EXECUTIVE SUMMARY
The Indian Ocean country case study provides good examples of the special characteristics of SIDSs
and their particular dependence on preferential trade arrangements and agreements. Seychelles, the
Comoros and Mauritius are all small and remote economies. The combination of smallness and remoteness
prevents them from successfully pursuing the two traditionally suggested development strategy (exportled
growth or import-substitution). The former is hampered by high transport costs and the latter by
diseconomies of scale. Besides, Mauritius also regularly suffers from natural disasters such as hurricanes
and even more frequently droughts, which can severely damage local production.
The success story of Mauritius, which is the sole member of the World Trade Organization (WTO)
among these three SIDSs, is often held up as a good example of the benefits of outward orientation.
However, it owes much of its success to trade preferences, including the Sugar Protocol, which strongly
contributed to its economic take-off and social development. The contribution of sugar to GDP in
Mauritius has now diminished, but it still plays an important multifunctional role in, for example, soil
preservation, rural development, income distribution and equity, and savings of energy imports. Without
trade preferences the Mauritius story could well have been one of hardship. The same applies, to a
lesser extent, to the Seychelles, where the main export revenues now come from canned tuna as a result
of preferential treatment accorded by the European Union (EU).
Both countries are net food importing developing countries, that have tried to lessen their dependence
on food imports by stimulating their agricultural sectors through various means. They have had some
success with a few products (such as potatoes, onions and poultry in Mauritius, and a few fruits and
vegetables and poultry in the Seychelles), owing largely to protectionist measures in the form of well
targeted tariffs (which can be high, but, nevertheless, below bound ones in Mauritius), import licensing
and seasonal bans, and State trading enterprise operations. They need to promote these elements of
their agricultural trade policy in the WTO negotiations. SIDSs should be allowed some flexibility in
terms of market access, an issue which appears to be more important for them than domestic support at
this point in time (however, that could change in the long run, and, in fact, Mauritius joined other
SIDSs to call for raising the de minimis limit).
Since SIDSs? export market shares and revenues could be considerably threatened by a faster and
deeper reform process (e.g. erosion of tariff preferences and elimination of the sugar rent), they should
favour modalities that slow down tariff reductions and reform of tariff rate quotas (TRQ), as well as
reductions of export subsidies in developed countries. There is no evidence of damage to farmers in
Mauritius and the Seychelles from OECD countries? massive support and subsidies for their agricultural
sector. This argument applies equally to the Comoros, even if it faces a completely different challenge
as a very poor LDC trying to implement an effective agricultural policy. Such a policy would require
even more protection against potentially highly subsidized food imports. Finally, SIDSs should pursue
additional objectives, such as requiring some special and differential treatment in WTO Agreements
(e.g. the Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures)
and in their forthcoming negotiations for a free trade agreement with both neighbouring countries and
the EU.
Answers
February 15, 2010
EXECUTIVE SUMMARY
The Indian Ocean country case study provides good examples of the special characteristics of SIDSs
and their particular dependence on preferential trade arrangements and agreements. Seychelles, the
Comoros and Mauritius are all small and remote economies. The combination of smallness and remoteness
prevents them from successfully pursuing the two traditionally suggested development strategy (exportled
growth or import-substitution). The former is hampered by high transport costs and the latter by
diseconomies of scale. Besides, Mauritius also regularly suffers from natural disasters such as hurricanes
and even more frequently droughts, which can severely damage local production.
The success story of Mauritius, which is the sole member of the World Trade Organization (WTO)
among these three SIDSs, is often held up as a good example of the benefits of outward orientation.
However, it owes much of its success to trade preferences, including the Sugar Protocol, which strongly
contributed to its economic take-off and social development. The contribution of sugar to GDP in
Mauritius has now diminished, but it still plays an important multifunctional role in, for example, soil
preservation, rural development, income distribution and equity, and savings of energy imports. Without
trade preferences the Mauritius story could well have been one of hardship. The same applies, to a
lesser extent, to the Seychelles, where the main export revenues now come from canned tuna as a result
of preferential treatment accorded by the European Union (EU).
Both countries are net food importing developing countries, that have tried to lessen their dependence
on food imports by stimulating their agricultural sectors through various means. They have had some
success with a few products (such as potatoes, onions and poultry in Mauritius, and a few fruits and
vegetables and poultry in the Seychelles), owing largely to protectionist measures in the form of well
targeted tariffs (which can be high, but, nevertheless, below bound ones in Mauritius), import licensing
and seasonal bans, and State trading enterprise operations. They need to promote these elements of
their agricultural trade policy in the WTO negotiations. SIDSs should be allowed some flexibility in
terms of market access, an issue which appears to be more important for them than domestic support at
this point in time (however, that could change in the long run, and, in fact, Mauritius joined other
SIDSs to call for raising the de minimis limit).
Since SIDSs? export market shares and revenues could be considerably threatened by a faster and
deeper reform process (e.g. erosion of tariff preferences and elimination of the sugar rent), they should
favour modalities that slow down tariff reductions and reform of tariff rate quotas (TRQ), as well as
reductions of export subsidies in developed countries. There is no evidence of damage to farmers in
Mauritius and the Seychelles from OECD countries? massive support and subsidies for their agricultural
sector. This argument applies equally to the Comoros, even if it faces a completely different challenge
as a very poor LDC trying to implement an effective agricultural policy. Such a policy would require
even more protection against potentially highly subsidized food imports. Finally, SIDSs should pursue
additional objectives, such as requiring some special and differential treatment in WTO Agreements
(e.g. the Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures)
and in their forthcoming negotiations for a free trade agreement with both neighbouring countries and
the EU.