The last few years have seen a growing interest by developing country super-powers, such as China and India, in the African continent. Growing populations, rising middle-class, and mineral resources are just a few of the reasons that explain this interest.
China is one of the countries that better illustrates the aim of foreign nations to secure a strong foothold on the African continent, and it has not been shy to invest billions of US Dollars in a wide range of countries to obtain political influence. In a recent conference celebrated in Beijing, President Xi promised a total of USD 20 billion in loans to African countries during the period 2018-2020, most of which is to be spent within the framework of its “Belt and Road Initiative”, which aims to reconstruct the old Silk Road and will encompass a wide range of infrastructural projects in partner countries.
One of China’s latest instruments to expand its influence on the continent are trade agreements. The leading Asian economy does not yet have any free trade agreements (FTAs) with an African counterpart, and has decided to start with one of the most liberal African countries, the small island of Mauritius (and which also happens to be the HQ of International Economics Consulting Ltd.).
Mauritius’ trade policy has embraced and adopted liberalism as its main mantra, aiming to become the Singapore of Africa. In this sense, Mauritius applies an almost entirely duty-free approach to imports, with 95% of its tariff lines being duty-free – major exceptions being alcohol, tobacco, and cars. This, linked to an extensive network of FTAs with Eastern and Southern Africa, the EU, and preferential access to the US, makes Mauritius an attractive partner to trade with. Mauritius also has a flexible and business friendly investment regime, through which it aims to become a bridge between Africa and Asia.
Both countries are set to gain from the FTA. Mauritius, on the one hand, will benefit from lower tariffs on its exports, which although limited, due to the production capabilities of the small island country, could see its exports increase due to the additional competitive advantage granted. An analysis of FTAs to which China is party of (such as China – Costa Rica, and China – Chile FTA) reveals that whilst China is open to liberalise most of its tariff lines, there are some agricultural products, such as cereal and sugar, of interest to many African nations, that remain excluded from the agreements.
Source: Author’s calculations based on WTO Tariff Analysis Online results.
China, on the other hand, is testing the waters on how to negotiate an FTA with African counterparts. In addition, Mauritius has a strong diplomatic influence across the African continent, and having the island as a preferential trading partner might help in future negotiations with other nations, such as South Africa, Ethiopia, Nigeria, Kenya; countries where China’s interest is growing.
By Pablo Quiles, Trade Analyst at International Economics Consulting Ltd.