Mauritius Faces ‘Competitive Shock’ as India and EU Seal Historic Trade Deal

Mauritius is bracing for a significant economic upheaval following the conclusion of a landmark Free Trade Agreement (FTA) between India and the European Union (EU), threatening the island nation’s vital export sectors.

The deal, signed on 27 January, unites two global giants representing two billion people and 25% of global GDP.

While New Delhi and Brussels hail the pact as a driver for growth, experts warn it constitutes a “potential external shock” for Mauritius, which has long enjoyed privileged economic ties with both partners.

The Textile Threat

The most immediate concern lies in the textile and clothing industry, a cornerstone of the Mauritian economy. Currently, Mauritius exports over Rs 20 billion worth of garments to the EU annually, accounting for 25% of its sector exports.

Under the new FTA, India—already a global textile powerhouse—will gain immediate duty-free access to the European market. Analysts at CareEdge Ratings predict:

• India’s share of the European clothing market could rise from 5.8% to 9%.
• Indian textile exports to the EU could surge by USD 4 billion to USD 4.5 billion annually.

With India’s massive economies of scale and lower production costs, Mauritian manufacturers face a “formidable” challenge that could lead to a rapid erosion of market share.

Broader Economic Fallout

The implications extend beyond garments. Mauritius risks losing its competitive edge in several other key segments where India possesses a broader industrial base, including:

• Leather goods and footwear
• Jewellery
• Processed agri-foods and marine products

This shift comes at a sensitive time, as Mauritian exporters already face uncertainty regarding the renewal of the AGOA (African Growth and Opportunity Act) in the United States.

Questioning the India-Mauritius Partnership

The FTA has reignited debate over the effectiveness of the 2021 Comprehensive Economic Cooperation and Partnership Agreement (CECPA) between India and Mauritius.

Despite four years of operation, results for Mauritian exports like special sugars and tuna remain “mixed.”

As India opens its doors to the EU, observers are questioning Mauritius’s actual standing in New Delhi’s broader commercial strategy.

A mission of Indian experts is expected shortly to evaluate the CECPA’s impact, though many note an “evident asymmetry” in the power balance.

A Call for Strategic Adaptation

The deal underscores a “brutal reality” of modern commerce: large economies negotiate as equals, while smaller nations must adapt or face obsolescence.

To mitigate the impact, experts suggest Mauritius must accelerate market diversification and move upmarket.

There is also a pressing call for the government to recruit seasoned “Trade Advisors” to bolster commercial diplomacy and protect Mauritian interests in key global capitals.

Failure to adapt, the report suggests, could turn this trade deal into a “lasting competitiveness shock” that exposes the limits of the current Mauritian export model.

Source: l’Express