Speeches

Making trade work for inclusive growth and jobs (en)

6 abril 2017
ITC Noticias
Mauritius Chamber of Commerce and Industry
Port Louis, 1 April 2017

MS. ARANCHA GONZALEZ
Executive Director, International Trade Centre

Prime Minister
Deputy Prime Minister
Ministers
Leader of the Opposition
Secretary-General of MCCI
Ladies and Gentlemen

It is a great honour for me to be here with the Mauritius Chamber of Commerce and Industry. For over a century and a half, the Chamber has been the voice of the Mauritian business community. And for nearly thirty of those years, the International Trade Centre has been proud to associate itself with the MCCI as a partner in helping Mauritian companies connect to international markets.

Mauritius is a fitting location to talk about making trade work for inclusive growth and jobs. Because since independence in 1968, this is precisely what Mauritius has done.

The strong growth of Mauritius has been broadly shared: inequality has decreased since the 1960s. The country provides an example worth emulating. You have every reason to look back with pride.


The Mauritian success was far from pre-ordained. Many of you will surely recall Nobel-winning economist James Meade’s assessment of this country’s prospects back in 1961. Rapid population growth, reliance on a single crop vulnerable to price swings and cyclones, little manufacturing expertise, and potential ethnic tensions led Meade to conclude that “the outlook for peaceful development is poor.”

As we know, Mauritius defied his predictions in style, registering strong growth and poverty reduction. In the 1980s, a lost decade elsewhere in sub-Saharan Africa, job creation reduced unemployment rates in Mauritius, turning Meade’s overpopulation fears into a demographic dividend. In the 1990s, productivity increases became an engine for growth.

Mauritius provides what is perhaps the textbook case on how to translate preferential market access into structural transformation and jobs. And, let us not forget, Mauritians accomplished this in spite of geographical remoteness from the major markets of the day..

A few numbers illustrate the scale of the Mauritian economic revolution between 1976 and 2010. The primary sector – agriculture - went down from 23% to 6% of the economy. Growth in manufacturing lifted the secondary sector from 23 to 28% of the economy. Finally, the tertiary sector, including tourism and financial services, went from just above 50% to nearly 70% of Mauritius’s GDP.

The very diversity that Meade saw as a weakness may well have turned out to be a source of strength. The country developed open and democratic political processes. It made access to free education a priority, fostered local entrepreneurship and encouraged joint ventures with foreign players that paved the way for an inflow of capital, technology and know-how. The mosaic blend of cultures and traditions also contributed to the attractiveness of Mauritius as a tourism destination.

In a nutshell, the example of Mauritius shows that one can keep markets open while fostering democracy and ensuring citizens’ lives improve through strong domestic policies. This is in common with other countries like Canada or Chile who defy economists that say this cannot be the case.

Former Prime Minister and President Sir Anerood Jugnauth once said, of Mauritius’s experience: “There is no miracle. It is due simply to hard work, discipline, and will.”

With apologies to Sir Anerood, I will keep using the term ‘miracle’. But the qualities he identified, together with the country’s history of pragmatic compromise among business, government, and civil society, will remain critical in the years ahead. Because the fact is that Mauritius now needs to achieve a new economic miracle. For this to happen it needs to have all of Mauritius in the same boat and heading in the same direction as one team.

Over the past decade, the growth model that underpinned the island’s success has been running out of steam. At the international level, market preferences have been phased out or eroded. At home, productivity and export growth have slowed down, so has been the investment rate.

The country faces strong headwinds. The rise in protectionist sentiment in some parts of the world is a serious threat to any small, open economy. Trade protectionism does not protect jobs. Offshore financial services centres everywhere have been affected by tighter post-crisis regulation and there is more to come.

Furthermore, the United Kingdom’s decision to leave the European Union, and possibly its single market, throws into question Mauritius’s future terms of access to what remains its biggest export destination, even if it has declined in importance over the last few years.

In my view the focus is less likely to be on tariffs, given their already relatively low level. The biggest issue will be that of standards and regulations, what we commonly call non-tariff measures. Today these standards and regulations are made by 28 for 28 member states: one standard for 28 markets. How will it work tomorrow? Which standards and regulations will the UK apply to its products and services? Which rules of origin will apply? Will there be cumulation? The answer to these questions is crucial since non-tariff measures account today for the largest trade costs.

As the National export Strategy that we launched yesterday advocates, Mauritian businesses and the government will have to look to further consolidate existing markets, diversify into new markets, within the EU and elsewhere, and to move up the value chain to better manage risks.

Yet market access and value addition alone may not suffice to solve Mauritius’s inclusive growth challenge.

It will be important to invest in empowering citizens to take advantage of the new opportunities offered by technological progress and to cushion the impact of the on-going transformations. Taxation and social policies will have an important role to play. In particular, it is of paramount importance to address the mismatch of skills in innovative way as part of an overarching strategy to develop Mauritius’ human resources. Because the economy of the 21st century is a knowledge economy, it is important for Mauritius to invest in areas such as bio medicine, IT, and software development.

Integrating Mauritian small and medium-sized enterprises (SMEs) – home to many youth and women - into international trade and investment networks would contribute to broadly-shared income gains. Investing in women entrepreneurs, many of whom are in the informal sector, will be critical. ITC’s global movement, Shetrades, aims to connect one million women entrepreneurs to market by 2020 and we hope to have Mauritius because a Shetrades champion.
SMEs account for the vast majority of jobs and firms in all countries. But while smaller firms in Europe are about two-thirds as productive as their larger national competitors, this ‘productivity gap’ tends to be much wider in developing countries. Lower productivity SMEs in turn translates into lower wages across much of the workforce and hence lower contribution to national growth.

Enabling Mauritian SMEs to become more productive and connect to international value chains would help them stimulate further productivity gains, grow faster and pay higher wages. More importantly, SMEs are crucial to make trade and growth work for the 99%.

ITC and the Mauritius Chamber of Commerce and Industry are working together to equip Mauritian SMEs to do just this.

The private sector voice has been central in our support to the Ministry of Industry, Commerce and Consumer Protection to develop the Export Strategy for Mauritius. It is important that this partnership continues and that you use this momentum to create a ‘Brand Mauritius’. ITC will continue to support We now know which sectors hold promising export potential. Through ITC’s SME Competitiveness Outlook we also know the areas of strength but also weakness in Mauritius’ SMEs.

We also know that because of their smaller size, SMEs are hit harder by costs associated with trade. That is why, the Chamber and the government in partnership with the International Trade Centre have created a “Trade Obstacles Alert Mechanism”. This online mechanism allows exporters and importers to notify the relevant authorities, in real time, when they face non-tariff barriers. Thanks to the alert mechanism Mauritian companies have been able to swiftly resolve port delays linked to measures like import and export licences.

I started by looking back on thirty years of cooperation. I will close by looking thirty years into the future. The location of Mauritius once rendered it distant from the world’s economic centre of gravity. That same location now puts it strategically between today’s growth markets in Asia, and tomorrow’s growth markets in Africa, especially when we see the growth in South-South trade to almost 1/3 of total world trade today. It is an appropriate position from which to achieve a second economic miracle. ITC stands ready to support Mauritians as they embark on this journey.

Thank you very much for your attention.