Study To Assess The Socio-Economic Impact of The International Exhaustion of Trademark Rights in Mauritius

THE EUROPEAN UNION’S FRAMEWORK CONTRACT:
FWC SIEA 2018: LOT 2: Infrastructure, sustainable growth and jobs
Study to assess the socio-economic

impact of the international exhaustion
of Trademark rights in Mauritius
Specific contract 2018/398478/1
Interim Report (final)
Prepared by
Dr. Ana María Pacón, LL.M.
June 2019
This project is A project implemented by Consortium Partner

funded by GFA Consulting Group GmbH
the European
Union
Study to assess the socio-economic
impact of the international exhaustion
of Trademark rights in Mauritius
Specific contract 2018/398478/1
Interim Report (final)
June 2019
Prepared by:
Dr. Ana María Pacón, LL.M.
Disclaimer
The contents of this publication are the sole responsibility of the contractor and can
in no way be taken to reflect the views of the European Union.
Address
GFA Consulting Group GmbH

Eulenkrugstraße 82
D-22359 Hamburg
Germany
Phone: +49 (40) 6 03 06 – 703

Fax: +49 (40) 6 03 06 – 799
E-mail: PD.SIEA@gfa-group.de
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TABLE OF CONTENTS
1. Introduction 1
2. Factual background .................................................................................................................. 3
3. Economic foundations of parallel trade .................................................................................... 5
3.1 Causes of parallel trade ............................................................................................................ 6
3.1.1 Price differences between import and export countries ........................................................... 6
3.1.2 Transaction costs, market entry barriers and framework conditions in the import
country ...................................................................................................................................... 7
3.2 Extent and importance of parallel trade .................................................................................... 8
3.3 Economic assessment of parallel imports ................................................................................ 9
3.3.1 Interest of the TM titleholders and the exclusive distributors ................................................. 10
3.3.2 Interest of the parallel importer ............................................................................................... 10
3.3.3 Consumer interest .................................................................................................................. 10
4. Arguments in pro of national exhaustion of trademark law .................................................... 11
5. Arguments in pro of international exhaustion of trademark law ............................................. 16
6. The economic model .............................................................................................................. 19
7. Automotive Industry ................................................................................................................ 24
7.1 Companies operating with foreign brands .............................................................................. 26
7.2 Contribution of companies in terms of employment, added value, investment and
innovation ............................................................................................................................... 27
7.3 Social costs and benefits of the eventual transition to the international exhaustion
of trademark rights .................................................................................................................. 28
8. Pharmaceutical Industry ......................................................................................................... 30
innovation ............................................................................................................................... 33
8.3 Social costs and benefits of the eventual transition to international exhaustion of
trademark rights ...................................................................................................................... 35
9. Textile and Clothing Industry .................................................................................................. 39
innovation ............................................................................................................................... 43
10. Food and beverages ............................................................................................................... 49
innovation ............................................................................................................................... 51
11. Perfumery, cosmetic or toilet preparations ............................................................................. 55
STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

INTERNATIONAL EXHAUSTION OF TRADEMARK RIGHTS i
Interim Report (final), June 2019

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innovation ............................................................................................................................... 60
12. Global assessment of costs and benefits ............................................................................... 63
13. Possible displacement of existing industries in Mauritius ....................................................... 70
14. The Madrid Protocol ............................................................................................................... 71
14.1 Objective ................................................................................................................................. 71
14.2 Advantages for the trademark owner ..................................................................................... 72
14.3 Advantages for the country and trademark offices ................................................................. 73
14.4 Disadvantages ........................................................................................................................ 74
14.5 Accession Procedures ............................................................................................................ 75
14.6 Effects of Accession ............................................................................................................... 77
15. Recommendations .................................................................................................................. 78
15.1 Exhaustion regime of trademark law ...................................................................................... 78
15.2 Capacity building programs .................................................................................................... 78
15.3 Enforcement ........................................................................................................................... 78

INTERNATIONAL EXHAUSTION OF TRADEMARK RIGHTS ii
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1. Introduction
The objective of this study is to assess the socio-economic impact if Mauritius

adopts the international exhaustion of trademark rights regime, focusing on the
economic and commercial aspects. The aim is to bring certainty and influence
future direction of intellectual property policy in Mauritius.
The specific objectives of this assignment are:
 Identification of relevant stakeholders operating with foreign trademark

licences, sorting them out by types of activities.
 A cost evaluation of the contribution of identified stakeholders to the

economy in terms of employment, productivity/contribution to the
economy, social responsibility, value addition, investment, innovation and
other relevant indicators.
 Examination of implications of the exclusive rights enjoyed by identified

operators on competition, the quality of the services provided, the price
of goods and services and on consumer expenditure.
 Analysis of the costs and benefits resulting from the transition from the
national to the international exhaustion of trademark rights regime,
focusing on the socio-economic impact of adopting the international
exhaustion of rights.
The choice between the regime of national or international exhaustion of

trademark law is a State decision that requires taking into account all available
sources of information; of a political, historical, economic or sociological nature.
It is attributed to Sir Winston Churchill the assertion that war is too important to
be left to the military, a phrase that can be extended to all professions and State
decisions. That is, the government should not wait for a mathematical formula to
take a decision, but should gather opinions from different professional
approaches and stakeholders, to weigh them and decide thinking about the
long-term benefit of the country.
In the present case, the historical context places the decision in the aftermath of
a break in the orientation of world trade policy in 1994. It was a break because
the previous orientation was towards free trade.
This orientation begins as far back as the eighteenth century, with Adam Smith
and the beginning of the modern economy, followed by David Ricardo and the

INTERNATIONAL EXHAUSTION OF TRADEMARK RIGHTS 1
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controversy over the free import of grains. The last episode began with the
Breton Woods agreements of 1944, at the end of the Second World War.
The Agreement on Trade-Related Aspects of Intellectual Property Rights

(TRIPS or TRIPS Agreement) of 1994 between all the members of the World
Trade Organization (WTO)1 is the most important multilateral milestone of the
20th century, because it definitively established a link between intellectual
property (IP) and trade.
TRIPS is the first international agreement requiring Members to establish a

detailed set of substantive norms - in all intellectual property (IP) categories -
within their national legal systems, as well as requiring them to establish
enforcement measures and procedures meeting minimum standards. In
addition TRIPS allow each Member to use the WTO Dispute Settlement system
for IP matter.
The process did not end with the TRIPS Agreement, but instead began a new
era that has not yet ended, in which the developed countries struggle to
promote a new wave of strengthening of intellectual property rights, beyond the
provisions of TRIPS and the treaties of WIPO in the frame of the Free Trade
Agreements (FTA).2
In Braithwaite and Davos (2000) developed countries press to create new rules
and regulations, while developing countries tend to accept them but trying to
reduce their impact incorporating other principles, among them the exhaustion
of intellectual property rights at national and international level. In this line,
Álvaro Díaz of the UN-ECLAC indicates that, in the debate on Free Trade
Agreements, the United States underlines the principle of national exhaustion of
rights while the countries of Latin America and the Caribbean emphasize the
principle of international exhaustion of the rights.3 Indeed
“The countries of the region need to pursue intellectual property policies that
facilitate the creation of a new intellectual property system for the twenty-first
century, one that will help the region to achieve its goals in terms of growth,
1 The TRIPS Agreement is Annex 1C of the Marrakesh Agreement establishing the World Trade
Organization, signed in Marrakesh, Morocco on 15 April 1994, available at:
https://www.wto.org/english/docs_e/legal_e/27-trips_01_e.htm.
2 See Antons, Christoph/Hilty, Reto, Intellectual property and free trade agreements in the Asia-
Pacific region, Springer, Heidelberg/New York/Dordrecht/London, 2015; Maskus, Keith/Ridley,
William, Intellectual Property-Related Preferential Trade Agreements and the Composition of
Trade, 2017, available at:
https://www.oecd.org/site/stipatents/IPSDM17_1.1_Maskus_paper.pdf
3 Comisión Económica para América Latina y el Caribe (CEPAL), La propiedad intelectual
después de los tratados de libre comercio, Santiago de Chile, 2008.

