TRADE POLICIES BY SECTOR (1) INTRODUCTION

Transcription

1 WT/TPR/S/90 Page 54 Trade Policy Review IV. TRADE POLICIES BY SECTOR (1) INTRODUCTION 1. Agriculture, mainly the sugar industry, has been a leading sector of the Mauritian economy. It has provided capital to the other sectors, and together with the export-led strategy implemented by Mauritius and preferential market access provided by developed countries, has contributed to the diversification within and away from the sugar industry. Sugar, textiles and clothing, tourism, and financial services are currently the four pillars of the Mauritian economy. 2. For food security purposes, Mauritius maintains import, export, and price controls, and strategic reserve stocks on certain agricultural products. Marketing boards are in place and monopolies have been granted to certain public enterprises over the importation of certain products. Incentives are provided to consolidate the agricultural base and to reduce production costs (e.g. input, freight, and irrigation costs). Quotas are maintained on imports of potatoes and on exports of chilled fish. Imports of sugar and chocolate confectionery and bubble/chewing gum in the form of cigarettes are prohibited. High production costs (wages in particular), heavy and costly institutional framework, and cumbersome land conversion procedures are among the major impediments to the further development of the sugar industry. Customs tariffs on agricultural imports range from zero to 80% on, inter alia, cane or beet sugar and chemically pure sucrose (in solid form), molasses resulting from the extraction or refining of sugar, and on other food products (Tables AIII.1 and AIV.1). 3. The manufacturing sector is dominated by textiles and clothing. Export-processing-zone companies account for the bulk of the production. As a response to the changing international environment (increasing competition resulting from the dismantling of the Multifibre Arrangement and post Lomé ACP-EU Agreements) and to rising production costs, Mauritius' manufacturing policy has focused on market and product diversification (e.g. sectoral integration and shift to higher-value products, delocalization of low-cost activities to neighbouring countries), and on improvement of competitiveness (through various incentive schemes, and elimination or reduction of customs tariffs on inputs and equipment). Certain manufactured products are subject to import and export controls, to the maximum markup system, and to compulsory standards. Customs tariffs on manufactured products range from zero to an ad valorem equivalent rate of 360%; the highest rates apply to textiles, clothing and leather products, and metallic and non-metallic furniture and fixtures (Table AIV.1). 4. In terms of contribution to GDP, the services sector, dominated by tourism and financial services, is the most important in the economy. Mauritius is a net exporter of services. Commitments made by Mauritius under the GATS largely reflect the current state of liberalization of the sector; monopolies or exclusive rights held by public enterprises limit competition in certain branches (telecommunications, postal, and transportation services) and contribute to maintaining production costs high. Measures affecting presence of natural persons are unbound. Mauritius has maintained MFN exemptions (in financial services) under Article II of the GATS on reciprocity grounds. (2) AGRICULTURE AND RELATED ACTIVITIES (i) Overview 5. Around two fifths of Mauritius' total land area of 2,040 km. 2 are under cultivation. The decline in the share of agriculture (including sugar industry, fisheries, livestock, and forestry) in the economy, which started in the 1980s, accelerated in the 1990s. Agriculture employs some 9% of the active population (down from about 13% in 1996), and contributes some 6% to real GDP (down from

2 Mauritius WT/TPR/S/90 Page 55 some 12% in 1990) 1, and around one quarter to foreign exchange earnings (down from some 30% in 1995). 6. Sugar cane is the main crop (section (ii)(a) below). Other cash crops grown in Mauritius include tea and tobacco. Mauritius also produces flowers, mainly anthurium flowers; revenue from exports of anthurium flowers amounted to Mau Rs 70 million in Food crops include potatoes, maize, cassava, spices, fruit, and vegetables. The fisheries subsector is not developed although Mauritius has great potential (including exclusive economic zones) for fishing activities; fish production has been falling since Mauritius produces poultry and pork in substantial quantities, and cattle, deer, goats, and sheep in limited quantities. Forestry is not developed; it is restricted to marginal lands. 7. As a tropical island, Mauritius is exposed to the vagaries of climate. It is generally cyclone prone, the severe cyclones reducing crops by at least 30%. In addition, over the past decade, four years out of ten were drought years. In 1998, a severe drought resulted in a 40% loss of the 1998/99 harvest: some 5,137 ha. out of 72,437 ha. cultivated with sugar cane were completely wiped out, and sugar production fell to 373,294 tonnes. Drought and cyclones also have adverse effects on forests. 8. Mauritius' agricultural policy is aimed at ensuring food security, and diversifying production within and away from sugar. To this end, import and export controls by means of permit have been set up, as well as price controls. Indeed, imports and exports of agricultural products require the approval of, and a sanitary/phytosanitary certificate from, the relevant authorities, and a permit from the Commerce Ministry (Chapter III(2)(v); III(3)(iii); and III(4)(iii)). Imports of agricultural goods that compete with local production are controlled by bodies such as the Agricultural Marketing Board (AMB), the Tea Board, the Tobacco Board, the Mauritius Sugar Syndicate and the Mauritius Meat Authority, to give priority to domestic suppliers. Imports of certain products are still under the monopoly of the State Trading Corporation (STC) (e.g. flour and ration rice), or the AMB, which also monitors the procurement and sale of the main controlled agricultural products (Chapter III(4)(iv)). 2 Strategic reserve stock requirements are maintained for rice and flour (at least one-month consumption above the normal STC stock of one to two months), and for, inter alia, potatoes, onion, and garlic (at least one-month consumption to be maintained by the AMB). 9. Because of scarcity of land, agricultural diversification means the reallocation of this resource and its better use. In this respect, the Sugar Efficiency Act was enacted in 1988 to promote both sugar and non-sugar agriculture. The Act, as amended up to 1999, is aimed at preserving land for agricultural purposes, bringing people back to the sector, and enhancing compensation to workers in the sugar branch and efficiency of sugar production. The Act provides for tax rebates to planters and millers of sugar cane (section (ii)(a)); tax rebates for cultivation of crops other than sugar cane; and a land conversion (use of agricultural land for other purposes) tax (Table IV.1) The Agricultural Development Scheme also provides incentives for the consolidation of Mauritius' agricultural base; food manufacturers are eligible for the Technology Diffusion Scheme (Chapter III(4)(i) and Table AIII.4). 11. The Freight Rebate Scheme provides for partial refunds of freight costs for certain exports, including agricultural products (Chapter III(3)(v)). The Government also provides irrigation systems 1 Central Statistical Office (2000) and WTO (1995). 2 An increased role is envisaged for the Agricultural Marketing Board to support the marketing of new crops. 3 Under Section 5 of the Sugar Industry Efficiency Act, no land will be put to any non-agricultural use except with the prior written authority of the Agriculture Minister and upon payment of the land conversion tax.

