Abstract
Recent studies of the impact of China's rise on the economies of sub-Saharan Africa generally find that the resource-rich countries of the sub-continent will gain while those that compete with China in export markets will invariably lose. Mauritius, with no exploitable natural resources, and facing acute Chinese competition in its traditional markets, is a most likely candidate to suffer China's onslaught. This paper argues that China's economic rise can benefit Mauritius. Analyzing the impact of China through the channels of trade, aid and investment, we show that preference erosion, not China's emergence, is to blame for the drastic loss of jobs in the clothing industry. This industry, however, has proved resilient since exports are back on a rising trend. On the other hand, Chinese aid to finance construction and infrastructure projects has been a welcome relief, even when it has been tied to the use of Chinese labour and inputs. The most significant benefits of China's engagement are likely to occur in the area of investment as China strategically uses Mauritius as a platform to penetrate the African market.
Les études récentes sur l’impact de la croissance de la Chine sur les économies de l’Afrique subsaharienne concluent généralement que les pays riches en ressources naturelles en seront les principaux bénéficiaires, tandis que ceux dont les marchés d’exportation concurrencent la Chine seront inévitablement désavantagés. L’Île Maurice, sans ressources naturelles exploitables, et faisant face à une concurrence chinoise aiguë sur ses marchés traditionnels, fournit un bon exemple d’un pays particulièrement susceptible d’être défavorisé. Cet article suggère que l’importance croissante de la Chine en Afrique peut être bénéfique à l’Île Maurice. En analysant l’impact de la Chine sur le commerce, l’investissement, et l’aide au développement, il est démontré que les licenciements dans l’industrie de la confection à l’Île Maurice sont dus à une érosion des préférences et non pas à l’émergence de la Chine. Néanmoins, cette industrie manifeste une certaine ténacité puisque les exportations sont en hausse. Par ailleurs, l’aide au développement chinoise dirigée vers des projets de construction et d’infrastructure est bien reçue, même lorsqu’elle est liée à l’utilisation de travailleurs et de matériaux Chinois. Mais les avantages les plus significatifs d’un engagement de plus en plus important avec la Chine sont susceptibles de se produire dans le domaine de l’investissement car l’Île Maurice est une plate-forme stratégique chinoise facilitant la pénétration du marché africain.
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Notes
The specialization index is calculated based on exports of 10 main products, namely sugar, cut flowers, fish and fish preparations, chemicals, pearls and (semi-) precious stones, machinery and transport equipment, textile and fabrics, wearing apparel, jewelry, and watches and clocks.
The UAE accounted for 15 per cent of exports in 2007. However, the bulk of this figure comprises of re-exports from the Freeport Zone of machinery and transport equipment, mainly cellular phones.
The reasons for the reversal are not clear at this stage.
Given the predominant share of textile and clothing in EPZ exports, the latter will henceforth be associated with apparel exports.
Prior to the setting up of the EPZ, female labor force participation was low and employment was male-dominated. For instance, in 1982, on the eve of the EPZ boom years, female employment was barely one-third of male employment. Of those who were formally employed, a significant proportion was working in sugarcane fields, and a smaller number in relatively low-level administrative/clerical jobs in the government (Ancharaz, 2007a).
Kaplinsky and Morris (2006a, 2006b), p. 6.
After intense diplomatic efforts, Mauritius finally qualified for the third-country fabric derogation in November 2008. This derogation will last 4 years. The impact of this development on clothing exports to the US and on employment and FDI in the clothing industry is yet to be determined.
Kaplinsky and Morris (2006a, 2006b) argue that SSA's overall export performance was not as bad as expected because of the degree of effective subsidy implicit in the AGOA, which, according to their calculations, ranges between 27 and 84 per cent for representative exported products, substantially higher than the nominal 16-32 per cent nominal tariffs. However, this argument is not applicable to Mauritius since it did not qualify for the same more flexible rules of origin as other SSA countries after 2005 (until November 2008).
The RCA is defined as the ratio of the share of a country's exports of product i in its total clothing exports to the world's share. Ratios greater than 1 indicate a RCA in the product; ratios less than 1 indicate a revealed comparative disadvantage.
An interesting anti-globalization policy move by the government occurred in 2005 shortly after it had come to power. The outgoing government had presented a program to make Mauritius a duty-free island, and to that end, a number of imported items, including clothing, were substantially liberalized. This measure attracted the indignation of local SMEs competing against cheap Chinese products. The new government re-introduced customs duties on various apparel products to protect the local import-competing sector.
This change has prompted the rebaptizing of the Mauritius Export-Processing Zones Association (MEPZA) into the Mauritius Export Association (MEXA) earlier in 2007.
See Ancharaz (2008) for an elaborate discussion of these vectors.
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Acknowledgements
This paper is the product of research under a grant from the AERC. The author thanks the AERC for the grant but assumes sole responsibility for the paper's contents, including any errors.