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equity and democracy. The challenge consists of striking a new type of

balance between the protection of intellectual property rights and social
interests, and between the need for private control over and public access to
knowledge and information”. 4
The purpose of intellectual property is to generate sufficient incentives to

promote innovations and creations, while ensuring the social dissemination of
its contents and benefits. This is not achieved by establishing eternal and
absolute property rights, but temporary and subject to a series of limitations and
exceptions. Intellectual property represents the balance between private control
and social access, between incentives for inventors and creators and the social
right of access to new knowledge and information.
2. Factual background
Mauritius is an island state of 1.3 million inhabitants in 1,979 square km, which
implies that the population density is high, about 650 per square kilometre.
The country’s economy has made great strides since independence in 1968,
and in 2017 real gross domestic product (GDP) growth reached 4%. The main
drivers of growth were the services sector, especially finance, and the trade and
accommodation services. The latter benefited from a buoyant tourism sector; a
key sector supported by the recent acceleration in the global economy. Tourist
arrivals increased by 5.2% in 2017 to reach 1.34 million—a number equivalent
to the island’s entire resident population.
In accordance to Mauritius Trade Easy, a website supported by the Ministry of

Foreign Affairs, Regional Integration and International Trade of Mauritius:
Mauritius has a liberal economic and trade policy, with a trade-to-GDP ratio
of 98% (World Bank, 2017). The country is a member of the WTO, as well as
other regional economic groups (COMESA, SADC, IOC). Mauritius aims to
transform the island into an open and globally competitive economy and to
fully integrate it into the world trade system through its trade policies.
Comparatively, the island does not have many trade barriers and customs
duties are low (the average applied tariff is only 0.9%).5
4 Comisión Económica para América Latina y el Caribe (CEPAL), La propiedad intelectual

después de los tratados de libre comercio, op.cit.
5 See http://www.mauritiustrade.mu/en/trading-with-mauritius/mauritius-trade-
profile#classification_by_products.

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Mauritius has been a Member of the WTO since 1995, and of the General
Agreement on Tariffs and Trade (GATT) since 1970.6
The country's main trade partners are the European Union (led by France and
the United Kingdom), China, India, South Africa and the United States.7
Mauritius exports clothing, textiles, sugar, cut flowers, molasses and fish and
radio transmission equipment. Sugarcane occupies 90% of the country's
cultivated land and represents 15% of its exports. The export of services has
been on the rise. As far as services are concerned, the country has a positive
trade balance.
The island imports petroleum products, fish, cars, medicine and radio
transmission equipment.8
Mauritius imports more than it exports, and the current account deficit continued
to be supported by financial and capital net inflows, including net inflows to the
large offshore corporate sector. Thus, the overall balance of payments
remained moderately in surplus, and gross international reserves rose to $ 6.1
billion in January 2018 (equivalent to over 10 months of imports).
As can be seen in the following table, the trade deficit is permanent.
The graphic shows that the export of services grew strongly between 2007 and
2011, and the country maintains a positive balance of services.9
Mauritius merchandise exports and imports, and exports and imports of

commercial services 2007-2017 (Million dollars)
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
X 2238 2384 1939 2261 2565 2649 2869 3094 2662 2376 2363
M 3894 4651 3733 4386 5149 5354 5397 5610 4790 4655 5253
6 World Trade Organization. https://www.wto.org/english/thewto_e/countries_e/mauritius_e.htm

7 Ministry of Foreign Affairs, Regional Integration and International Trade of Mauritius.
http://www.mauritiustrade.mu/en/trading-with-mauritius/mauritius-trade-
profile#classification_by_products

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Trade deficit -1656 -2267 -1794 -2125 -2584 -2705 -2528 -2516 -2128 -2279 -2890
Xs 2194 2530 2225 2656 3215 3364 2734 3119 2802 2835 2981
Ms 1562 1910 1586 1951 2428 2382 2143 2426 2188 2038 2231
Services balance 632 620 639 705 787 982 591 693 614 797 750
X Total 4432 4914 4164 4917 5780 6013 5603 6213 5464 5211 5344
M Total 5456 6561 5319 6337 7577 7736 7540 8036 6978 6693 7484
Balance in Current C -1024 -1647 -1155 -1420 -1797 -1723 -1937 -1823 -1514 -1482 -2140
Source: World Trade Organization. World Trade Statistical Review 2018, available at:
www.wto.org/statistics
X and M = merchandise exports and imports
Xs and Ms = exports and imports of commercial services
6000
5000
4000
3000
2000
1000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
X M Xs Ms
3. Economic foundations of parallel trade
Parallel trade in trademarked products can be a significant component of trade

and affect a variety of private and public interests. A study of the parallel import
problem in Mauritius therefore requires knowledge of the causes, extent and
economic consequences of parallel trade.
The ability to use intellectual property rights to avoid parallel imports has been
discussed for decades, and is still being discussed. The patent grant the right to
monopolize the commercialization of the product protected by the patent, which
constitutes an argument to obtain an exception to the economic principle of the
free circulation of goods in international trade. That is why discussions on

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parallel imports have focused on patent law and less attention has been paid to
trademark law.Therefore, it is important to distinguish whether parallel imports
correspond to products with current patent or trademarks.10
3.1 Causes of parallel trade
Parallel imports are a good business if the same products are sold in different
countries at different prices and the parallel trader can sell the product
purchased in the exporting country at a price in the importing country that
covers the cost of the business (purchasing price + transaction costs) and gain
additional profit (arbitrage potential). For the business to be profitable for the
parallel importer, the spread between the prices on the low-price and high-price
markets must be so great that it promises the parallel trader a profit after
subtracting the transaction costs.
3.1.1 Price differences between import and

export countries
Different selling prices in different countries for the products distributed under
an identical trademark are based on the decisions of multinational companies,
which set the selling prices for a product (at the same purchasing prices) in
accordance with the demand conditions in the respective market.
Demand conditions can vary considerably in different countries, and are

determined above all by so-called demand elasticity. So, for a monopolistic
exporter, it makes economic sense in industrialized countries with a relatively
inelastic demand to demand higher prices than in countries with relatively
elastic demand. In the latter countries with a relatively elastic demand, the
increase in prices would reduce the sales volume so much that the total
turnover would be lower than before the price increase.
In addition, the intensity of competition, the cost of production, the level of VAT,
and the purchasing power and willingness to pay of consumers 11 are also
significant for the differences in demand conditions.
When national licensees, rather than holders of intellectual property rights,

provide marketing support, there can be significant differences in marketing
10 For example, on an article of the WTO dealing with the TRIPS Agreement, there is no
reference to trademark law and there are 23 references to patents, available at:
https://www.wto.org/spanish/tratop_s/trips_s/art27_3b_background_s.htm.
11 However, the behavior of the consumer is not determined solely by his solvency. Especially
with certain luxury and branded articles, the so-called snob effect can be observed, according
to which consumers pay attention to a good only after a certain price, because they assume
that the corresponding product is not acquired by a broad layer.