3 WT/TPR/S/90 Page 56 Trade Policy Review in needy areas; around 20-25% of irrigation costs are recovered from the beneficiaries, with the Government currently disbursing Mau Rs 175 million per year. Planting materials and products subject to price controls have been eligible for subsidy (Table IV.2). Data on subsidy per unit/volume of product, and the calculation method and basis are not available. The Government budget for the Food and Agricultural Research Council amounts to some Mau Rs 80 million per year. Table IV.1 Land conversion tax Rates of land conversion tax (Mau Rs per hectare) Area of land converted a Category I b Category II c a b c Less than 0.25 hectare 250,000 Nil 0.25 hectare but less than 0.50 hectare , hectare but less than 1.00 hectare 1,000,000 1,000, hectare but less than 5.00 hectares 2,000,000 2,000, hectares and above 3,500,000 3,500,000 Where more than one conversion is effected by one and the same person within a period of three years, the land conversion tax payable by him shall be on the basis of the aggregate area of all land converted by him during that period. The rates specified in Category I in the second column are applicable to land which, on 1 January 1981, formed part of a larger extent of agricultural land which had a total acreage exceeding hectares which may or may not have been subsequently subdivided into two or more lots. The rate specified in Category II in the third column is applicable to all other agricultural land. Source: Sugar Industry Efficiency Act, 1988, as amended up to Table IV.2 Subsidies for planting materials and products subject to price controls, (Mau Rs '000) Seed potatoes 6,773 4,736 6,295 7,135 7,775 Imported potatoes 10,636 35,197 11, Rodrigues onions Traditional onions ,800 a.. Milk 4,864 4,960 4,589 4,093 3,031 Imported onions ,031 b.. Other seeds Subtotal 23,912 46,350 22,866 26,852 10,786 Storage refund on local potatoes 1,777 2,306 1, Total 25,689 48,656 24,295 26,852 10,786.. Not available. a Some Mau Rs 1.8 million were refunded exceptionally for local onions purchased from La Chaumiere region (an onionproducing region in the western part of Mauritius. b Some Mau Rs 13.0 million were reimbursed to the Agricultural Marketing Board to meet higher costs of importation of onions from overseas. Source: Information provided by the Mauritian authorities. 12. A Master Plan on Agriculture was adopted in The Plan provides for a strategy for agricultural development in the non-sugar subsector up to the year In this respect, several sub-committees have been set up. 13. The simple average tariff in agriculture (Major Division 1 of ISIC Revision 2) is 14%, with a maximum tariff rate of 80% (Chapter III(2)(ii)(b)).

4 Mauritius WT/TPR/S/90 Page 57 (ii) (a) Key subsectors Sugar 14. The sugar industry is the main branch of the agriculture sector. Sugar cane, a pillar of the economy, accounts for some 80% of cultivated land, more than half of agricultural income, and occupies some 30,000 planters. Miller-planters account for nearly three fourths of cane production. Mauritius has 14 sugar mills, down from 17 in It is among the world's ten largest exporters of sugar. 5 Sugar accounts for around one fifth of foreign exchange earnings. Mauritius has a full potential production of 650,000 tonnes in a good year, and 620,000 tonnes in a normal year (Table IV.3). The annual average yield is around 8 tonnes of sugar per hectare, and the extraction rate around 10.5%. Labour accounts for some 55% of total production costs of sugar. Table IV.3 Basic statistics on the sugar industry, Area under cultivation (ha.) 77,468 76,838 76,814 78,326 78,021 Area harvested (ha.) 73,017 72,010 71,800 72,758 74,013 Cane yield per hectare (tonnes) Cane production (tonnes) 4,813,545 5,159,244 5,260,138 5,787,070 5,781,095 Sucrose content (% cane) Sugar recovered (% cane) Tonnes of cane per tonne of sugar Sugar yield per hectare (tonnes) Sugar production (tonnes) 500, , , , ,588 White 39,691 6,510 7,359 5,296 4,346 Raw 460, , , , ,242 Source: Central Statistical Office; and the Mauritius Sugar Industry Research Institute. 15. The sugar industry has large linkages with the rest of the economy. In fact, diversification within the sugar subsector has consisted of production of special sugars, use of bagasse for electricity generation and of cane interlines to grow vegetables, and research and development in respect of the use of molasses. Special sugars, as well as molasses and derived products, are exported. Mauritius intends to increase production of special sugars currently supplied by four factories. Moreover, sugar-factory-sited power plants (using bagasse and coal) will account for nearly 50% of Mauritius' total demand for electricity by end-2001 and 60% in Other by-products of the sugar industry include alcohol and alcohol products. 16. Several bodies intervene in the sugar industry. The Mauritius Sugar Authority (MSA) is the coordinating body between the Government and the various organizations of the sugar industry. The four members of its Board of Directors are appointed by the Agriculture Minister; the Board is chaired by the Permanent Secretary of the Agriculture Ministry. The Mauritius Sugar Syndicate (MSS) is the marketing board: it is the sole exporter of sugar and also the sole supplier to the local market. 7 The Mauritius Sugar Producers' Association (MSPA) regroups 13 of the 14 largest estate factories (the Government owns and administers one estate with one factory). The members of the 4 Mauritius Chamber of Agriculture (2000). Foreigners cannot hold more than 25% of the capital of a sugar company. 5 Dunn and Bradstreet (2000). 6 The production of electricity from bagasse economises on the use of coal, by more than 200,000 tonnes per year. 7 All sugar producers in Mauritius are members of the MSS.

