Impact of the Dismantling of the Multi-Fiber Agreement in the Export Processing Zones of Mauritius

Abstract

Mauritius is one of the countries that benefited from the Multi-Fibre Agreement (MFA) during the 1980s and 1990s. With the creation of the World Trade Organization in 1995 and the gradual dismantling of MFA until 2005, it was expected that net welfare losses would accrue for Mauritius. Difference-in-difference estimates are used to compare changes in the textiles and apparel sectors. The results show that although the removal of preferences had a negative impact, it was less than what might have been expected. The treatment (T) coefficient was not significant, meaning that exports in the treatment group did not change by a significant percentage after the preferences had been removed. The role played by the African Growth and Opportunity Act in redefining the export potential of Mauritius towards the US and the diversification of exports to non-EU markets played a pivotal role for coping with difficulties experienced with exports to the EU after 2005.