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costs. These differences in market cost are transmitted to the price charged by
the national licensees. Where local marketing costs are lower, the selling price
is lower, and result in a price difference with countries where the costs are high
enough to cover cross shipping and various transaction costs.
It could even happen that licensees in export markets sell to parallel importers
at prices that exclude some or all of the local marketing expenses incurred in
the export market, making dumping possible.
Price differences in the pharmaceutical sector can also be caused by

government price regulations based on national health policy decisions.12
In addition, differences in selling prices for the same product may arise as a
result of proprietors not owning investments in marketing, advertising, repair
and warranty services,13 but rather to national licensees and independent
distributors who reimburse their costs according to the individual expenses
incurred through the sale cover the trademarked products.
3.1.2 Transaction costs, market entry barriers

and framework conditions in the import
country
Transaction costs may reduce the arbitrage potential of parallel imports in terms
of transport and other distribution costs as well as in terms of market entry costs
in the importing country.14
Transportation costs are mainly influenced by the ratio of the specific value of
the product to its physical weight. In addition, sensitivity and perishability of the
goods can cause increased transport costs.
Further costs that the parallel importer has to cover arise by overcoming market
entry barriers in the importing country. If parallel trade is not conducted within a
free trade area, the importer has to pay customs duties. In individual cases,
imports may even be excluded due to import quotas or other trade policy
measures. In addition, market entry costs are incurred if the parallel importer in
the importing country has to modify his products due to health and safety
regulations, technical standards and packaging requirements in the importing
country. This is especially true in the pharmaceutical sector. In certain sectors,
in particular in the fertilizer and plant protection sectors, and in the price-
regulated pharmaceutical sector, the parallel importer must also carry out
12 See Vautier, in: Heath (eds.) Parallel Imports in Asia, 2004, pp. 1, 5.
13 See OECD (eds.), Synthesis Report on Parallel Imports, 2002, p. 8.
14 According to the NERA study (1999, p. 79), parallel transport of motor vehicles, non-alcoholic
drinks and electrical and domestic appliances is associated with relatively high transport costs.

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licensing and licensing procedures and produce proof of conformity (testing,

inspection, certificate), which can entail administrative expenditures and
significant costs.
3.2 Extent and importance of parallel

trade
The extent and importance of parallel trade varies in different countries and
sectors, as only part of the trade volume is effectively eligible for parallel
imports.15 Which volumes are actually affected by a parallel import depends on
the factors mentioned above (the actual price difference and the specific
amount of the transaction costs) and the tradability of the goods concerned and
the maximum volume of goods involved.
The tradability of protected products presupposes that they are transportable

and that there is a sufficiently broad customer base. Tradeable are medicines
and most consumer goods. On the other hand, capital goods that enter into
production processes of other companies as intermediate consumption are in
principle not suitable for parallel imports.
To define the scope of the customer base, among other things, customer
demand and the existence of parallel high and low-price markets are relevant.
Consumer demand is important in that it determines the size of the sales market
and thus the volume of trade that is effectively affected. If the priority of
consumers is to maintain a certain standard of warranty and other services, and
consumers are prepared to pay more for their products, then this will be as
negative for the parallel importer as consumers are for goods to order the
private use also over the Internet.16
Positive demand effects, on the other hand, result for the parallel importer in
parallel high- and low-price parallel markets and price elasticity of demand. The
more price-elastic the demand is, the greater the additional quantity demanded
for the cheaper products.
The real importance of global and national parallel trade is difficult to ascertain,
as parallel imports as legal components of trade are not specifically identified in
the trade balance. Empirical studies on the worldwide extent of parallel trade do
not exist, as far as can be seen. According to the studies to date, parallel trade
15 OECD (eds.), Synthesis Report on Parallel Imports, 2002, p. 232.

16 Konkurrensverket, Schwedisch Competition Authority, Parallel Imports, Summary, 1999, p. 3.

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in industrialized countries has not been significant.17 In individual sectors,

however, parallel imports may play a significant role.
The subject of the parallel trade is primarily technically high-quality goods with
luxury and prestige character as well as pharmaceuticals. According to the
international studies, in particular, car components and auto spare parts,
compact discs and records, clothes, motorcycles, shoes, sporting goods,
perfumes and cosmetics, consumer electronics, photographic equipment,
optics, watches, tires, food and champagne will have varying market shares in
the countries imported from 3% and 15% in parallel.18 It has also been found
that parallel imports can account for up to 20% of trade in specific products.
Unfortunately, there is currently a lack of meaningful empirical research on the
extent of parallel trade in developing and emerging countries. The study by the
OECD does not provide any reliable material on the importance of parallel
imports in these countries.19
3.3 Economic assessment of parallel

imports
The standardization of a specific parallel import rule is of particular economic

relevance. This also applies to the study of the parallel import question in
Mauritius.
On the one hand, the parallel import question affects a wide range of private
and public interests. Depending on the perspective, parallel imports are
therefore considered to be economically advantageous or disadvantageous. A
parallel import ban is initially fundamentally in the interest of trademark
proprietors and exclusive distributors, while parallel imports clearly benefit the
parallel importers.
17 According to Frontier, Economics/Plaut, Erschöpfung von Eigentumsrechten, 2003, p. xvi, the

parallel import volume in Switzerland for pharmaceutical products is estimated at CHF 0.9-1.3
billion and for consumer goods at CHF 0.6-1.1 billion. This corresponds to about 0.19-0.28%
of the gross national product.
18 According to the NERA study (SJ Berwin & Co and IFF Research. 1999. The economic
consequences of the choice of regime of exhaustion in the area of trademarks. Page iv.
London), parallel trade in the EU covered, in particular, beverages, leather goods and
footwear with a market share of up to 5% of clothing with a market share above 5%, and
cosmetics and alcoholic beverages with a market share of 5-10%. According to
Konkurrensverket, parallel trade in car components and car wheels each has a market share
of 20% and parallel trade in clothing and motorcycles each has a market share of 10%. Critical
in relation to both studies OECD, which contains a summary of all relevant studies.
19 OECD (eds.), Synthesis Report on Parallel Imports, 2002.

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3.3.1 Interest of the TM titleholders and the

exclusive distributors
International titleholders generally benefit from parallel import bans because
they are enabled to pursue a differentiated price policy geared by demand
elasticity. If parallel import bans exist in the industrialized countries as countries
with relatively inelastic demand, the IPR holder in these countries may charge
higher prices because he is not under pressure to lower his prices for the
protected products due to the lack of parallel import competition.
3.3.2 Interest of the parallel importer

By contrast, open parallel import arrangements are in the interest of parallel
importers and those involved in parallel imports, e.g. the transport companies.
Parallel importers are international wholesalers, department stores or even
retailers. In addition, multinational companies sometimes operate as parallel
importers themselves in order to sell "excess production" in other countries or to
discipline local traders. In developing countries, due to better knowledge of the
domestic market, mainly national companies are likely to participate in parallel
trade.
In some cases, parallel importers benefit to a significant extent from parallel

imports, whose gross profits and revenues increase with increasing penetration
rates. After experience in the pharmaceutical industry, the price difference is
almost completely exploited by the parallel importers.
3.3.3 Consumer interest

Consumers in developing countries are affected both by parallel import
regulations in their own countries and by parallel import regulations in
developed countries.
Allowing parallel imports to these countries through open parallel import

schemes in developing countries is seen by developing countries as being in
the interest of their consumers, as they can benefit from lower prices and wider
product range. Parallel imports are particularly important in the pharmaceutical
sector as a means to ensure access to affordable essential medicines against
epidemics.
These effects occur when parallel imports to the developing country are in fact
attractive and profitable because the developing country has a higher price level
and a large and efficient market. In addition, the transaction costs incurred in
parallel trade must be relatively low.
However, in the discussion on the authorization of parallel imports into

developing countries, it is also claimed that consumers could also be

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disadvantaged because of parallel imports. Since the system of unfair

competition in developing countries often presents deficiencies, parallel imports
of poor-quality products and inadequate operating instructions cannot be
averted. There is a risk that consumers will be misled and harmed by parallel
imports.
In addition, consumers may to be indirectly disadvantaged as a developing

country with its own capacity to produce goods is weakened in the development
of domestic industry because it is exposed to parallel import competition.
There are different opinions about the positive or negative effects of the
application of international exhaustion of trademark law, and there are
economic arguments in pro and against it. These arguments may relate to
parallel imports in the developed world or in developing countries; or refer to
any restriction on free trade or, in particular, to the prohibition on parallel
imports.
4. Arguments in pro of national

exhaustion of trademark law
The main arguments in favour of national exhaustion and against parallel

imports are, in summary, the following:20
 Parallel imports interfere with exclusive distribution contracts.
 Those who import in parallel take indirect and undue advantage of

advertising, marketing and other expenses incurred by authorized
sellers. A parallel importer does not incur these expenses, since it does
not deal with problems such as supply, services, quality control, storage
facilities, etc.
 The entry of parallel imports generates the emergence of direct

competition for the official distribution network (controlled by the owner of
the trademark), which triggers intra-brand competition (horizontal
competition) beyond the owner's control.
 By acquiring an imported product in parallel, the consumer could be

acquiring apparently original and genuine merchandise, but that would
not be covered by any guarantee, the consumer not being aware of this
situation when acquiring the parallel importer's product.
20 Ferrero, Gonzalo, Importaciones paralelas y agotamiento de derechos de propiedad

intelectual. Themis: Revista de Derecho, N° 41. Lima, 2000, available at:
https://dialnet.unirioja.es/descarga/articulo/5109665.pdf