5 WT/TPR/S/90 Page 58 Trade Policy Review MSPA own some 55% of the cane land and account for 68% of total sugar production in Mauritius. The Mauritius Sugar Terminal Corporation (MSTC), jointly held by the Government and sugar producers, provides storage facilities; its budgetary expenses (Mau Rs million in 1999/2000) are financed by the MSS through revenue from a Global Cess paid to the MSA. 17. The Bagged Sugar Storage and Distribution Corporation Ltd. (BSSD) is responsible for the storage and delivery of all bagged sugar for local and export markets. Its shareholders are the MSTC and the State Investment Corporation. Its operating expenses (Mau Rs 29.5 million in 1999/2000) are financed by the MSS. The industry also has its own insurance scheme, the Sugar Insurance Fund Board. Other bodies intervening in the industry include the MSS Laboratory (for inspection and testing of raw sugars), the Cane Planters and Millers Arbitration and Control Board, the Mauritius Sugar Industry Research Institute, the Sugar Planters Mechanical Pool Corporation, the Sugar Industry Labour Welfare Fund, and the Farmers Service Corporation. 18. Almost all the sugar produced in Mauritius is exported (Chart IV.1). Mauritius' sugar exports have benefited from preferential market access to the EU (in accordance with the ACP-EU Sugar Protocol and the Special Preferential Sugar Agreement under the EU Sugar Regime) and to the United States (under the U.S. Sugar Protocol and then under the U.S. African Growth Opportunity Act (AGOA) since January 2001). Under the ACP-EU Sugar Protocol, Mauritius benefits from a quota of some 507,000 tonnes tel quel (491,030.5 tonnes white sugar equivalent) for delivery between 1 July and 30 June every year. The sugar, consisting largely of "bulk raws" (more than 80% of Mauritius' exports of sugar under the Protocol) for refining, is sold by the MSS to commercial buyers (mainly Tate & Lyle) in the EU. The "bulk raws" for refining are sold at the ACP-EU guaranteed price, equivalent to the EU raw sugar intervention price ( per tonne) 8, unchanged in ECU and then Euro terms, since Nevertheless, the price is still relatively high (Chart IV.2). In addition, under the Special Preferential Sugar Agreement, Mauritius is allowed to export some 85,000 tonnes (white sugar equivalent) to the EU. 9 Exports of sugar to the EU account for nearly 90% of total revenue from the industry. 19. Mauritius had been allowed to export some 12,000 tonnes of raw sugar under the GSP duty-free treatment of the United States; with the entry into force of AGOA for Mauritius, its exports of certain manufactured products, including sugar, are eligible for duty- and quota-free treatment in the United States. Furthermore, under the SADC Sugar Protocol, Mauritius is allowed to export 1,000 tonnes of sugar duty free to the other member countries. A marginal percentage of the production is also exported to other countries, including Switzerland, Israel, New Zealand, and Hong Kong, China. 20. Foreign exchange earnings from sugar exports are required to be sold on the local market to the Bank of Mauritius (50% of the total) and to commercial banks (50%) at negotiated exchange rates. Sugar proceeds are used mainly for payment to producers (on a weekly basis), for remittances on their behalf in respect of the Global Cess and of the Sugar Insurance Fund Board premiums, and for subsidies provided on local consumption. Additional revenue arising from the utilization of bagasse (by the Central Electricity Board and by millers) for purposes other than sugar are also distributed to sugar producers. 8 Mauritius Sugar Syndicate (2000). 9 The 1995 ACP/EU Special Preferential Sugar Agreement aims to compensate for the sugar deficit of EU refiners for a period of six years to 2001.

6 Mauritius WT/TPR/S/90 Page 59 Chart IV.1 Sugar proceeds, Mau Rs million 12 Local 10 USA and World SPS a European Union (protocol) a 0 Source: 1994/ / / / / /00 Special Preferential Sugar Agreement. Mauritius Sugar Syndicate (2000), Report and Statement of Account 1999/ Mauritius imports the bulk of sugar requirements for the local market. Sales of local production on the domestic market represent a marginal percentage (below 7% of the production). The sales prices on the local market are set by the Government. Since 1995, the prices have been: Mau Rs 3,710 per tonne for white sugar to a wholesaler; Mau Rs 2,210 per tonne for raw sugar to a wholesaler (unchanged since 1992); and Mau Rs 8,300 per tonne for white or raw sugar for industrial usage (the industrial price of sugar has increased in recent years). 10 Domestic prices of sugar for direct consumption are maintained low (below production costs) thanks to subsidies of some Mau Rs 100 million a year granted by local producers. 11 The subsidies consist of, inter alia, compensation for costs pertaining to imported sugars and/or to the five traditional suppliers of white sugar for the local market. All industrial users of sugar are required to source this input from the MSS. 12 For monitoring purposes, exports of locally manufactured products with a sugar content are subject to a permit from the Ministry of Industry, Commerce and International Trade (Chapter III(3)(iii)); the permit is issued upon presentation of a certificate from the MSS attesting that the industrial price has been paid on the sugar content of the products. Imports of sugar and chocolate confectionery and bubble/chewing gum in the form of cigarettes into Mauritius are prohibited (Chapter III(2)(v)). 10 Government Notice No. 106, Mauritius Sugar Syndicate (2000). 12 The 1987 Supplies Control Act (as amended).

