| In The News #6 >> | ||
>> TITLE The Textile Tale of Mauritius Lead Story-Dateline: >> SUMMARY The tiny island of Mauritius, off the coast of Madagascar, gained independence in 1968 and created a literal oasis of free trade. The new government created a low tax export zone and relaxed labor laws to make the country business friendly. Big business responded accordingly by investing huge sums in textile factories to take advantage of the cheap labor and pro-business environment. Mauritius became one of the most prosperous African nations with an annual household income of approximately $4,560, a stable democratic government, and one of Africa’s highest literacy rates. The tiny country exported over $900 million in clothing to the U.S. and Europe during 2002. Until recently, a poster country for free trade, Mauritius is now experiencing the down side. Trade barriers easing around the world have stiffened the textile competition from India and China, now sources for even cheaper labor. Unemployment has crept up to nearly 10% from a low of 3% a decade ago as textile factories close the doors and move overseas. Many native Mauritians find themselves out of work while the foreign nationals (mostly from China and India) continue to be employed because they are willing to work longer hours for lower pay. The expatriate workers continue to enter the country while the factories continue to leave. Mauritius, it seems has felt both edges of the free trade sword. Foreign investment, once flowing into the country, is now flowing elsewhere and exports are expected to decline when international agreements offering some trade protection in textiles expire in 2005. >> Talking it Over and Thinking it Through
>> Thinking About the Future We often hear proponents of free trade tout the benefits, including a rising standard of living for all countries. Critics of free trade publicize the opposite….an increase in unemployment as jobs follow the cheapest factor inputs and often move to other parts of the globe. The tale of Mauritius highlights both sides. The prosperity associated with initial reduction in trade barriers and the pro-business environment, and then years later the downside as other countries with cheaper labor attracted the same industry away from the small country. Perhaps the primary lesson should be economic diversification while prosperity lingers so that economic health of a country or region does not hinge on one industry. It will be interesting to note whether other countries learn from the experience of Mauritius.
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