hungary, Poland and Russia.
2.4 Trade Related Measures
Sanitary and Phytosanitary Measures
76. Sanitary and Phytosanitary Measures conditions are in compliance with the provisions of the
WTO Agreement on SPS and are based on scientific evidence.  Mauritius fully recognises pest free
areas and work as per qualified standards recommended by the FAO/WHO Codex Alimentarius and
the International Plant Protection Convention (IPPC).  Decisions taken on SPS Measures are
transparent.  Mauritius is currently in the process of harmonising its regulations with its trading
partners.  An inquiry point has been set up at the Plant Pathology Division of the Ministry of
Agriculture which is responsible to disseminate information and prepare notifications on SPS.
Technical Barriers to Trade
77. Standardisation, testing, type approval are in full conformity with the WTO Agreement on
TBT.  The Mauritian Standard Bureau Act 1993 has been amended in June 1999 to increase the
period of one month allocated for public comment on draft standard, proposed amendment,
withdrawal or revision of a standard.  The amendment provides for a 60 days period to submit
comments.
78. The MSB has notified acceptance of the Code of good practice for the preparation, adoption
and application of standards to the ISO/IEC Information Centre.
79. The Bureau prepares a work programme for two years for each of its ten standards
committees, which is reviewed every year and submitted to the standards council for approval.
2.5 Investment Measures
Measures applicable to the Manufacturing Sector
80. Mauritius is a small economy with little land and no other natural resources.  Prior to the
seventies its only export was sugar and it was highly dependent on imports.  Diversification of the
economy became imperative in order to redress the deteriorating balance of payments situation andWT/TPR/G/90 Trade Policy Review
Page 18
high unemployment rate.  Consequently the country had no other alternative than to diversify its
production base through the manufacture of other products.
81. Investment incentives were granted to the manufacturing sector since 1964 under the
Development Incentives Act and subsequently under the Export Processing Zone Act of 1970.  These
legislations were consolidated and new schemes introduced in the Industrial Expansion Act.
82. Under the Industrial Expansion Act of 1993 th e following categories of enterprises were
granted tax incentives certificates by the Ministry of Industry, Commerce, and International Trade
(until March 2001 when BOI (Board of Investment) t ook over) after approval of their applications by
Cabinet, on the basis of recommendations made by an Industrial Development Committee:
- export Enterprises – those manufacturing for export;
- pioneer Enterprises defined as those undertaking activities involving technology and
skills that will enhance the industrial and technological development of the country;
- strategic Local Enterprises defined as those producing for the local market and
promoting the industrial and technological advancement of the country;
- modernisation and Expansion Enterprises – those investing in production machinery
involving automation, computer applications or anti-pollution technology;
- industrial Building Enterprises for construction of buildings of a minimum floor
space of 1000m2 for use of a manufacturing enterprise;
- small and Medium Enterprises defined as those investing in production equipment up
to a maximum c.i.f. value of Rs 10 million.
83. Investment incentives have been largely harmonized across sectors of activities.  The main
incentive, a reduced 15 per cent corporate tax rate, is no longer restricted to holders of the
above-mentioned tax incentive certificates but applies to all enterprises in the manufacturing sector(except manufacturers of cigarettes and alcoholic beverages).  Other incentives include duty
exemptions on imported raw materials, tax remissi ons on acquisition of immovable property and free
repatriation of profits and dividends.  At the request of Government, UNCTAD is currently carrying
out a comprehensive review of the various fiscal incentive regimes.
2.6 Pioneer Financial Services Scheme
84. The Pioneer Financial Services Scheme was set up in 1997 under the Development Incentives
(Pioneer Financial Services) Regulations 1997.
85. The aim of this scheme is to promote specialised financial institutions providing new services
and products such as foreign currency and portfolio management, options and futures instruments,
factoring and actuarial services but excludes any activity falling under the Banking Act.  This schemeis also designed to facilitate the transfer of know-how so as to develop and build up local expertise in
these highly sophisticated activities.