7 WT/TPR/S/90 Page 60 Trade Policy Review Chart IV.2 Average comparative prices for raw sugar, US$ f.o.b European Union United States SPS a World 100 a 1990/ / / / / / / / / /00 Special Preferential Sugar Agreement. Source: Mauritius Sugar Syndicate (2000), Report and Statement of Account 1999/ A Global Cess is levied annually on sugar proceeds. 13 Revenue from the Cess amounted to Mau Rs 450 million in 1999/2000 (i.e. some Mau Rs 1,202 per tonne) and to Mau Rs 500 million in 1998/99 (i.e. about Mau Rs 794 per tonne). 14 Revenue from the Global Cess is used to finance the administrative expenses of the MSA, and the annual budget and capital expenditure of, inter alia, the MSTC, the Cane Planters and Millers Arbitration and Control Board, the Mauritius Sugar Industry Research Institute (the Sugar Energy Development Project having lapsed), the Sugar Planters Mechanical Pool Corporation, and the Farmers Service Corporation. 23. Increasing production costs, labour market rigidities, high costs of centralization through heavy and costly institutional framework financed by revenue from the global cess, and cumbersome land conversion procedures are among the impediments to the further development of the sugar industry. 15 Residential and industrial development has reduced (by some 500 ha. per year) the land area under sugar cane. The Government intends to partially offset this loss by a gradual increase of 5,000 ha. in the area under irrigation and by bringing 1,000 ha. under cultivation through derocking. To maintain output and profitability, productivity is to be improved through the grouping of small planters, increased mechanization, more efficient irrigation systems and cultural practices, introduction of high-yield varieties, and adoption of lower cost methods in fields, factory, and marketing operations. 16 The Government currently funds major irrigation projects, and subsidizes, inter alia, tractor rentals, cuttings, and electricity for pumping water for irrigation purposes. 13 The 1984 Mauritius Sugar Authority Act No Mauritius Sugar Syndicate (2000). 15 JEC (2001). 16 Ministry of Economic Development, Productivity and Regional Development (2000), Highlights.

8 Mauritius WT/TPR/S/90 Page Drought from end 1998 to early 1999, combined with cyclone Davina in February 1999, resulted in poor harvest, with a 40% reduction in sugar production to 373,294 tonnes in the 1998/99 crop. As a result, sugar requirements for the local market for the period from July 1999 to June 2000 were imported duty-free by MSS, the sole importer of sugar in Mauritius. 17 The Sugar Insurance Fund Board disbursed Mau Rs 2,265 million to compensate for losses resulting from the drought. In March 2000, the Government launched an assistance scheme (loans of up to Mau Rs 100,000 per project, at concessionary interest rates and through the Development Bank of Mauritius) to rehabilitate and replant fields that had been severely affected by the drought Imports of sugar and sugar confectionery are subject to an average tariff of 43%, with rates ranging up to 80% on cane or beet sugar and chemically pure sucrose (in solid form), and on molasses resulting from the extraction or refining of sugar. (b) Other cash crops Tea 26. Annual production of green tea leaf is around 8,000 tonnes, with an average yield of some 11 tonnes (equivalent to some 2 tonnes of manufactured tea) per ha. The bulk of the production is from private farmers. Mauritius produces some 1,500 tonnes of manufactured tea per year, down from around 3,800 tonnes in the mid-1990s (Table IV.4). Foreign exchange earnings from tea exports are currently equivalent to some Mau Rs 10 million per year. There are around 200 tea planters, down from around 600 in Table IV.4 Tea area, production and sales, Area (hectares) 2,077 1, Private plantations Wooton Experimental Station and Smallholders n.a. Production (tonnes) Green leaf 27, , , ,910.5 Tea 3, , , ,487.9 Sales of tea (tonnes) a 4, , , ,461.4 Exports 2, , Local 1, , , , Not available. n.a. Not applicable. a Total sales do not correspond to total production because of wastes, samples and variations in stock. Source: Tea Board. 27. The Agricultural Diversification Programme has contributed to the reduction of the area under tea from some 3,000 ha. in the early 1990s to 668 ha. in Under the Programme, the Government has vested the Tea Board with the mission of monitoring the conversion of planters who are diversifying their tea plots to sugar cane and food crops: these planters are offered Mau Rs 10,300 per arpent to cover land preparation costs, and monthly financial assistance of Mau Rs 2,000 from the time of uprooting to the time of harvest. The Government had provided to small tea planters, inter alia, a complex fertilizer grant (Mau Rs 1 million in 1998), winter assistance (20 cents per kg. 17 Exemptions from payment of import duties were granted by the Finance Minister. 18 The loans are granted for mechanization purposes and for the introduction of new agricultural techniques.