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 Only the owner of the trademark, and not the parallel importers, can
adequately assume the handling of certain products in terms of
packaging, deposit conditions, and other aspects.
The principal opponents to international exhaustion are the owners of trademark

rights, which is logical because “Arguments for limiting exhaustion to the EEA
derive from the belief that this provides a higher economic reward to firms”. 21
Actually, the International Trademark Association (INTA) “supports the principle

that international exhaustion should not apply to parallel imports in the absence
of clear proof that the trademark owner expressly consented to such imports,
and that the burden of proof should be on the party seeking to demonstrate
such consent”.22
In similar orientation, according to the International Chamber of Commerce

(ICC), the socioeconomic impact would be negative in the following aspects:23
 International exhaustion reduces the commercial incentive to invest in

innovation, brand reputation, and customer service.
 In the long term, therefore, international exhaustion could discourage

investment in innovation and brand reputation, with negative
consequences for social and consumer welfare.
 The intellectual property owner will be forced to withdraw the product

from low priced markets altogether, denying access to beneficial
products, or may be compelled to converge prices internationally to stop
leakage from the lower priced market to the higher priced market, and
such convergence will inevitably exclude less developed regions, or may
also reduce the investment in manufacture, supply and customer service
in certain countries, further reducing consumer welfare.
 In the long run, a regime of international exhaustion could limit instead of

encourage trade and investment and deprive consumers in certain
markets of innovative products that they could have afforded under a
differential pricing system.
But international studies were written in developed countries, considering the

hypothesis of retaliation of other countries that have to protect their national
21 NERA, op.cit.
22 Harmonization of Trademark Law and Practice Committee. 2011. INTA Model Free Trade
Agreement. New York
23 International Chamber of Commerce, ICC, Commission on Intellectual and Industrial Property.
Policy statement. Exhaustion of intellectual property rights. Washington, 2000.

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enterprises who invest in trademarks around the world. Also, studies carried out
by international organizations refer to the international community and not to an
extremely little economy in an island. Thus, the cited studies that lead to the
conclusion that "moving towards an international exhaustion of rights would
bring no real benefits to consumers" have been made to answer the question
about the impact on the welfare of consumers of the imposition of an
international exhaustion regime in the economy of a large group of developed
countries, not just one little country.
For the reasons indicated, it is important to focus on the analysis on the position
of The Mauritius Chamber of Commerce and Industry (MCCI), expressed in the
document: International Exhaustion of IP Rights in Mauritius, MCCI Position.
November 2016. MCCI Position Papers/ 2016/ No. 1.
The position paper of MCCI24 includes several lists of arguments similar to

those of INTA and ICC:
a) Does international exhaustion of rights benefit the consumer?
 The MCCI paper cited a document of The London School of

Economics,25 which is a research on six European countries, where
“Pharmaceutical parallel imports are defined as the legal importation into
a country where a patent has been registered for the same product which
is patented and legally marketed in another country without the
authorization of the patent holder”. There is no doubt that the problem
referred to in the document is the international exhaustion of patent law,
not the international exhaustion of trademarks rights.
 The citation26 of the OECD document27 “The high entry cost together with
rapidly decreasing margins from parallel imports due to country size are
likely to limit the number of parallel imports in a small country - the
resulting oligopolistic market structure could leave little benefit for the
customer” refers to the low probability of parallel imports entering a small
country, something that may be in the interests of the current
representatives of foreign trademarks, but in no way allows concluding
that parallel imports could raise consumer prices in Mauritius. On the
24 MCCI Position Paper, International Exhaustion of IP Rights in Mauritius, November 2016.

MCCI Position Papers/ 2016/ No. 1.
25 ―The Economic Impact of Pharmaceutical Parallel Trade, Special Research Paper, LSE, p. 15
(sic).
26 ―OECD Economic Surveys: Switzerland, 2004, p. 120.
27 Giorno, C./Jimenez, M./Gugler, P., "Product Market Competition and Economic Performance
in Switzerland", OECD Economics Department Working Papers, No. 383, OECD Publishing,
Paris, 2004, available at: https://doi.org/10.1787/336304241158.

_____________________________________________________________________________________________
other hand, the comparison with a Mediterranean country, with borders

with four developed countries and with a GDP equal to 65 times that of
Mauritius, does not allow to reach that conclusion either.
 MCCI also cites the document of Müller-Langer, “Does Parallel Trade

Freedom Harm Consumers in Small Markets?” and reproduces the
affirmation “Parallel trade limits the scope for third-degree price
discrimination in the sense that the price in a low-income country with a
high price elasticity of demand is likely to increase as a result of parallel
trade, whereas the price in a high-income country with a low price
elasticity of demand is likely to fall”.28 But, it happens that the economic
model used by Müller-Langer considers only two countries, that the
producer has the patent and the legal monopoly of the market in both
countries, and that using his monopoly power discriminates prices to
maximize his total utility. The application of this model to the case of
Mauritius implies that the rest of the world is the producer country, and
that parallel exports start from Mauritius and the products return to the
producing country. It is not "international exhaustion of rights in
Mauritius" but the exhaustion in the rest of the world that allows the
author to conclude that the "parallel trade flowing from low-income
countries to high-income countries should be prohibited".29 In short, what
worries the owners of patents in developed countries is the re-enter to
their market of products that they sold at a low price in developing
countries; they are not in any way concerned about the exhaustion of
trademark law in Mauritius.
 The reference in the MCCI paper to "TRIPS, pharmaceuticals,

developing countries and the DOHA solution, 2002" repeats the
preceding argument.30
b) Parallel importer rent and 'free rider' situation
 It is noted that companies that import in parallel exploit a price difference

between the exporting and importing countries of approximately 21
percent of the price of the original manufacturer in Sweden. However,
28 Müller-Langer, Frank. 2008. Does Parallel Trade Freedom Harm Consumers in Small
Markets? Croatian Economic Survey 2008.
29 Müller-Langer, op.cit., p. 25.
30 ―Some intellectual property owners may set their retail prices lower in less developed countries
to reflect local economic conditions, such as lower per capita incomes. The example of
HIV/AIDS Drugs were taken. In the absence of parallel import restrictions, a seller would lose
this ability to price discriminate. This could force the seller to raise prices in those countries to
the detriment of their consumers”.