86. The Pioneer Financial Services Development Certificate is issued to companies providing one
or more of the pioneer financial services and having a minimum paid up capital of Rs 200,000/-.  The
certificate is valid for a period of five years as from the date on which the companies start theiroperations.Mauritius WT/TPR/G/90
Page 19
87. Companies holding Pioneer Financial Services Development Certificate are granted the
following incentives:
- Corporate tax at 15%;
- Customs duty concession on importation of equipment on such terms and conditions
as may be approved and
Expatriate staffs benefit from:- 50% reduction of income tax liability;
- Customs duty free purchase of car not exceeding 1850cc (limited to 2 members of the
staff);
- Customs duty free purchase of household effects as may be approved.
III. EXTERNAL ECONOMIC ENVIRONMENT
3.1 Implementation of the U.R. Agreement
88. With a view to adopting a consistent approach to policy making in the area of international
and regional trade and following a recommendation from the Commonwealth Secretariat, a Trade
Policy Unit was set up in 1996.
89. The unit is responsible, inter alia , to shape the negotiating position of Mauritius, ensure
implementation of obligations contracted out under Multilateral and Regional Agreements, coordinate
all matters relating to International and Regional Trade, prepare for the periodic trade policy reviews
of Mauritius and maintain a watching brief on WTO issues.  A Standing WTO Coordination
Committee chaired by the Minister responsible for international trade has also been set up comprising
representatives from the public and private sectors to guide on the general policy orientation relating
to International Trade.
90. In order to assess the level of compliance of the Mauritius trade regime with the WTO
Agreements, a study was commissioned on the matter, the objective of which was to:
(i) examine Mauritius trade regime from the perspective of the country’s WTO
obligations;
(ii) identify those aspects of the regime that were not in compliance;  and
recommend actions to rectify the unambiguous instances of non-compliance.
91. All the legislation of Mauritius whether directly or indirectly related to the Mauritius Trade
Regime were scrupulously examined and all non-compliant measures identified.  Following the
publication of the report a number of corrective measures have been initiated to address the problems;
these are detailed below.
Tax and Tariff Rationalisation
92. Mauritius has over the last five years brought major reforms in its tax system with a view to
providing a more effective fiscal policy instrument for the management of the economy.  The Income
Tax Act 1995 which replaced the Income Tax Act 1974, consolidated the fundamental changes
brought to income tax legislation since 1974.
93. As regards indirect taxation, the White Paper on Indirect Taxation published in May 1997 set
the framework, direction and strategy for the reform.  It aimed mainly at rationalising andWT/TPR/G/90 Trade Policy Review
Page 20
streamlining the tax systems as well as bringing it in conformity with established international norms
and practices.
Tariff Structure
94. In June 1994 significant changes were brought to the tariff structure.  The rates of duty which
varied from 0% to 600% was reduced to 0% to 80%, and  the number of tariff  bands was reduced
from 60 to 8.
95. The 1997 White Paper on Indirect Taxation sets out clearly the need for reform of our
customs tariffs.  In particular, a number of weaknesses were identified, namely:
- high dependence on customs duties;
- tariff structure not consistently graduated according to the degree of processing of
goods;
- high level of effective protection;
- proliferation of exemptions and concessions;
- preferential tariff regimes.
96. Steps and measures have been taken in successive budgets since then to either eliminate or
minimise those weaknesses.  The phased approach adopted was motivated by the need to give localenterprises time to adjust to the new environment as well as due to budgetary constraints.
1999/2000 Budget Speech
97. In June 1999, customs tariffs were reduced on more than 500 items, including the abolition of
customs duties on industrial machinery and equipment.
2000/2001 Budget Speech
98. The external tariff reform was further intensified in June 2000.  Customs duty on raw
materials on more than 1,300 items were abolished.  In addition, customs duty on a number of handtools and laboratory equipment were also eliminated.