9 WT/TPR/S/90 Page 62 Trade Policy Review of green leaf), and special end-of-year assistance (20 cents per kg. of green leaf in 1998/1999). As from 2000, this type of financial assistance, including subsidies and fertilizer grants, was terminated in the tea branch. 28. The Tea Board currently regulates and controls, inter alia, the production of green leaf, and the manufacture, marketing, imports, and exports of tea. It sets the conditions of contracts entered into by planters, metayers and manufacturers, and the producer price of green leaf. The price is set annually and varies from one region to another. The Board also arbitrates disputes between persons engaged in or connected with the tea industry. 29. The importation of tea requires a permit, issued by the Tea Board. The permit is subject to payment of Mau Rs 5,000 for black tea and Mau Rs 1,000 for China tea (per consignment). Imports of tea are also subject to payment of a fee set at 20% of the c.i.f. value (customs value) to the Tea Board, a cess of Mau Rs 0.20 per kg. of tea, and a customs tariff of 40%. Exporters of tea have to be licensed by the Tea Board and pay a licence fee of Mau Rs 2,000 per year. Tobacco 30. Some 450 ha. are under tobacco cultivation. Mauritius currently produces some 700 tonnes of leaf tobacco per year (Table IV.5). Over the past five years, consumption of locally manufactured cigarettes has declined by about 2.6% annually, resulting in an overall decrease of about 11.4% in the demand for domestic leaf tobacco. Table IV.5 Tobacco and cigarettes, crops (Hectares) Quota of land allocated Virginia flue-cured Amarello air-cured Area harvested Virginia flue-cured Amarello air-cured (Tonnes) Leaf production Virginia flue-cured Amarello air-cured (Mau Rs million) Value of crops Virginia flue-cured Amarello air-cured Average values (per kilo of leaf) (Mau Rs) Virginia flue-cured Amarello air-cured (Per hectare harvested) Virginia flue-cured 119, ,492 Amarello air-cured 63,952 54,782 Tobacco used in cigarette manufacture (tonnes) Calendar Year 1997 Calendar Year 1998 Domestic leaf Imported leaf Total Source: Tobacco Board.

10 Mauritius WT/TPR/S/90 Page Established under the aegis of the Ministry of Agriculture, Food Technology and Natural Resources, the Tobacco Board controls the production and sale of leaf tobacco in Mauritius. At the start of the crop, the Board sets the purchase and sale prices of domestic leaf tobacco after consultation with representatives of growers and the sole manufacturer. It purchases all locally produced leaf tobacco according to an approved grading system. The Board sets production targets and allocates permits for the cultivation of tobacco. It approves the sale prices of cigarettes proposed by the manufacturer, and licenses and controls the importation of leaf tobacco, manufactured tobacco and tobacco products. 19 The Board also manages the Tobacco Warehouse where the locally produced leaf tobacco is purchased, bulked (according to respective grades), re-dried, baled, and sold to the sole cigarette manufacturer. Revenue generated by the management of the Tobacco Warehouse finances the recurrent and capital expenditures of the Board. Research on tobacco cultivation is carried out by the Agricultural Research and Extension Unit of the Food and Agricultural Research Council, a parastatal. 32. The Tobacco Board, the tobacco growers, and the manufacturer contribute to a Mechanization and Inputs Fund, which is managed by the Board and from which interest-free loans are granted to growers for the repair of barns and purchase of equipment. Tobacco growers may also obtain interestfree credit facilities from the Fund for the purchase of agricultural inputs (including fertilizers and pesticides) used in the production of tobacco. Tobacco seeds are provided free of charge to registered growers. The Tobacco Board contributes Mau Rs 30,000 annually to the Agriculture Ministry for production of tobacco seeds. (c) Food crops 33. Nearly 7,000 ha. are under food crops, up from less than 5,000 ha. in 1988 (Table IV.6). Mauritius produced some 90,000 tonnes of food crops in 1998, up from some 44,000 tonnes in This performance was due mainly to an increase in the production of vegetables from 22,000 tonnes to 60,000 tonnes over the period. Mauritius is self-sufficient in fresh vegetables. 20 However, it imports some 60% of its requirements of food commodities. 21 Maize, the most important crop in Rodrigues, is no longer grown for grain. Domestic production of tomatoes, at some 11,750 tonnes per year, partially covers local demand. 34. For self-sufficiency purposes, the Agricultural Marketing Board (AMB) monitors imports of certain food commodities (taking into account local production), including table potatoes, onions, garlic, maize, turmeric, and cardamom; these products are marketed by the AMB (Chapter III(4)(iv)). It acts as a buyer of last resort for these commodities. Import and export controls, and a fixed maximum price system apply to some of these commodities (Chapter III(2)(v); III(3)(iii); and III(4)(iii)). Imports of food products are subject to sanitary/phytosanitary and labelling requirements (Chapter III(4)(ii) (b) and (c)). 35. In the case of potatoes, the AMB fixes annual production targets (20,000 tonnes for table potatoes in recent years) and allocates potato seeds to producers, including the AMB Cooperative Federation Ltd., and sugar estates that grow potatoes in cane interlines. 22 In general, annual production falls short of the targets, as potato production in Mauritius is affected by, inter alia, 19 The Tobacco Board ensures that every packet of imported cigarettes bears an approved health warning. 20 Mauritius Chamber of Agriculture (2000). 21 Ministry of Economic Development, Productivity and Regional Development (2000), Technical Supplement. 22 Some 1,100 ha. under sugar cane must be converted into potato plantations to meet the target of 20,000 tonnes.

11 WT/TPR/S/90 Page 64 Trade Policy Review adverse climatic conditions. Potato seeds are subsidized by the AMB in the amount of Mau Rs 2,850 per tonne of imported seeds and Mau Rs 3,000 per tonne of locally produced seeds (for ware production); and Mau Rs 7,175 per tonne of locally produced or imported seeds for seed production. Imports of potatoes are subject to quotas (Chapter III(2)(v)). Table IV.6 Food crops: area and production, Area harvested (Ha.) Area Area Production harvested Production harvested (tonnes) (Ha.) (tonnes) (Ha.) Production (tonnes) Fresh vegetables 4,557 57,324 4,861 65,263 4,968 57,352 of which Tomatoes ,877 1,061 12,226 1,040 10,729 Cabbage 340 7, , ,283 Pumpkin 328 7, , ,429 Other vegetables and food crops 1,333 19,945 1,469 24,912 1,446 23,072 Eddoes (arouille) Ginger Groundnuts Manioc Potatoes (Irish) , , ,612 Sweet potatoes Garlic Onions 341 6, , ,727 Fruits , , ,605 Bananas 508 9, , ,143 Pineapples 105 2, , ,462 Total 6,503 89,629 6, ,692 6,894 90,029 Source: Central Statistical Office. 36. Customs duties range from zero to 80% on food products: they average some 10% on first-stage processed food; about 19% on semi-processed food; and around 29% on fully processed food. Imports of potatoes are subject to the zero rate. (d) Fisheries 37. The number of fishermen, as well as of boats, is declining: there were 1,585 fishermen in 1998 (down from 2,740 in 1994) and 905 boats (down from 1,045 in 1994). As a result, total fish production dropped from 18,956 tonnes in 1994 to 12,085 tonnes in The bulk of the catch is from deep-sea fishing on the banks to the north of the island. The catch comprises skipjack tuna (51% of the total), yellowfinger (42%), bigeye tuna (6%) and others (1%). Aquacultural production remains marginal; its development is impeded by limited fresh water resources and coastal areas, high production costs (including costs of inputs), and competition from imports. The Mauritius Tuna Fishing and Canning Enterprises (MTFCE) Ltd. produces some 17,300 tonnes of canned fish for export (some 90% of the production) and for the local market (10%). 38. Mauritius imports more than 50% of its requirements of fish. The Government intends to develop fisheries within sustainable levels while ensuring that local demand for fishery products are met. Therefore, excess fishing in the lagoon has led the Government to encourage fishing in off-lagoon areas, through the use of fish aggregating devices (mainly the vertical longline technique). 23 The cessation of operation of two oceanic purse seiners in the tuna fishery has largely contributed to the drop.

