Will Africa’s First Free Trade Agreement With China Actually Help Africa?

 In analysis, op-ed

Famed for its natural beauty, surrounded by nothing but the Indian Ocean, tiny in size yet densely populated, understanding how Mauritius managed to become the most developed, diversified, and competitive economy in Africa is worth exploring.

Overall, Mauritius’s economic growth is largely due to the government’s sustained commitment to diversifying sources of growth beyond the exportation of sugar. Mauritius has developed thriving tourism, finance, ICT, and manufacturing industries by diversifying its trading partnerships and attracting Foreign Direct Investment.

This is demonstrated by the numerous preferential trade agreements that increase and diversify the amount of value-added goods Mauritius exports including preserved and prepared fish to Europe, apparel to the USA, and to India, optical, photo, and medical apparatus.

The latest agreement, signed on 17th October 2019 is the Mauritius-China Free Trade Agreement (FTA) – the first FTA that China has signed with an African country.  The agreement will enable Mauritius to increase and diversify its exports to China, by giving Mauritius duty-free access to over 8,000 products and both countries will eventually reach zero tariffs on 96.3% (China) and 94.2% (Mauritius) of traded items.

Why Is the FTA So Important?

Although Sino-Mauritian relations have been strong since their establishment in 1972, the relationship has mainly resulted in investment in new infrastructure projects and a rising number of Chinese laborers working in textile and clothing enterprises. There has also been a steady rise of Chinese imports – meaning that –in 2018 – for every dollar of goods that Mauritius exported to China, it imported 21 dollars worth of goods back in. This is an improvement since 2002 (where the ratio was more like 60:1) but it nevertheless inhibits growth. Furthermore, the Mauritius agricultural sector contributes only a minimal amount to the country’s total GDP (3% of GDP in 2019) and as such this could hinder the country’s overall economic growth in the future.

This is because urbanization and increased per capita income levels are increasing the popularity of foods, such as processed fruits and vegetables (frozen fruit and vegetables, fruit and vegetable salads, jams, and juices). Consequently, the growth of the global fruit and vegetable processing industry is expected to accelerate over the next five years. Furthermore, Mauritius and China’s own consumers are also increasingly choosing processed fruits and vegetables due to both countries’ steady rise in urbanization and per capita income levels. As a result, although Mauritius is close to 100% self-sufficiency in fresh fruits and vegetables, it currently imports more than 70% of its overall food requirements.

Thus, using the FTA strategically to encourage the development of Mauritius’s agro-processing industry could not only reduce outgoing expenditures on food but also could increase the volume of its processed, value-added agricultural exports to, for instance, China’s huge consumer market of 1.4 billion people and ultimately, drive economic growth and job creation. In order to take advantage of this opportunity, the Mauritian government has developed policies, such as its agro-processing national export strategy to further develop its agro-processing industry.

But how can Mauritius – and the rest of Africa – really make the most of the new China FTA and see a real change in the agriculture sector through trade?

Despite numerous free trade agreements with other richer economies, previous analysis by our firm shows that the actual trade relationship of most large countries with Africa has hardly shifted since before the World Trade Organisation’s (WTO) Doha round was initiated in 2001, with agriculture being one of the most contentious issues.

So, What Does Our Team at Development Reimagined Suggest?

First, invest in modern technology and Research & Development (R&D)

Chinese companies have developed an extensive amount of agro-processing techniques and technologies, and have the funding to develop more in Mauritius. Doing so will not only help Mauritius to increase and diversify its exports to China and globally, but it will also improve product quality in order to meet shifting consumer demands, and challenging food and agricultural trade regulations.

R&D can also be another key area for collaboration. In Mauritius, The Food and Agriculture Research and Extension Institute (FAREI) currently conducts research into non-sugar crops and aims to develop new varieties of fruits and vegetables. However, FAREI currently lacks the tools and skills it needs to implement these goals.