_____________________________________________________________________________________________
this fact is an argument in favour of international exhaustion, because it

shows that the "exclusive" distributor was taking advantage of that
margin or higher and that parallel imports could reduce that margin in
favour of Swedish consumers.
 Follow an argument that is an extension of the previous one: "Unless

parallel trade can operate dynamically on prices, it creates inefficiencies
because most, but not all, of the financial benefits accrue to the parallel
trader rather than the heath care system or patient".The parallel importer
increases competition, which benefits the consumer, but it is criticized
that its benefit is greater than that of the consumer. The logical
conclusion would be that more parallel importers are required, and no
less, to reduce the financial benefits that the first parallel operator
receives.
 Then it is pointed out that economic theory ―suggests‖, does not

demonstrate, the risk of shortages if there is international exhaustion of
patent law (not the right of trademarks) in a developed country.
 The argument refers to the protection of patented products.
 Finally, a real fact stands out: Parallel importers get a free ride in the
market demand and the brand image of the product created by the
authorized distributor, without sharing the efforts and expenses of
marketing communications that have generated the demand and the
associated image. However, the OECD citation refers to the owners of
patents, not trademarks. In the face of increased competition, authorized
channels will have to face the cost of marketing to maintain their sales, a
cost that the authority will include in its overall social cost-benefit
assessment.
c) Impact on R&D activities
The studies cited in the MCCI document refer to the possible effects of parallel
imports of products with patent in force in developed countries, not to products
with a foreign trademark in the Mauritius market.
d) Brand equity & after sale services
Consumers may purchase parallel imported trademarked goods without being

aware of the difference between these goods and those purchased through
'official' distribution channels. If problems arise, and customers find that they do
not get the expected post-sale service and warranty protection, it may be the

_____________________________________________________________________________________________
goodwill established by the 'official' distributor/trademark owner which will

suffer.31
5. Arguments in pro of international

exhaustion of trademark law
The main arguments of those who promote parallel imports are the following:32
 The parallel importer generates an increase in the supply of the product,

and induces price competition with sellers that were integrated into the
official network. Price competition may also occur between the sellers
that are members of the same network, which undoubtedly will directly
benefit the consuming public.
 Through parallel imports, existing demand is met and multinational

corporations are prevented from applying price discrimination policies. In
effect, if prices are discriminated in a country, parallel importers will
acquire the products in the country where the discriminatory price is
lower. Thus, if there were no parallel imports, producers could set higher
prices in some countries arbitrarily.
 Parallel imports also help to avoid price conversions in oligopolistic

markets, because they generate a price war that is beneficial for society
by generating a more efficient allocation of resources.
 Increasing the supply, satisfies the demand of the public and decreases
the prices to the consumer.
 The obligation of the State to protect consumers is not only to protect

them from possible harm, but also to promote their freedom to choose
between different products and alternative suppliers, which can occur
through parallel imports.
 If the exclusive distribution contracts do not allow parallel imports,

monopolies are generated because these contracts grant them an
absolute territorial protection.
31 Philip Kitchen/Lynne Eagle/Lawrence Rose/Brendan Moyle,The Impact of Gray Marketing and

Parallel Importing on Brand Equity and Brand Value. Research Memorandum 38. The
University of Hull Business School, 2003.
32 Ferrero Diez Canseco, G. Importaciones Paralelas y Agotamiento de Derechos de Propiedad
Intelectual. THEMIS, Revista de Derecho, N° 41, 2000, available at:
https://dialnet.unirioja.es/descarga/articulo/5109665.pdf

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An argument of a generic nature that encompasses the previous ones, is based

on the contradiction between the right of trademarks and the economic principle
of free movement of goods.
The ability to use intellectual property rights to avoid parallel imports is

questioned because the economic function of trademarks is limited to:
1) Inform consumers about the origin of the products, improving their ability to
judge the quality of these.
2) Represent the value of the investments made by the owner to maintain the
quality of their products, which allows them to fight against piracy and unfair
competition.
Consequently, any sign, or any combination of signs, capable of distinguishing

the goods or services of a company from those of other companies may
constitute a registered trademark. Given this definition, Stucki's question is:
Why should a trademark right empower its owner to prohibit the importation of
legally acquired, non-counterfeit products that legally bear an identical, although
usually foreign mark?33
On the other hand, the principle of free circulation of goods and services is the
basis for the creation of the WTO and of multiple regional agreements, because
it promotes growth and well-being, both in developed countries and in
developing countries.
In the conflict between trademark law and the economic principle of freedom of
trade, the United Nations (UN) considers that restrictive business practices
include:
Restrictions on the importation of goods which have been legitimately

marked abroad with a trademark identical with or similar to the trademark
protected as to identical or similar goods in the importing country where the
trademarks in question are of the same origin, i. e. belong to the same owner
or are used by enterprises between which there is economic, organizational,
managerial or legal interdependence and where the purpose of such
restrictions is to maintain artificially high prices;34
33 Stucki, Marc. 1997. Trademarks and Free Trade. An Analysis in Light of the Principle of Free
Movement of Goods, the Exhaustion Doctrine in EC Law and of the WTO Agreements. Bern:
Stampfli Verlag AG.
34 United Nations Conference on Trade and Development. The United Nations Set of Principles
and Rules on Competition. https://unctad.org/en/Pages/DITC/CompetitionLaw/The-United-
Nations-Set-of-Principles-on-Competition.aspx

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A good summary of the problem of academic analysis on parallel imports can

be found in a document cited by the MCCI:
The practice of parallel importing represents an uneasy balance between

the protection of intellectual property rights such as trademark and patent
rights and the liberalization of trade in goods and services promoted by
organizations such as the World Trade Organization (e.g. Bronkers,
1998). For gray markets to operate there must be a source of supply,
easy access from one market to another, and price differentials that are
large enough to make the venture financially viable. Much of the debate
in the academic literature centres on whether parallel importing is a
legitimate response to discriminatory pricing strategies or a free rider
problem (see, e.g. Malueg & Schwartz, 1994).35
Indeed, the balance between the protection of intellectual property and the
principle of free trade is difficult, by which goods must circulate between
countries in the same way as within their country of origin: no obstacles to
export in the country, country of origin, borders or destination.
The balance is particularly difficult in the case of patents, because – as already

mentioned - they grant monopoly power to the patent titleholder (the inventor or
the person that has the right to apply for a patent) over the patented product for
a period of several years; as an incentive to creation and as compensation for
the cost of the invention. But, the right of trademarks does not grant monopoly
power over the branded products. Competitors can still use the products but
with another trademark.
From this point of view, the argument in favor of the application of international
exhaustion of trademark rights derives, as a logical conclusion, from the priority
accorded to freedom of trade; so it would only be necessary to demonstrate that
free trade is better than imposing restrictions on the free transit of goods and
services, to conclude that it is appropriate to authorize parallel imports.
The most discussed trade restriction has been the imposition of tariffs on
imports, a subject that is briefly presented below. It should be noted that the
argument begins, paradoxically, stating that the country that imposes tariffs gets
a benefit.
35 Philip Kitchen, Lynne Eagle, Lawrence Rose and Brendan Moyle. 2003. The Impact of Gray
Marketing and Parallel Importing on Brand Equity and Brand Value. Research Memorandum
38. The University of Hull Business School, UK.
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_P
arallel_Importing_on_Brand_Equity_and_Brand_Value

_____________________________________________________________________________________________
In manuals of international economics courses it is demonstrated that the

optimal import tariff is always positive, and that the benefit for the country that
imposes this trade restriction is greater in the large countries, in which they can
affect the international price of the products. However, in practice it happens
that the unilateral application of tariffs leads very quickly to reprisals from
partner countries, so that the initial benefit obtained by a country becomes a
loss for all the countries of the world.
This was what happened before the Second World War, which was preceded
by a commercial war; with tariffs, other restrictions on trade and combat
devaluations. The experience of both wars led most nations to sign the General
Agreement on Tariffs and Trade (GATT) consecrating the general principle that
goods should circulate between countries as they circulate within each one,
without any restriction.36 Thus, in practice it was shown that, even for countries
that can impact the world market, trade restrictions are harmful for everyone.
6. The economic model
To distinguish the different impacts that parallel imports can have, a partial
equilibrium model with functions of supply and demand is applied, in which the
price and volume of a product traded are the result of the balance of the internal
market forces, together with the international price of the imported product.
The first graph represents a situation of autarky, without international trade. The
balance point between supply and demand is marked with the letter A, the
quantity produced and consumed will be Qa, and sales will be made at the price
Pa. The benefit or surplus of the consumer, is measured by the area of the
upper triangle and that of the producer by the lower triangle.
36 The last of the recitals of the General Agreement on Tariffs and Trade of 1947 is: Being
desirous of contributing to these objectives by entering into reciprocal and mutually
advantageous arrangements directed to the substantial reduction of tariffs and other barriers
to trade and to the elimination of discriminatory treatment in international commerce.