12 Mauritius WT/TPR/S/90 Page 65 The use of nets is being discouraged: the Government is implementing a buy-back programme for the phasing-out of net fishing. As from 1994, the banks fishery has been managed through application of a licensing system for vessels and catch quotas. 24 Incentives are provided to prospective investors in fisheries where the resources are not being optimally tapped. For the highly migratory tuna, for which Mauritius does not have fishing capacity, bilateral agreements allow EU and Japanese vessels to fish within the Mauritian exclusive economic zone. Other foreign vessels are also allowed to fish for tuna in Mauritian waters. Joint-ventures are allowed. 39. Other incentives granted by the Government to fishermen include bad weather allowances (some Mau Rs 13 million in 1997 and Mau Rs 24 million in 1998), close season allowances, scholarship allowances to fishermen's wards (Mau Rs 531,375 in the 1998 season), concessionary loans for purchase of equipment (e.g. fishing vessels and outboard motors), and duty concessions on imported equipment and inputs used in the subsector. 40. The price of fish is market-determined. 25 Imports of fish and fish products are subject to permits issued by the Commerce Ministry, subject to approval by the Fisheries Ministry and against payment of Mau Rs 2,000 per individual consignment. Exports are also subject to permits issued by the Commerce Ministry, subject to approval by the Fisheries Ministry (Chapter III(3)(iii)). Exports of chilled fish are subject to a quota (16.6 tonnes per year distributed between five companies). Tariffs on imports of fish and fish products average some 14%, with rates ranging from zero on frozen fish to 15% and 40% on processed or prepared fish products. 41. In 1998, a Ten-Year Development Plan for fisheries was adopted. The plan emphasizes: sustainable use of existing resources and protection of the marine ecosystems; maximization of returns from new and existing fisheries through value addition (e.g. increase in the processing capacity of the tuna industry); modernization of the local fleet through upgrading of technology; and possible increase in production through cautious development of under-utilized resources, and diversification of aquaculture. A National Fisheries Development Authority is being set up to promote sustainable fisheries development, exports, marketing, product development, and consumption of fish and fish products (annual per capita consumption is around 19 kg.). (e) Livestock 42. The livestock comprises cattle, sheep, deer, poultry and pigs (Table IV.7). The liberalization of imports of slaughter cattle has increased competition. Imports account for more than 80% of Mauritius' requirements of fresh beef. The Government provided investment grants of Mau Rs 9.1 million in 1998/99, and Mau Rs 5.9 million in 1999/2000 to rehabilitate the slaughterhouse (Central Abattoir) run by the Mauritius Meat Authority (MMA). 43. Under the Milk Marketing Scheme, the AMB purchases milk from producers, and grants them subsidies of Mau Rs 3.30 per litre (a total of Mau Rs 4 million in 1998). The Scheme is operated by the AMB. 44. Deer ranching is being further promoted: some 10,800 head were killed in 1998 for a total carcass weight of about 410 tonnes. Deer is now the primary local fresh red meat industry. The Mauritius Deer Farming Cooperative Society Ltd. is the main producer. State lands are leased to farmers for deer production. The Mauritius Meat Producers' Association (MMPA) sets the "minimum recommended price" at which farmers sell their production. The Government, through the Agricultural Research and Extension Unit (AREU) and the Mauritius Research Council, finances research on deer production. 24 In aggregate, the total allowable catches for fishing seasons are not generally filled. 25 The price of frozen fish has been liberalized since August 1997.

13 WT/TPR/S/90 Page 66 Trade Policy Review Table IV.7 Census of animals belonging to members of the MMPA a, Cattle Females 3,765 3,887 2,778 Males 1,768 1,659 1,219 Total 5,533 5,546 3,997 Sheep Females Males Total Deer 65,000 65,000 70,000 Poultry Layers 243, , ,573 Broilers 1,716,413 1,839,798 2,003,143 Total 1,959,589 2,140,347 2,330,716 Pigs Boars Sows Others 1,914 1,803 1,788 Total 2,231 2,175 2,156 a Mauritius Meat Producers' Association. Source: Mauritius Chamber of Agriculture (2000), Annual Report 1998/ Import and export controls apply to animals and animal products (Chapter III(2)(v); III(3)(iii); and III(4)(ii)(b)). Customs duties on imports of equipment used in the livestock subsector have been gradually reduced since the 1998/99 National Budget. Customs tariffs average nearly 20% on live animals, and 32% on meat and edible meat offal. (3) MANUFACTURING 46. Manufacturing accounts for around one fifth of real GDP (up from 15% in 1980). The sector has been growing at around 6% per year since 1995 (Table IV.8); its value-added increased from some Mau Rs 14 billion in 1995 to Mau Rs 23 billion in Manufacturing contributes some 75% to the total value of merchandise exports (up from 70% in 1993), and nearly 30% to total employment (down from some 37% in 1993). The sector is dominated by textiles and clothing (more than 40% of the production). Table IV.8 Manufacturing sector: basic statistics, Output (Mau Rs million) 15,248 16,986 19,453 21,755 Growth rate (%) Investment (Mau Rs million) 2,745 3,345 4,530 5,375 Employment ('000) Source: The Mauritius Chamber of Commerce and Industry (2000), Annual Report Mauritius also produces chemicals and chemical products, paper and printing, jewellery items, watches and clocks, razor blades, optical goods, electronics, information technology products, and marble, in addition to sugar, processed fish (mainly canned tuna) and other food products (already covered under section (2) above).