Facilitating collaborations between FAREI and Chinese agricultural R&D companies can strengthen the overall FTA by boosting Mauritian agro-processing productivity, and easing technical barriers to trade by ensuring that fruit and vegetable varieties continue to meet one another’s trade standards. It can also help both nations become global leaders of groundbreaking research (excuse the pun!).

Second, actively promote Mauritian value-added products in China

With government encouragement, many manufacturers are skilfully marketing new processed fruit products within Mauritius. However, as Mauritian agro-processors are only just starting to explore the Chinese marketplace – a marketplace that is notoriously difficult for foreign companies to compete in – Chinese stakeholders should offer marketing support, for example, by offering insights into Chinese consumer behaviour, and linking Mauritian sellers to suitable marketing channels.

Alternatively, Mauritian sellers could take advantage of China market entry programmes such as ours to help African brands navigate the Chinese market, including, inter alia, getting products onto China’s e-commerce platforms and intellectual property registration.

Third, and perhaps most importantly, ensure that the terms of FTA link to and strengthen the African Continental Free Trade Area (AfCFTA)

For most African countries, the majority of their trade is conducted with countries and regions outside of Africa. Consequently, the majority of African goods leave the continent whilst countries remain commodities. This hinders economic growth in many African countries and is the reason why AfCFTA is being developed in order to boost the movement of goods and capital within Africa. If enacted with careful consideration, AfCFTA will play a pivotal role in Africa’s development. Thus, any African government interested in signing an FTA with China should consider whether the terms of the FTA compliment AfCFTA or not.

It is in this regard that the Mauritius FTA with China has a number of challenges, notably the current terms surrounding Rules of Origin (ROO) that may hinder AfCFTA’s success. The current ROO terms prevent products exported from Mauritius that contain non-originating Mauritian materials exceeding 10% of the product’s Freight on Board value from being covered by the FTA. For example, Mauritius and the USA’s preferential trade agreement under the African Growth Opportunity Act (AGOA) gives apparel manufactured in Mauritius duty-free benefits even if the apparel is entirely made from material sourced from outside Mauritius. As Mauritius is still increasing its arable landmass and crop varieties, many Mauritian products, such as cotton apparel, are made from imported materials. This restriction could therefore reduce the number of value-added products that Mauritius can export to China duty-free and will discourage Mauritius from being a conduit for increased trade of raw materials between African countries.

Consequently, we suggest that Mauritian officials call on the AfCFTA Secretariat to explore this issue further and facilitate further discussions between Chinese and Mauritian stakeholders in the context of AfCFTA in order to negotiate for more flexible ROO terms.

Rosie Wigmore is a Policy Analyst at Development Reimagined.

This article was originally published on the China Africa Project Website on 2 October 2020

**Special thanks to the Embassy of the Republic of Mauritius to People’s Republic of China for insights into the FTA.

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EDMOND BOSILONG

Research Analyst

Edmond is a research analyst who is passionate about sustainable development, innovation, and the environment. Passionate about climate financing, he firmly believe there is a more reliable system to promote equality, growth, and welfare in societies without affecting the ecosystem. Through his skills, knowledge and experienced gained over 7 years, he wants to make an impact in the world of development. Edmond holds a Master’s Degree in Public Policy from Korea Development Institute and a BA Degree (Honors) in Business from University of Derby.

HANNAH RYDER

Founder and CEO

Hannah Ryder is the Founder & CEO of Development Reimagined. A former diplomat and economist with 20 years of experience, named one of 100 most influential Africans in 2021, she is also Senior Associate for the Africa Program of the Center for Strategic International Studies (CSIS), sits on the Board of the Environmental Defence Fund, and is a member of UAE's International Advisory Council on the New Economy. Prior to her role at DR, Ms Ryder led the United Nations Development Programme (UNDP)’s work with China to help it scale up and improve its cooperation with other developing countries, including in Africa. She has also played various advisory roles for the UN and OECD and co-authored the seminal Stern Review of the Economics of Climate Change in 2006.

