The Mauritian textile industry has been diving into trouble for the past year. Factories have closed down and exports to the United States (US) have dropped by 12 % between March and December 2003. It is widely held that this situation is the result of the third country fabric derogation obtained by less developed countries through the African Growth and Opportunity Act.

The third country fabric gives duty-free access to the US market to African countries even if the raw material used for garment manufacturing is imported from spinning mills outside America or the African region.

Mauritius does not benefit from this derogation and neighbouring countries, like Madagascar, Kenya and Lesotho, using cheap Asian fabrics, have out-marketed a large part of the Mauritian production.

?Third country fabric? advantage

This is no level playing field, says Paul Ryberg, president of the Mauritius-US business association. It is expected that Jayen Cuttaree, minister for International trade will try to set the record straight next Thursday when deponing before the Ways and Means Committee of the US Congress.

Mauritius is lobbying hard to be included on the third country fabric list of countries. Only 40 % of Mauritian textile exports to the US enter that country duty-free. It is nevertheless believed that, if the island is deprived of this derogation, exports to the US will be further reduced as competition from neighbouring countries heightens. With the third country fabric, advantage, even Madagascar overtook Mauritius last year. In 2003, Mauritius exported only 45 million square metres equivalent (SME) of garments to the United States, whereas Lesotho exported 103 million SME, South Africa 70 million, Kenya 52 million, Swaziland 49 million and Madagascar 45,6 million.

Mauritius stands in sixth position, but comes out second as far as export value is concerned. A clear indication that high value added garments are being exported.

In fact, the average price, which Mauritius earns per SME of garment is US $ 5,95, whereas its African competitors earn an average of $ 3,30.

Though the third country fabric derogation will be allowed only for a further three years, whilst the AGOA is set to be extended till 2015, Mauritius will spare no opportunity to make a case for its inclusion on the list of exempted countries.

Not being included on this list was considered in the past as a blessing in disguise for Mauritius. Analysts believed that this situation would push Mauritius into setting up spinning mills and developing vertically integrated factories.

But the island has not known the expected boom in spinning. Furthermore, Chinese garments will be allowed quota free, but with duty, on the US market as from next year. Chinese exporters may thus eat up a large part of the Mauritian market in the States. Obtaining the third country fabric derogation will help the island export its products 18 % cheaper to America. Mauritius is in no position to relinquish such an advantage.