14 Mauritius WT/TPR/S/90 Page Incentives provided under various schemes 26, the Export Processing Zone Scheme in particular, have given impetus to manufacturing in Mauritius. The schemes, together with preferential market access provided by certain developed countries, have contributed to the development and specialization of the sector in the production of labour-intensive goods requiring low skills and low technology, in particular textiles and clothing. 49. The Export Processing Zones (EPZs, also called export enterprises) account for around 18% of total employment and around half of the total value-added in manufacturing: they generated some Mau Rs 12 billion in 1999 and are growing at broadly the same rate as the manufacturing sector as a whole. 27 EPZ exports increased from Mau Rs 18.3 billion in 1995 to some Mau Rs 29 billion in 1999 (Table IV.9). Table IV.9 Main economic indicators of the EPZ sector, Number of enterprises as at December New Closures Employment as at December 82,176 80,466 79,993 83,391 90,116 91,374 - Net change -3,445-1, ,598 6,725 1,258 - Growth rate (%) Exports (f.o.b. Mau Rs million) 16,533 18, ,049 26,075 28,952 Imports (c.i.f. Mau Rs million) 10,125 10, ,880 16,179 15,725 - Raw materials 9,016 9, ,442 14,693 13,880 - Machinery and spare parts 1, ,438 1,486 1,845 Net exports (Mau Rs million) 6,408 7, ,169 9,896 13,227 Net exports to exports (%) Value added at current prices (Mau Rs million) 6,373 7, ,138 10,452 11,633 - Share in manufacturing (%) Share in GDP (%) Value added at constant '82 prices (Mau Rs million) 2,173 2, ,587 2,766 2,932 Growth rate (%) Investment (Mau Rs million) ,245 1,445 1,710 - Machinery ,200 1,355 1,590.. Not available. Source: Information provided by the Mauritian authorities. 50. Textiles and clothing account for some 85% of EPZ exports in value, 89% of EPZ employment, and 55% of the total number of EPZ companies. These companies contribute some 99% to the total value of exports of textiles and clothing from Mauritius. The four main clothing items exported by Mauritius are T-shirts, trousers, shirts, and pullover/cardigans (Table IV.10). Mauritius has become the world's second largest exporter of woollen knits. 28 Total earnings from exports of textile yarns, fabrics and clothing reached Mau Rs 24.7 billion in 1999, up from Mau Rs 14.8 billion in Exports of clothing increased on average by Mau Rs 2 billion per year over the period, from Mau Rs 13.8 billion to Mau Rs 22.9 billion. 26 There are 22 incentive schemes in Mauritius. 27 There were some 523 EPZ companies employing some 90,000 persons in Dunn and Bradstreet, Inc. (2000).

15 WT/TPR/S/90 Page 68 Trade Policy Review Table IV.10 Evolution of main EPZ a clothing exports, Product Quantity (million units) T-shirts Trousers Shirts Pullovers/cardigans Value (Mau Rs million) T-shirts 3,750 4,936 5,355 5,939 6,809 Trousers 2,364 3,337 4,125 5,232 5,767 Shirts 2,688 2,780 3,031 3,778 4,777 Pullovers/cardigans 2,785 3,181 3,583 3,759 3,272 a Source: Export Processing Zones. Information provided by the Mauritian authorities. 51. Around two thirds of the production of textiles and clothing are exported quota- and duty-free to the EU. However, the U.S. is the major single destination for Mauritian textile, clothing, and leather products (some 25% of the total), followed by France, the United Kingdom, Germany, and Italy. In general, Mauritius has partially filled its export quotas for textiles and clothing to the United States. (Table IV.11). Therefore, as far as textiles and clothing products are concerned, the impact of AGOA on Mauritian exports may be limited. Table IV.11 Utilization of U.S. quotas on textiles and clothing by Mauritius, (Per cent) Description (Jan.-Oct.) Playsuits Jackets Ladies dresses T-shirts Shirts Blouses Sweaters Trousers/shorts Sleepwear/Pyjamas Underwear Skirts Knitted shirts and blouses Man-made fibre shorts/trousers Knit group Unweighted average of all products Source: Information provided by the Mauritian authorities. 52. The challenges to Mauritius' textiles and clothing branch include: rising production costs, labour costs in particular (Chapter I(1)) 29 ; lack of skilled labour; limited product base and insufficient upgrading into higher-value products; limited research and development, and low technology; and low design and marketing capabilities. 30 The recent appreciation of the U.S. dollar 29 High labour costs are due to labour market rigidities: there are some 200 labour unions in Mauritius. 30 JEC (2001).