LEAH LYNCH

Deputy Director

Leah Lynch is Deputy Director of Development Reimagined (DR), and head of the China office. Leah has over 10 years of experience in development and has lived in China for over 8 years. Leah has also travelled extensively around Asia and Africa for research. Leah supports the strategic direction of the team across China, with a mission to deliver high quality research on sustainable development and poverty reduction. Leah is also Chair of the Sustainability Forum at the British Chamber of Commerce in China, providing direction on sustainability initiatives for British and Chinese business. Leah has also consulted on various evaluations on UK aid (ICAI) and is a specialist on development cooperation from the UK and China. Leah has also consulted on various UN projects, including providing support to the UN China team during the COVID-19 Pandemic. Prior to DR, Leah was at the United Nations Development Programme (UNDP) China, supporting the UN’s portfolio on communication strategies, China’s South- South Cooperation and the Belt and Road Initiative (BRI). Before UNDP, Leah lived and worked in Kenya developing sustainable water policies for the Kenyan government.

YIKE FU

China-Africa Policy Analyst

Yike Fu is a Policy Analyst and has been responsible for leading numerous areas of work, including on debt analysis in Africa and beyond, and China-Africa trade and investment logistics and analysis. She is the co-author of “African Debt Guide”, in which she challenged the narrative that Africa is in the midst of a new debt crisis by analysing data back to the 1970s and adopting new metrics to present the real story behind the data. She also developed a benchmark to compare the financial distribution of development partners such as the UK, US, Japan, France and China in Africa. Prior to her role at DR she worked at the International Finance Corporation and African Union Representational Mission to the US. She holds a Masters in International Affairs from George Washington University.

JUDITH MWAI

Research Analyst

Judith is a Research and Policy Analyst, where she specialises in Africa-China relations, international development, and diplomacy. During her time at Development Reimagined, Judith has co-authored several articles published in The Diplomat on debt and China-Barbados relations and was quoted by China Daily in a piece on Women Rights in China. Previously, Judith worked as a research analyst for an Advocate and Commissioner and Oats office in Kenya.

OVIGWE EGUEGU

Policy Analyst

Ovigwe specialises in geopolitics with particular reference to Africa in a changing Global Order. He is adept at critically analysing the politics of contemporary development processes and providing insight into the geopolitical interests that influence them. His work includes research, publications, tailored briefings and advising on global and regional trends, and issues at the nexus of geopolitics and development. Ovigwe appears frequently in media around the world such as Al Jazeera, TRT World, SABC, CGTN, BBC Radio, and other platforms.

JING CAI

Policy Analyst

Jing leads China-African health and agriculture cooperation research at Development Reimagined, having managed our FOCAC Policy Analysis and Advocacy project. She is also the co-author of “China-Africa Health Cooperation under FOCAC Umbrella”, in which she analysed China’s commitments around health cooperation since the first FOCAC summit and deepdived into four African countries’ health overview, challenges and cooperation with China as cases studies. Before DR, Jing worked at GIZ Cambodia on M&E of a disability advocacy project. She also worked as a translator with Chinese medical team in Benin.

PATRICK ANAM

Trade Policy Analyst

Patrick is an International Trade Policy and Trade Law Expert with over 5 years of experience. His expertise includes trade law, trade policy analysis and regional integration. He is currently engaged with Development Reimagined as a Senior Trade Analyst and was the lead author of Development Reimagined's recent Report on Africa-China Relations titled "From China-Africa to Africa- China: A Blue Print for a Green and Inclusive Continent-Wide Strategy Towards China." and “Reimaging FOCAC Going Forward.” Patrick has previously consulted for the East African Community, UNECA and for the Kenya Ministry of Trade.

