ABSTRACT
Mauritius has been engaged in EPA negotiations since 2002, and in February 2004 joined with the Eastern and Southern African (ESA) negotiating group. The negotiations are considered important because the EU is a major trading partner, accounting for over 30 per cent of Mauritian imports and over 60 per cent of exports in the early 2000s, that has provided longstanding preferential access for Mauritian exports (sugar and garments in particular). An EPA requires the phasing out (over about ten years) of tariffs on ‘substantially all’ imports from the EU, which will have trade, revenue, welfare and adjustment impacts on Mauritius. Estimating these effects is the principle purpose of this chapter. The EPA is also important to Mauritius in maintaining preferential access to the EU for exports. In evaluating the overall effect of an EPA we take the impact of preferences on exports into account. Mauritius represents an interesting country study on EPAs for two reasons (given that sufficient data were available on production and employment to permit estimates of adjustment costs). First, it is a relatively developed ACP country (thus not an LDC) with a relatively large manufacturing sector, including significant exports of manufactures to the EU. Second, and related, its exports have benefited to a significant degree from preferential access to the EU, so an EPA is potentially important to maintain preferences. Although EPAs will in principle ensure the continued preferential access of ACP countries to the EU market, in the case of Mauritius the value of these preferences is being eroded (because of reforms in EU regimes for sugar and garments). Mauritius has been very successful in exploiting preferential access to the EU for its exports of sugar, knitwear and woven clothing, which account for over 80 per cent of Mauritian exports to the EU, so changes in preferences clearly pose a major challenge. If liberalisation of imports imposes net welfare costs on Mauritius, it is not evident that there will be more than offsetting gains in export preferences. This chapter assesses the capacity of Mauritius to adjust to and benefit from an EPA. Section 4.1 outlines the methodology; as the approach to estimating trade, revenue and welfare impacts largely follows McKay et al. (2005) this is set out only briefly (see exposition in Chapter 3), with more detail on how we estimate production gains and adjustment effects. Section 4.2 presents estimates of the effects of eliminating tariffs on imports from the EU, including a full
customs revenue, production and employment. Section 4.4 considers the potential impact on exports, noting that factors independent of the EPA have reduced the value of preferences facing Mauritius for sugar and garments. Section 4.5 concludes; both qualitative and quantitative analysis is used to inform the appraisal and underpin our policy discussion.
