MAURITIUS: NEW FREE TRADE AGREEMENT POSITIONS THE COUNTRY AS A MIDDLEMAN BETWEEN ASIA AND AFRICA
The Free Trade Agreement between China and Mauritius (Agreement) came into operation on 1 January 2021.
Inspired by their longstanding friendship and growing bilateral economic relationship since the establishment of diplomatic relations in 1972, the Agreement is the first free trade agreement that China has signed with an African country.
The Agreement comes into operation after several years of negotiations. It is one step towards achieving Mauritius’s ambition to position itself as a platform between China and mainland Africa. China is gaining a foothold in the strategic Indian Ocean region.
In line with its liberal policy towards free trade, Mauritius also signed the agreement establishing the African Continental Free Trade Area (AfCFTA) in October 2019, which coincidentally came into operation on 1January 2021.
The AfCFTA creates a free trade area over 54 African countries for the trading of goods and services through the reduction or progressive elimination of tariffs and elimination of non-tariff barriers to trade and investment.
The Agreement entered into between Mauritius and China contains four main components which pertain to:
- trade in goods;
- trade in services;
- investment; and
- economic cooperation.
Trade between Mauritius and China will benefit from preferential tariffs. There is also immediate duty-free access to the Chinese market on 8 547 tariff lines from Mauritius, and to the Mauritian market on 6 120 tariff lines from China. In line with the Agreement, the trade preferences will apply subject to the rules of origin of the goods.
The rules of origin
In accordance with these principles, the rules of origin are applied to attribute one country of origin to each product. As per the rules of origin, the following goods are considered as originating in Mauritius when:
- the goods are wholly obtained or produced in Mauritius;
- the goods are produced in Mauritius exclusively from originating materials; or
- the goods are produced from non-originating materials in Mauritius, provided that the goods conform to a regional value content of no less than 40%, except for some specific goods.
In order to benefit from duty-free access to the Chinese market, an exporter or producer will have to be issued with a certificate of origin delivered by the Customs Department of the Mauritius Revenue Authority on the condition that the goods are considered as originating in Mauritius.
Trade in services
The Agreement also provides for removal of restrictions in more than 100 service sectors. These include:
- financial services;
- information and communications technology;
- professional services;
- construction; and
- health services.
For example, in accordance with the specific commitments on trade in services of China, the establishment of branches by Mauritius companies is unbound, unless otherwise indicated in specific sub-sectors and laws. On the other side, as per the specific commitments on trade in services of Mauritius, restrictions have been removed on several sectors such as banking and financial services, tourism and travel-related services. For example, substantial restrictions have been removed in Mauritius for the participation of Chinese companies in issues of all kinds of securities, including underwriting and placement as agent (whether publicly or privately) and provision of services related to such issues.
Further, the Government of Mauritius is encouraging Chinese companies to choose the jurisdiction of Mauritius to set up their regional headquarters.
The removal of these restrictions on both sides of trade in services, together with preferential access to goods between Mauritius and China will undoubtedly boost trade volume between the two countries, while Mauritius could be used as a platform for Chinese exports into the mainland African continent.
The AfCFTA has created the world’s largest free trade area in terms of the number of participating countries, with economic integration of the continent’s 54 countries, and a market of over 1.3 billion people.
The AfCFTA aims to create a single market across the African continent for goods and services while fostering free movement of persons and investments with a view to enhancing intra-Africa trade.
The Agreement establishing the AfCFTA provides for three Protocols in respect of trade in goods, trade in services and rules and procedures on the settlement of disputes.
Free trade in goods and services under conditions
As already party to the two existing African continental trade blocs, namely the Southern African Development Community (SADC, 16 African states) and the Common Market for Eastern and Southern Africa (COMESA, 21 member states), Mauritian trade with COMESA/SADC countries will continue on the basis of the COMESA Treaty and the SADC Trade Protocol.
In consequence, trade under the AfCFTA will apply only in Mauritius for non-SADC and non-COMESA state parties. It is also understood that trade under the AfCFTA will be applicable only between countries having submitted their tariff schedules and ratified the AfCFTA Agreement.
Preferential access will therefore only be granted to those AfCFTA state parties which grant Mauritian imports reciprocal tariff preferences.
The AfCFTA tariff preferences
According to Schedules of tariff concessions, the tariffs on imports from AfCFTA state parties are duty-free and tariffs levied on:
- black tea;
- ground spices;
- bottled water;
- alcoholic beverages;
- linens; and
- galvanized steel shapes and sections.
Rules of origin are applicable in order to benefit from these tariff preferences. In this case, again, an exporter or producer will have to be issued with a certificate of origin delivered by the Customs Department of the Mauritius Revenue Authority on the condition that the goods are considered as originating in Mauritius. In addition to goods, AfCFTA also applies to services, investments, intellectual property rights, competition policy and dispute settlement.
With the coming into force of the AfCFTA and the Agreement, Mauritius now has preferential access to key African markets and to China. Customs duties, non-tariff barriers and other restrictions on trade in goods and services among the member countries are eliminated.
Mauritius is positioning itself as middleman for the importation and exportation of goods and trade services from China to the members of the AfCFTA and vice versa.