_____________________________________________________________________________________________
Price
Domestic offer
Consumer
surplus
A
Pa
Producer
surplus
Domestic demand
Quantity
Qa
If the market opens up to international competition, there will be imports if the

world price is lower than the domestic price, otherwise there would be no
incentive to import.
To study the impact of imports (which include parallel imports) in Mauritius, the
simplest and most appropriate assumption is that, given the small size of the
national economy in relation to the rest of the world, any quantity of the product
that it demands can be bought without affecting the international price. For this
reason, the following graph shows the international offer of the product by a
horizontal straight line at the Pm level of the world market price.

_____________________________________________________________________________________________
Price
Domestic offer
1
A
Pa
2
4 5
Pm International price
3 Domestic demand
Quantity
Qp Qa Qc
Due to imports, the price of the product falls to the level of the international price
Pm, the quantity consumed rises from Qa to Qc and domestic production falls to
Qp. The difference between the quantity demanded and the quantity offered is
covered by imports.
The fall in the domestic price means that the surplus of the consumer rises and
that of the producer goes down.
In the graph it can be seen that the consumer surplus indicator, which was
represented by area number 1, increases in areas 2, 4 and 5; and the surplus or
benefit of the producer is reduced in area 2. This last area does not mean a net
gain for the economy, because the consumer's profit is made at the producer's
expense; but there is a net gain that is measured by the sum of areas 4 and 5,
which corroborates that if a country is opened to international trade there is a
net benefit to society and, on the contrary, any restriction on imports harms the
consumers.
Under the current regime of national exhaustion of trademark law, there are
imports, but parallel imports are restricted. Therefore, the following graph is
based on a global supply that does not include parallel imports (price Ps) and

_____________________________________________________________________________________________
the result of greater trade opening is a reduction in the domestic price of the
product from Ps to Pm.
Price
Domestic offer
Global offer without

Ps parallel imports
1 2 3 4
Pm Global offer
Domestic demand
Quantity
Q2 Q1 C1 C2
This price reduction in turn reduces the surplus of the domestic producer in area
1 and that of the importers with trademark licenses in area 3.
In contrast, the surplus of consumers increases by an amount equal to the sum

of the areas 1 + 2 + 3 + 4.
Since two groups of economic agents have the indicated losses due to the price
reduction, the net benefit for the national economy as a whole is equal to the
sum of the 2 + 4 areas.
It should be remembered that this is a partial static equilibrium model, very

useful for estimating the short-term impact on the market of a product that has
no greater effect on the economy as a whole, as in the case of tea, which is an
example used by Professor Marshall.37 In particular, it should not be forgotten
that the partial equilibrium model is short-term, and that it does not take into
37 Marshall, Alfred, Principles of Economics. Eighth Edition. Palgrave Classics in Economics,

1920, available at: http://www.library.fa.ru/files/Marshall-Principles.pdf

_____________________________________________________________________________________________
account the possible long-term impacts or the possible indirect effects of the
release of parallel imports, such as:
 The estimation of the economic and social benefit will be an

underestimation of the real impact.
 The increase of the real income of the consumers in Mauritius, due to the
reduction of the prices of the goods in which the parallel imports happen.
This would increase their purchasing power, since the savings in their
initial consumption basket would allow them to consume more and better
goods.
 Depending on the value of elasticities, imports could increase or
decrease, with an effect on the exchange rate.
Furthermore, to try a quantitative estimate of the different impacts that parallel

imports can have, it is necessary to know the following variables:
 Quantity and price of a basket representative of imports of products with

a foreign brand.
 Quantity and price of the imports of perfect substitute products of the
previous ones.
 Quantity and price of the national production of perfect substitutes of the
previous ones.
 The percentage difference between the price of foreign brand products
and that of parallel imports.
 Elasticity price of demand and national supply.
Unfortunately, this information was not available. In particular, that of

elasticities, whose estimation requires econometric research. In the study of the
pharmaceutical sector, indicators of the other variables were found, at least
approximate, which allowed for some numerical calculations adopting estimates
of the elasticities of other countries.
In summary, the model demonstrates that there is a positive net impact on the
well-being of the population, but the quantitative estimate of the impact would
be less than the actual impact. A more accurate estimate would require the
application of a dynamic general equilibrium model, much more complicated
than the one used.
The situation of five sectors is presented in some detail below, to estimate the
possible consequences of the international exhaustion of trademark law in
Mauritius.

_____________________________________________________________________________________________
7.Automotive Industry
In Mauritius there are several car dealers that cover the most popular brands in
the world, which benefits the consumer by the multiple options to choose
according to their acquisition capacity. Dealerships have thrived selling a variety
of cars, from luxury cars to compact cars, in differentiated markets.
In 2017, 531,797 vehicles were registered on the island, of which 8,799 are
owned by the government. The private ones were 522,998: of which 51.4%
were cars and dual-purpose vehicles and 39.0% were two-wheeled motorized
vehicles. The remaining 9.6% consists of vans, lorries and trucks, buses and
other vehicles.

_____________________________________________________________________________________________
Motor vehicles registered, 2014 - 201738
Type 2014 2015 2016 2017
A. Government owned vehicles 8,134 8,248 8,552 8,799
B. Private/commercial vehicles:
Car 171,679 185,947 200,230 216,416
Dual purpose vehicle1 47,741 47,539 47,199 46,843
Double cab pickup2 1,886 2,503 3,251 4,282
Heavy motor car3 1,067 1,081 1,108 1,134
Motor cycle 71,045 76,567 81,648 87,199
Autocycle 115,607 115,908 116,476 116,956
Lorry and truck 13,561 13,676 13,946 14,312
Van 25,989 26,327 26,739 27,190
Bus 3,006 2,980 3,107 3,101
Other 5,337 5,368 5,420 5,565
Total 465,052 486,144 507,676 531,797
1 Essentially a car but so designed as to be capable of carrying a certain load of goods.

2 New category of vehicle defined in Road Traffic Act as amended by Act No. 27 of 2012.
Prior to the year 2013 'double cab pickup' was included in 'dual purpose vehicle'
3 Vehicle of the 'bus' type designed to carry passengers but not for hire or reward
The more impressive numbers come from a comparison of registered

vehicles at the NTA39 over the last decade. In 2006, there was a total of
319,440 vehicles registered in the country, including 91,911 cars and
33,936 motorcycles. The numbers have systematically gone up since,
averaging a percentage increase of over 4% every year. As of February
2017, there are 511,139 vehicles registered at the NTA, with 204,931
cars and 83,666 motorcycles. With these numbers, there should have
been little reason for concern for the industry in Mauritius but there are
inevitable challenges.40
38 Ministry of Finance and Economic Development, Annual Digest of Statistics – 2017, Port Luis,
Mauritius, 2018, Table 13.1.
39 The National Transport Authority, Ministry of Public Infrastructure and Land Transport,
Mauritius.
40 Moorghen, Shanda, Automotive Industry: facing the challenges, 2017, available at:.
https://www.lexpress.mu/node/307525.

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7.1 Companies operating with foreign

b r a n d s 41
There are several entities involved in car dealership covering most of the
popular brands in the world, and it seems that the automotive market in
Mauritius is becoming more and more competitive for suppliers.
However, in Mauritius at the very least, car dealers manage to thrive by

selling a variety of different cars, ranging from luxury cars to compact
cars suited to the streets of Port Louis. They each have their own
markets even though the major companies in the Mauritian automotive
industry control the lion’s share of the market. For the time being, the
industry has been better off with the increased competition.42
Ranking Company Name Turnover Profit Before Tax % Profit
1 Leal & Co. Ltd 3012.07 176.13 5.8
2 ABC Motors Company 2938.46 129.87 4.4
3 CFAO Motors (Mauritius) Ltd 2298 105.2 4.6
4 Axess Limited 2104.03 62.48 3.0
5 Toyota Mauritius Ltd 1889.93 257.18 13.6
6 United Motors Limited 1033.5 59.6 5.8
7 Allied Motors Co. Ltd. 546.62 37.62 6.9
8 EAL Man Hin and Sons Limited 495.03 17.99 3.6
Total 14317.64 846.07 5.9
Source: DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018
Edition. La Sentinelle Editions
41 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La Sentinelle Editions.
42 Moorghen, Shanda, op. cit.