16 Mauritius WT/TPR/S/90 Page 69 and depreciation of the Euro have also affected the competitiveness of Mauritian exports to the EU, EPZ imports being mostly denominated in U.S dollars and the bulk of their exports being in Euro. The dismantling of the Multifibre Arrangement (MFA) 31, and post Lomé ACP-EU Agreements will increase competition in traditional markets, mainly the EU where Mauritius is the largest exporter of textiles and clothing among the ACP countries. 53. In the wake of the changing international environment and with a view to remedying the problems manufacturing is facing, the Government's policy in the sector has focused on market and product diversification, as well as on improving competitiveness. To reduce dependence on traditional markets, particular attention is being given to regional markets with a view to developing Mauritius as a manufacturing base for the region. Regional integration of manufacturing is being promoted through delocalization of low-cost (low-value-added) activities to neighbouring countries, especially least developed countries (e.g. Madagascar and Mozambique) given their low production costs and the slower erosion of their preferential margins compared with that of developing countries. 32 To this end, incentives are granted by the Government under the Regional Headquarters Scheme (Table AIII.4). As a result of delocalization and vertical integration of certain manufacturing activities, Mauritius' exports of certain textile and clothing products to Madagascar have increased in recent years (e.g. by 64% from 1998 to 1999). 54. The 1993 Industrial Expansion Act was enacted to revise and consolidate existing legislation with a view to modernizing, integrating, and diversifying manufacturing industries (Chapters II(4) and III(4)(i)). Incentive schemes such as the Technology Diffusion Scheme, the Pioneer Status Enterprise Scheme, and the Strategic Local Enterprise Scheme are in place to contribute to shifting to production of higher-value-added and more capital-intensive goods on which competition is on quality and business excellence (just-in-time deliveries) rather than on prices. In particular, the Pioneer Status Enterprise Scheme is aimed at further fostering diversification, with emphasis on, inter alia, printing and press activities, light engineering, information technology, pharmaceuticals, agri-based industries, electronics, and jewellery. 55. Sectoral integration is being promoted through the shift from industries to clusters, strong linkages between small and medium-sized enterprises and large companies, as well as within and across sectors (e.g. export and non-export sectors, and agriculture, manufacturing, and services) and across the region (especially with delocalized companies). New clusters are to be introduced. Trade marks and copyrights will be more protected in order to promote local research and development, and to attract investments. ISO standards are being promoted for quality improvement purposes (Chapter III(4)(ii)(a)). 56. The Mauritius Export Development and Investment Authority (MEDIA), the Export Processing Zone Development Authority (EPZDA) and the Small and Medium Industries Development Organization (SMIDO) provide support to manufacturing companies. Since 1996, MEDIA has been organizing (on a regular basis) Mauritius International Apparel and Textile Exhibitions (MIATEX) in Europe. The Clothing Technology Centre (a technical arm of the EPZDA) was established in 1998 to help to address the needs of small and medium-sized enterprises through assistance in material sourcing, technical specification, pattern creation, manufacturing techniques, and training courses. The Industrial and Vocational Training Board (IVTB), in collaboration with international institutes, supplies skilled labour to, inter alia, textile and clothing, printing, electronic, engineering, and jewellery industries. 31 Mauritius was not a member of the MFA. 32 In Mauritius, the unit labour cost is on average five times higher than in Madagascar, "Globalview Africa" Fashionbusiness international, Spring 2001.

17 WT/TPR/S/90 Page 70 Trade Policy Review 57. Since the 2000/01 Budget, the Government has been rationalizing import duties through the elimination or reduction of customs tariffs on inputs, machinery, and equipment. Mauritius' participation in the Ministerial Declaration on Trade in Information Technology Products and the related dismantling of tariffs have promoted domestic use of information technology products. These tariff reductions, together with various incentive schemes available to manufacturers, might have increased the effective protection of the manufacturing sector. 58. Nominal tariff protection for manufacturing averages 20.6% (above the overall simple tariff average), with rates ranging up to 80%; the ad valorem equivalent of the specific tariff on straps of thong-type sandals is around 360%. The highest tariffs in the sector apply to imports of textile and clothing products: customs tariffs average some 59% on made-up textile goods (except wearing apparel), 67% on knitted and crocheted fabrics, 71% on clothing (except footwear), 73% on specified footwear, 79% on leather products (except footwear), and 80% on carpets and rugs. Other simple average tariffs in the sector are 75% on non-metallic furniture and fixtures, 56% on soaps, and 54% on metallic furniture and fixtures (Table AIV.1). A customs tariff of 80% applies to imports of fully processed basic metal products. 59. Import and export controls apply to certain manufactured products (Chapter III(2)(v) and III(3)(iii)). Some manufactured goods are subject to compulsory standards and price controls, the maximum mark-up system in particular (Chapter III(4)(ii) and III(4)(iii)). 60. Mauritius has not resorted to quantitative restrictions on imports of textiles, clothing and footwear. However, it retains the right to use the transitional safeguard mechanism of Article 6 of the WTO Agreement on Textiles and Clothing (Chapter III(2)(vi)). (4) SERVICES (i) Overview 61. The services sector, including electricity, gas, construction and water, contributes around 74% to Mauritius' real GDP (up from two thirds in the early 1990s). The sector includes two of the four pillars of the economy: financial services and tourism. Mauritius is a net exporter of services (Chapter I). 62. Commitments made by Mauritius under the GATS largely reflect the current state of competition in its services branches. Limitations on market access and on national treatment are governed by the provisions of the 1984 Companies Act, the 1975 Non-Citizens Property Restrictions Act, the 1970 Non-Citizens Employment Restrictions Act; the 1974 Income Tax Act, and the 1988 Banking Act. Measures affecting presence of natural persons, and the supply of transportation services are unbound Mauritius has maintained MFN exemptions under Article II of the GATS on the grounds of reciprocity measures, designed to enhance access to foreign financial markets for Mauritian financial service suppliers WTO document GATS/SC/55, Mauritius: Schedule of Specific Commitments, 15 April WTO document GATS/EL/55/Suppl.1, Mauritius: List of Article II (MFN) Exemptions, Supplement 1, 26 February 1998.