99. Government moved a step forward with a view  to removing the discrimination between the
tariff charged on goods imported from scheduled and non-scheduled territories.  Thus, the additional
duty of 20 percent applicable on goods attracting customs duty of 80 percent originating from non-
scheduled countries was abolished.  Moreover, the additional customs duty of 20 percent which wasapplied to goods originating from non-scheduled countries attracting duty 55 percent was reduced to
10 percent.
2001/2002 Budget Speech
100. In June 2001, customs duties on various industrial inputs as well as on specialised spare parts
for production equipment were abolished.
101. With the on-going customs tariff reform, the customs tariff structure has changed significantly
over the past five years.  In June 1999, about 28% of the tariff lines did not attract duty.  In June 2001,
that figure has increased to 55%.  Furthermore, only 18% of the tariff lines attract customs duty of
55% and 80%.  As a result, average customs duty collection on imports has declined considerably.  It
currently stands at around 6 per cent compared to 12 per cent at June 1995Mauritius WT/TPR/G/90
Page 21
102. The reform will prepare the local enterprises to start an early preparation to meet the daunting
challenges of trade liberalisation under WTO as well as within SADC and COMESA.
Customs Valuation
103. A new set of criteria for the valuation of goods for duty purposes has been adopted as from
the 1st January 2000.  The Customs Tariff Act 1988 was amended to provide for the appliance of the
new rules and procedures for the determination of customs value of goods, in accordance with theWorld Trade Organisation Valuation Agreement.
Excise Duties
104. As mentioned in the White Paper on Indirect Taxes, in spite of the 1994 reform, the excise
taxation still contained major flaws.  For example, the tax base and rates of excise duties for the same
product differed significantly, whether it was imported or produced locally.
105. Since then, a number of steps has been taken in each budget to remove the various anomalies
and inconsistencies existing in excise taxation and bring it closer to established international norms.
In 1997, excise duty was removed on such inputs as leaf tobacco.  In 1998, the 47% duty imposed
solely on imported furniture was abolished.  Over the period, the gap in the rates of duty between
imported and locally-produced excisable goods has been considerably narrowed.
106. In the June 2001 Budget Speech, in the context of an acceleration of the excise duty reform
programme, the differentiated rates of duty applicable to importation of cars from scheduled and
non-scheduled territories have been harmonized.  The basis of taxation for both cigarettes and
alcoholic beverages has also been harmonized.
Value Added Tax
107. The cornerstone of the reform of the indirect tax system has been the replacement of 8% sales
tax by 10% VAT on 7 September 1998.  It has increased to 12% in the 2001-2002 budget.
108. Sales tax was introduced on 10 January 1983 at a rate of 5% and it was raised to 8% on
1 June 1996.  It was a tax on the sale of goods and was chargeable up to the wholesale stage only.
The Sales Tax system taxed both input and output, thus eroding the competitiveness of goods
produced locally.  This flaw is removed with VAT as entrepreneurs and investors are able to recoup
VAT paid on all the input used for the production of taxable goods and services, be it raw materials,office supplies, services, office building or machinery and equipment and capital expenditure, thus
lowering their cost of production.
109. The invoice-based VAT is levied on any supply of goods and services made in Mauritius
(including Rodrigues) by a registered person in the course of carrying his business, except for those
supplies that are specifically exempt or zero-rated.  It is charged on the value of the supply at eachstage of the production/distribution chain up to the retail level.  Like Sales Tax, VAT is also levied on
imports at the time it is cleared from customs.