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7.2 Contribution of companies in terms of

employment, added value, investment
and innovation
The vehicles imported by the main companies, registered every year, are the
ones that led to reach the 531,797 units registered in 2017. As can be observed
in the following table, the value of imports in 2015 was higher than nine billion
Rupees.43
Trade 2015 by Chapter (Rs. Million)
Chapter Description Imports Domestic Re-Exports

(CIF) Exports (FOB) (FOB)
87 Vehicles other than railway or tramway rolling-stock and parts 9,355 1 98

and accessories thereof
As can be seen in the following tables, employment in the industrial group,

Wholesale & retail trade; Repair of motor vehicles and motorcycles has
remained at the level of one hundred thousand workers. At the same time, the
GDP has grown at an annual rate of more than 3% in all the years of 2012 to
2015, reaching almost Rs. 45 billion in 2015.
In contrast, the Gross Domestic Fixed Capital Formation of the industrial group
was greatly reduced in real terms in those years, to the point that its real value
in 2015 was only 45.9% in 2012. It should be noted that Wholesale and retail
trade activities represent most of the industrial group.
Gross Domestic Product by industry group at current basic prices
2012 2013 2014 2015
Wholesale & retail trade; repair of motor vehicles and motorcycles 36807 36464 42469 44861
Annual real growth rates (%) 3.9 3.1 3.2 3.0
of which: Wholesale and retail trade 33906 36464 38897 40961
Annual real growth rates (%) 3.5 2.7 2.9 2.7
43 The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis

_____________________________________________________________________________________________
Gross Domestic Fixed Capital Formation at current prices by type and use
2012 2013 2014 2015
Wholesale & retail trade; repair of motor vehicles and motorcycles 8875 6020 5047 4624
Annual real growth rates (%) -6.9 -33.0 -17.4 -10.1
Employment (‘000) 99.5 101.5 101.5 96.6
of which: Wholesale and retail trade 8438 5643 4660 4153
Annual real growth rates (%) -8.2 -34.0 -18.6 -12.6
7.3 Social costs and benefits of the

eventual transition to the
international exhaustion of trademark
rights
As indicated, all trade liberalization in a small country has a positive net impact,
although not all economic agents benefit.
Regarding the positive impact in general, parallel imports do not occur if there is
no substantial price difference, so that, if this form of commercial release
occurs, there will be a reduction in the price of vehicles and motorcycles in
Mauritius that will benefit the consumers.
The national added value will also increase, in proportion to the increase in
wholesale and retail trade of the sector, as well as the greater activity of the
repair of motor vehicles and motorcycles activities.
For this, it will be essential to invest in the repair of motor vehicles and
motorcycles activities, so that the formation of fixed capital will increase, which,
as has been pointed out, was reduced between the years 2012 and 2015.
Employment in the sector, which remained stable during those years, should
increase in proportion to the increase in imports of vehicles and motorcycles
and the economic activity they generate.
Some entrepreneurs, who currently import vehicles with a foreign trademark,

have expressed their concern about the increased competition that parallel
imports would generate. However, they have already faced a greater challenge

_____________________________________________________________________________________________
with the unfair competition of the so-called "Dumping of used cars",44 and it
seems that they handled it well.
In this case, different scenarios can be presented according to the way in which
representatives of foreign brands react to the authorization of parallel imports.
One possible way of reacting is to diversify its offer by including lower-priced
vehicles (even lower-quality ones) to better take advantage of the different
income levels of the population. That is, participating themselves in the
business of parallel imports, for which they have the advantage of positioning in
the market.
At this point, it is convenient to consider the Chinese experience, but not exactly
that of the great country but that of its free trade zones, which are more similar
territories to the geography of Mauritius.45
Indeed, a recent pilot scheme launched in the new Shanghai Free Trade
Zone (SFTZ), later extended to Tianjin, Guangdong and Fujian, admits
the parallel imports of cars, especially luxury cars that are much more
expensive in the PRC than in the US.
(…)
For some time, the issue of parallel imports in China has been somehow
underestimated. However, the rise in prices following the economic
growth, development, increasing wealth and the abolition of many
restrictions to the establishment of foreign business in the country have
begun to attract more foreign entrepreneurs and, therefore, more parallel
traders. One of the most interesting openings of the Chinese market to
parallel imports occurred in the context of the Shanghai Free Trade Zone
(SFTZ). This one is the first free-trade zone in mainland China and
features among its goals the promotion of trade and investment in China.
1 Recently, on 15 January 2015, the SFTZ launched a pilot programme

for the parallel imports of cars, allowing car dealers to import vehicles
directly from overseas without authorisation from any particular car
maker. The goal of the plan was to exploit the huge price differential
between the luxury cars sold in the US and those marketed in China.
For example, an Audi Q7 sports utility vehicle costs $48,300 in the US
44 Centre for Science and Environment (CSE), Clunkered: Combating Dumping of Used Vehicles
-- A roadmap for Africa and South Asia, 2018, available at:
https://www.cseindia.org/clunkered-combating-dumping-of-used-vehicles-8863.
45 Zappalaglio, Andrea, The exhaustion of trademarks in the PRC compared with the US and EU
experience: a dilemma that still needs an answer. European intellectual property review ·
September, 2016, available at: https://www.researchgate.net/publication/308618825.

_____________________________________________________________________________________________
and parallel importers sell it in China for $106,000, i.e. at a price that is
20 per cent cheaper than that charged by the official German
manufacturer’s authorised retailers. At the end of May 2015, the
Chinese Government announced that the programme would be
extended to the city of Tianjin, and the pilot project was launched on 8
June and later extended to Fujian and Guangdong’s FTZs. 46
In this sense, another appointment to consider is the text of Moorghen:
With all that being said, there is no doubt that the automotive industry is
set to face challenging times ahead. However, given the market in
Mauritius and the poor public transport system, the industry is set to
thrive for years to come.47
8. Pharmaceutical Industry
Health is one of the most important aspects worldwide. The introduction and set
up of the World Health Organization (WHO) further enhances the value and
importance of Health worldwide.
In Mauritius, although it was a small island with a little per capita gross domestic
product of price US$ 5406 (National Accounts Estimates, 2003) it has managed
to put a system of health care which has brought major achievement in order to
put Mauritius to the level top in health among developing countries. The general
state towards health in Mauritius’ population has been improving and is in good
terms for the present years. Among other countries, in Mauritius the public
health care services are tax funded and free as it is considered health to be a
human right issue48.
In delivering the best health care services, it will missed an important point that
is the safety of the health care workers who are responsible in deliver the health
care services including the patient and the cleaners in the health care
establishment. Among the different hazards in the hospitals, there consist of
biological hazards which affect the health care workers, patients and cleaners
(guidelines for health care worker, n.d). The health safety executive suggested
that the rate of infection among nurses may be at 30/100,000 a year. There may
be cases which are unreported (protecting staff from infection, n.d).
46 Zappalaglio, Andrea, The exhaustion of trademarks in the PRC compared with the US and EU
experience: a dilemma that still needs an answer. European Intellectual Property Review
(EIPR), September, 2016, available at: https://www.researchgate.net/publication/308618825.
47 Moorghen, Shanda. 2017. Automotive Industry: facing the challenges, available at:
https://www.lexpress.mu/node/307525.
48 WHO, 2008.