ROSIE FLOWERS

Senior Policy Analyst 

Rosemary is our Senior Policy Analyst. She is a skilled policy analyst and has previously worked as a UK civil servant. She is studying Human Rights at Birkbeck, University of London with a research focus on international law in the context of health crises such as the COVID-19 pandemic.

JADE SCARFE

Project Manager and Africa-China Communication Assistant

Jade is a Project Manager for Development Reimagined’s flagship project Africa Unconstrained, which focuses on financing needs and debt vulnerabilities of African countries. Her research focuses on China-Africa development finance alongside debt vulnerabilities, infrastructure needs and South-South cooperation. She has worked with a breadth of stakeholders from China, Africa and the wider international community, including governments, private sector, NGOs and civil society. Her writing has appeared in a number of publications, including The Africa Report, The China-Africa Project, The Diplomat and more. Jade holds a Master’s in China and Globalisation studies from King’s College London.

ROSIE WIGMORE

Programme Manager

Rosie is the Project Manager of Africa Reimagined (AR) at Development Reimagined (DR) where she supports high-end African brands with entering the Chinese market by operating services such as trademark protection, Chinese market research, Chinese partnership building, and Africa to China logistical support and import/export services. Rosie has worked with DR for over two years now with proven success in helping high-end African brands navigate the Chinese market. She is extremely passionate about her work because more African brands selling in the Chinese marketplace means African countries can export MORE value-added goods, create MORE jobs and foster MORE innovation in African countries.

Rosie is also alumni of the School of International Studies at Peking University in Beijing where she is also an editor at the Peking Africa Think Tank. PATT is led by a diverse group of scholars who specialise in African Studies within the context of Sino-Africa relations.

LAUREN ASHMORE

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Lauren has lived in six countries from the Americas to Europe and Asia and speaks both French and Spanish proficiently. At Development Reimagined, Lauren’s research focuses on climate action both in the Asia-Pacific and in Africa, and how countries are using tools such as SDGs and Covid-19 action to build a more climate-resilient future. She holds a Masters in International Relations from Leiden University.

ETSEHIWOT KEBRET

Consultant

Etsehiwot holds a Masters’s degree in Development Studies from the London School of Economics. She has diverse experience in humanitarian and development issues by working in both multilateral organizations and international non-governmental organizations. Etsehiwot is currently a consultant focusing on the SDGs and development finance.

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Dibekulu is an economist by training. He holds an MSc in International Development Studies from Palacky University Olomouc, an MSc in Development Economics from the University of Clermont Auvergne, and an MSc in Economics, Finance, and International Integration from the University of Pavia. At Development Reimagined, he works as an Economist consultant. He has strong data analysis skills, with research interests centring around development finance, impact assessment, food security, and agricultural insurance.

OSARU OMOSIGHO

Research Analyst

Osaru is a health professional with an MSc in Health Systems Policy and an interest in women’s health and population management. At Development Reimagined, she applies her health sector experience to global health research and collating locally applicable development insights from China.

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Research Analyst

Ferdinando’s research at Development Reimagined is centred on South-South Cooperation dynamics, specifically on the analysis of Chinese investment and debt flows in Africa and their linkages to African industrialisation. He is currently a Yenching Scholar at Peking University, after having graduated from the University of Cambridge with an MPhil in Development Studies.

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Research Analyst Kenya

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JOY ENE

Research And Data Analyst China 

Joy Ene is a Research and Data Analyst at DR. Joy is passionate about African/global development, poverty eradication and trade policies between underdeveloped and developing countries. She is also a fourth-year student of International Economics and Trade at the  Liaoning University, Shenyang, China. She serves as the President of the Student Union, Liaoning University, International Students chapter.

CHENSI LI

Research Analyst 

Chensi Li is a research analyst. She has previously worked for local NGOs in Nigeria and Cameroon and think-tanks in China.  Her research areas include Sino-African relations, African foreign affairs, public diplomacy, state-building and national governance.