110. Enterprises having an annual turnover exceeding Rs3 million should register themselves with
VAT Department.  Those having turnover below Rs3 million may opt for voluntary registration.WT/TPR/G/90 Trade Policy Review
Page 22
Income Tax
111. Various provisions of the Income Tax 1995 have been amended in each successive Finance
Acts, including those relating to the rates of taxation.  Thus, the top marginal rate of personal income
tax has been lowered from its 1995 level of 35 per cent to 25 per cent in stages and the number of tax
bands reduced from 4 to 2.  Likewise, the maximum rate of corporate income tax has been brought
down from 35 per cent to 25 per cent.  In the process, the tax incentive rate of 15 per cent has beenextended to virtually all the sectors of the economy.
Government Finance
112. In spite of the introduction of VAT in 1998 and the various increases in excise rates since
1995, Government budgetary position has continued to be weak.  Overall budget deficit which stood
at 6.1 per cent of GDP at June 1996 and improved to 3.8 per cent at June 2000 shot up again to6.5 per cent at June 2001.
113. The main cause for the deterioration in the budgetary situation is the decline in the buoyancy
of the taxation system.  At June 2001, tax receipts in terms of GDP were only 15.8 per cent, down
from 18 per cent in the preceding year, wiping out the adjustment efforts made on the expenditure
side and bringing government finance back to its June 1996 position.  As shown in Table 5, thevarious tariff reform measures implemented over the period have been translated into a very
significant loss of government revenue.  Yield from  customs tariffs in terms of GDP has thus steadily
declined from 5.7 per cent in fiscal year 1995/96 to 2.7 per cent in 2000/01.  Such loss has not been
offset by the higher receipts generated from domestic taxes on goods and services, through successive
increases in rates.
Table 5:
Evolution of Budgetary Aggregates (Since FY 1994/95)(As a % of GDP)
A Total revenue 1995/96
18.01996/97
20.61997/98
20.91998/99
21.31999/00
21.32000/01
18.22001/02
19.0
A1 Total tax revenue 15.5 17.1 17.1 17.3 18.0 15.8 16.2
a Customs duty 5.7 5.7 5.7 4.9 3.7 2.7 2.6
b Excise duties 2.5 2.7 2.8 2.6 4.4 3.9 3.8
c VAT/Sales Tax 1.8 3.0 3.0 4.5 5.0 4.6 5.5
d Other taxes 5.4 5.7 5.7 5.3 5.0 4.6 4.4
A2 Total non-tax Revenue 2.5 3.5 3.8 4.0 3.2 2.4 2.8
B Total expenditure 24.1 26.0 24.8 25.5 25.1 24.7 25.5
B1 Capital expenditure 4.4 4.9 3.7 4.2 4.3 4.0 5.7
B2 Recurrent expenditure 19.7 21.1 21.1 21.3 20.8 20.7 19.8
C Budget balance
(A-B)-6.1 -5.4 -3.8 -4.2 -3.8 -6.5 -6.5
114. In the budget presented in June 2001, additional revenue adjustment measures have had to be
taken, mainly an increase from 10 to 12 per cent in the VAT rate.  However, with the backlog of
investment in public infrastructure investment following the adjustment efforts of preceding years, the
capital budget is expected to climb to 5.7 per cent of GDP.  As a result, the overall budget deficit is
expected to remain at the same level as in the preceding year, namely 6.5 per cent of GDP.Mauritius WT/TPR/G/90
Page 23
Other measures taken to implement the U.R. obligations include:
- harmonisation of tax incentives for virtually all the sectors of the economy;
- introduction of a new Copy Right Act in 1998 which incorporates the requirements of
the TRIPS Agreement and the Berne and Rome Conventions;
- a WTO Compatible Legislation on Industrial Property comprising Patents, Trade
Marks, Industrial Design, Geographical Indications, Lay Out design of integratedcircuits and the protection against unfair competition have also been drafted.
115. In addition to these, a number of measures have also been taken to pursue the trade
liberalisation process.  These include the accession of Mauritius to the Agreement on Information
Technology with commitments to completely dismantle tariffs on IT and Telecom products by the
year 2005, liberalisation commitments in financial services, and telecommunications, scalingdown/removal of duties on a whole range of products, abolition of domestic support provided to the
tea sector.
3.2 External Trade Environment – Implications on some sectors of the economy
(i) Textiles and Clothing
116. The exclusive nature of the trade regime of Mauritius based mostly on contractual
arrangements has been under pressure since the coming into force of the Marakesh Agreement.  The
dismantling of the Multifibre Arrangement under the Agreement of Textiles and Clothing would
gradually subject Mauritian exports to the EU to greater competition.  The preferences available to the
textiles and clothing sector under the Lome Convention and now through the roll over of the
preferences under the Cotonou Agreement are very  extensive and are useful in conferring a
competitive advantage.
117. The Lome Covention has therefore been instrumental in the development of the textiles and
apparel sectors in that it provided duty and quota free access to the EU Market.  In contrast, the more
competitive suppliers of like products -Indonesia, Turkey, Hong Kong, China, India, etc. have been
subject to both quantitative restrictions under the MFA and to a tariff peak averaging 14% on textiles
and apparel.  These countries are among the top 10 suppliers of MFA textiles and clothing on both the
EU and the U.S. Markets.
118. While Mauritius in terms of labour costs (U S$1.41) compares favourably to Turkey, it
however compares unfavourably with Indonesia ( $0.24), Bangladesh ($0.43), India ($0.60) and China
($0.62).  For Mauritius the Quota and tariff factors have helped in mitigating significantly the impact
of the relative high labour cost as compared to its competitors.  In an equation where quota would be
dismantled and tariffs scaled down in the trade liberalisation process, the impact on Mauritius isbound to be significant, especially taking into account that the sector contributed to about 11% to the
GDP and employed 80,000 persons in 2000 with absolute revenue amounting to approximately
Rs 27 billion.
119. On the U.S. Market, Mauritius textiles and apparel are eligible for quota and duty free access
under the AGOA subject to strict comp liance with the conditions set out in the Act.  However in view
of the mounting production costs the duty element may not suffice to confer a definite cost advantage
as continued liberalisation of the textiles sector would water down the benefits that were expected to
devolve from the preferences.WT/TPR/G/90 Trade Policy Review
Page 24
(ii) Agriculture
120. The Agreement on Agriculture has a two-fold impl ication for Mauritius.  On the one hand the
high rate of duty resulting out of the tariffication process has improved the preference margin of
Mauritius as an ACP Supplier on the EU Market for certain products.  On the other hand the reduction
in domestic support should theoretically add downward pressure on the price of sugar exported under
the sugar protocol.  The reduction of Export Subsidies has added upward pressure on the import billsof the country due to its being a net food importer.  Unfortunately Mauritius has not been in a position
to avail fully of the enhanced margin of preference in the first case due to its heavy dependence on
sugar as the main export earner and the difficulty to develop other crops due to soil characteristic and
topology.  A survey carried out by the Mauritius Ch amber of Agriculture has also indicated that for
many products, including Anthurium flower and pinea pple, the market conditions have worsened for
the country as a result of acute world wide comp etition and the application by many countries of
sanitary and phytosanitary norms above international ones.
(iii) The LAMY Initiative
121. The Cotonou Agreement contains provisions relating to the extension of duty free access for
essentially all products to all LDC’s by the year 2005.  However the EBA initiative came
unexpectedly with quota and duty free access to al l LDC’s, catching Mauritius unawares and
unprepared to face the implications of the initiative.
122. The Sugar Sector will be the worst affected given the production cost in Mauritius which is
twice as high as that of the world average.  The opening up of the EU market will lead to a surge in
imports from the LDC’s due to lower production cost.  In fact various studies have shown that imports
from the LDC’s to the EU will pose a real problem to Mauritius.
123. A study carried out by the “Association des Organisations Professionels du Commerce des
Sucres pour l’Union Europeene” shows that countries like Bangladesh, Sudan, Zambia, Mozambique,
Malawi etc can substantially increase their exports to EU at the expense of less competitive suppliers.
Assuming that 50% of their current production and 65% of their planned capacity becomes available
for exports in the medium term, exports to the EU from these countries will amount to some 1.6
million tonnes.  The ACP quota is about 1.3 million tonnes.  Such important increases will impactdirectly on exports from Mauritius.
124. As far as the price of sugar is concerned, it would appear that due to an increase in imports
from the LDC’s, the average price of sugar on the EU market may fall by some 10% in 2005, 15% in
2000 and 20% in 2009.  Moreover buyers of ACP sugar in the EU could have easier access to LDC
sugar at lower prices and this could motivate them to exert pressure on countries like Mauritius tooffer price discounts.
125. The sugar sector in Mauritius will therefore come under severe pressure due to the LAMY
initiative.  As indicated earlier, the EBA initiative has already caused the quota of Mauritius under the
SPS Agreement to decrease substantially.  The initiative is also bound to have far reaching
implications on the other important sectors, in particular the textiles and clothing sector.
126. Complete duty free and quota free treatment for textiles and clothing imports from the LDC’s
will bear directly on the export performance of Mauritius as a result of high production cost.  Bearing
in mind the potential of the LDC’s, the availability of raw materials in these countries, cheap labour
and production costs etc, it will be more and more difficult for Mauritius to compete with them in the
very near future.Mauritius WT/TPR/G/90
Page 25
Remedies
127. The strategy mapped out by Mauritius to address the above problems rests on two pillars: (i)
the external front (ii) endogenous measures.
128. On the external front Mauritius has been canvass ing the International Institutions to recognise
the inherent constraints of the country as a Small Economy and as a Small Island Developing one
which limits the prospect for growth and development.  The UN General Assembly at its specialsession on Small Island Developing Countries held in September 1999 officially recognised the
problems faced by SIDs relating to the environment and to development.  Various Institutions like
UNCTAD and the Commonwealth have been actively pursuing the SIDs Agenda.  Unfortunately the
WTO which is the main body responsible for International Trade Matters so far has still not
elaborated a concrete action plan to address the concerns of Small Economies/ SIDs.  The multilateraltrading rules should contain provisions that cater to the specific situation of Small Economies/ SIDs
that would smooth out their integration into the world economy.
129. On the internal front, measures have been taken to improve multi-factor productivity through
investment in new technology and the shift to up ma rket production.  Substantial investment has also
been made to improve management and information technology
, infrastructure, training and better
quality products.
130. To mitigate the problem of labour cost, labour intensive production is being delocalised to
lower costs destinations in the region.  The ongoing battle for sustained competitiveness also requires
that beyond the imperative of improving multifactor productivity, ways and means are also worked
out to reduce costs of supplies and equipment, freight, forwarding, utilities and other auxiliary costs.
A whole set of measures should be set in place to address these specific problems.  It is anticipated
that support institutions that exist in Mauritius s hould assist in streamlining these cost elements in
order to further sharpen the competitive edge.
IV. CONCLUSION
131. Despite the fact that Mauritius is all set to pa rticipate fully in the trade liberalisation process,
it is increasingly being constrained in its advent to  integrate the globalising world economy due to the
adverse impacts of unbridled liberalisation on exports on the one hand and the limitations posed by itsbeing a Small Economy on the other.  On top of these constraining factors, unforeseen developments
in the form of the LAMY initiative, for example ha ve come to further exacerbate the already difficult
market access conditions of Mauritius.  In the circumstances, it is felt that unless the concerns of the
country as a Small Economy is fully addressed and its access conditions to markets improved
significantly, it may be difficult for it to integrate the world economy.  The WTO and otherInternational Institutions, including the World Bank and the IMF should therefore work on an action
plan aimed at addressing the concerns of countries like Mauritius in a comprehensive manner so that
they can effectively participate in International Trade.
__________