_____________________________________________________________________________________________
In the opinion of foreign trade officials of the United States, the pharmaceutical
sector of Mauritius has relevant characteristics for the interest of the service
providers or North American investors.
Mauritius has a well-developed health system. About 73% of the health

needs of the population are catered to by public health institutions and 27%
by the private sector. Non-communicable diseases, such as cardiovascular
diseases, diabetes, cancer, and chronic respiratory diseases account for
80% of total mortality in Mauritius every year.
Public hospitals are free in Mauritius, but there are also several private
clinics. Mauritius’ healthcare infrastructure includes five major public
hospitals, six specialized public hospitals, 18 private multi-specialty clinics,
11 private specialized clinics, and 28 medical laboratories. There are more
than 4,500 beds in both public and private hospitals. The Government has
announced plans to upgrade the healthcare infrastructure, and tenders are
issued on a regular basis for medical equipment as well as for the
procurement of pharmaceuticals and disposables.49
And in the opinion of the officials of The Economic Development Board (EDB)
the pharmaceutical sector of Mauritius has bright development prospects.
The healthcare sector in Mauritius has metamorphosed itself into an

integrated cluster underpinned by a core group of high-value activities such
as hi-tech medicine, medical tourism, medical education and wellness.
With state-of-the-art medical facilities and highly qualified personnel,

Mauritius is positioning itself to cater for the growing needs of both domestic
and international patients.
Over the years the number of private institutions has doubled and future
projections indicate that the sector is expected to substantially contribute to
GDP and become a pillar of the economy.
The presence of global healthcare players is increasingly positioning

Mauritius as a competitive high-tech medical hub.50
Private institutions have multiplied and are expected to continue growing until
they become an important sector of the national economy.
49 Export.gov Helping US Companies Export. Healthcare Resource Guide: Mauritius, available

at:
https://2016.export.gov/industry/health/healthcareresourceguide/eg_main_116239.asp#P179_
12554.
50 The Economic Development Board (EDB), available at:
http://www.edbmauritius.org/opportunities/healthcare/.

_____________________________________________________________________________________________

brands
The health sectors operators showed notable growth in 2017, in both turnover
and profitability. Their cumulated turnover reached Rs. 5.30 billion in 2017,
compared to Rs. 4.32 billion in 2016. The total profit stood at Rs. 602 million.
Seven newcomers make their entry in the list of Top 100 Companies 2018-
Mauritius, and two companies no longer form part of the ranking51. The attached
table includes a list of the main private companies in the sector, as well as two
indicators of their economic activity in 2007.
In accordance to Mauritius The TOP 100 Companies; Ajanta Pharma

(Mauritius), a specialty pharmaceutical company engaged in the development,
manufacturing and marketing of quality finished dosages, was (2017) the
company in the health sector with the biggest turnover (Rs. 1.4 billion) and profit
(Rs. 309 million). The Medical and Surgical Centre Limited was in the second
place with a turnover of Rs. 1.2 billion). The company however showed a loss of
Rs. 14.25 million. Scott Health was in the third place with Rs. 4.18 million in
turnover.
Here the list of the biggest companies in the health sector:

Turnover Rs Profit Before Tax
Company Name
Million Rs Million
1 Ajanta Pharma (Mauritius) Limited 1400 309
2 The Medical and Surgical Centre Limited 1216 -14
3 Scott Health Ltd. 420 21
4 Proximed Ltd 317 86
5 Medical Trading Company Ltd. 300 4
6 City Clinic Ltd 279 65
7 Ducray Lenoir Limited 269 13
8 Nutec Medical Ltd 246 4
9 The Mauritius Pharmacy (Seegobin) Ltd. 232 8
10 Jyotic’s Clinic Ltd 161 50
11 Nouvele Clinic du Bon Pasteur Ltee 130 11
12 Pay Medical Ltd 109 7
13 Azur Medical Ltd 56 15
14 Bo Head Ltd 55 12
15 Pharmacure Co Ltd 45 2
16 Orbit Healthcare Services (Mauritius) Ltd 43 5
17 Gynecology and Fertility Centre Ltd 30 8
Total 5308 606
Edition. La Sentinelle Editions
51 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La Sentinelle Editions.

_____________________________________________________________________________________________
According to the Ministry of Health there are 33 pharmaceutical companies that

are registered for the Ministry52 and are authorised to import pharmaceutical
products to Mauritius.

and innovation
In 2011 the Pharmaceutical Country Profile indicated that:53
 The state health services employ over 650 doctors and 17 pharmacists.
 The private sector employs over 400 doctors and 275 pharmacists.
 Also, it provides primary and secondary services with 14 private clinics,

20 private medical laboratories and absorbs 32% of the total expenditure
on health.
 In terms of manufacturing capabilities, there is no Research and

Development for discovering new active substances, no Production of
pharmaceutical starting materials (APIs).
 There is production of formulations from pharmaceutical starting material

and repackaging of finished dosage forms.
 The percentage of market share by volume produced by domestic

manufacturers is 0.9% and 2% by value produced.
 Private health expenditure as % of total health expenditure (% of total

expenditure on health): 53.8.
 Market share of generic pharmaceuticals [branded and INN] by value

(%): 65.
 Private out-of-pocket expenditure as % of private health expenditure (%

of private expenditure on health): 81.88.
 Premiums for private prepaid health plans as % of total private health

expenditure (% of private expenditure on health): 10.13.
Turnover was 5,300’ in 2017, superior in 23% to the 4,320´in 2016. Profit was
602’ in 2017.54
52 Interview held with representatives of the Ministry of Health.

53 Ministry of Health and Quality of Life-World Health Organization, Pharmaceutical Country
Profile. Mauritius, 2011.

_____________________________________________________________________________________________
According to the Three-Year Strategic Plan 2017/18-2019/20 there are huge

opportunities for the export of high value-added pharmaceutical products.55
The information included below has been taken from Healthcare Resource
Guide: Mauritius:56
About 27% of the health needs of the population are catered to by the private
sector.
Public hospitals are free in Mauritius, but there are also several private clinics.
Mauritius’ healthcare infrastructure includes 18 private multi-specialty clinics, 11
private specialized clinics, and 28 medical laboratories.
In the past few years several global companies have invested in ―centers of
excellence‖ to cater to the growing healthcare needs of both national and
international patients. In 2017, Mauritius attracted more than 11,500 foreign
patients for treatment in specialty areas such as cosmetic surgery and
procedures, orthopedics, cardiology, fertility treatment, and ophthalmology.
There are potential opportunities for establishing:
 Specialized diabetes research and treatment centers
 Specialized centers for elderly care and rehabilitative medicine
 Specialized centers for novel treatments/stem-cell therapies
 Plastic reconstructive surgery clinics
 Clinics for dental surgery and dentofacial orthopedics
 Convalescence and pain clinics providing specialized care to patients

suffering from acute and chronic conditions
There are also significant opportunities in pharmaceutical manufacturing,

medical devices and clinical trials. Preferential access to the European and
54 DCDM Research. Business Magazine. Mauritius The TOP 100 Companies, 2018 Edition. La
Sentinelle Editions.
55 Three-Year Strategic Plan 2017/18-2019/20, available at:
http://budget.mof.govmu.org/budget2017-18/2017_183-YearPlan.pdf
56 Export.gov Helping US Companies Export. Healthcare Resource Guide: Mauritius, available
at:
https://2016.export.gov/industry/health/healthcareresourceguide/eg_main_116239.asp#P179_
12554

_____________________________________________________________________________________________
African markets for Mauritian exports has attracted several international

companies to set up medical devices and pharmaceutical manufacturing
facilities in Mauritius. It should be noted that exports of most medical devices
and pharmaceuticals from Mauritius to the United States are also duty-free.
Furthermore, there are 4 companies currently conducting clinical trials in the
country.
As of July 2018, there were 371 registered private drugstores and 38 registered
pharmaceutical wholesalers in Mauritius. Of the US$ 114 million of
pharmaceuticals imported in 2017, the private sector accounted for 75% of the
import value. Mauritius imports the vast majority of its pharmaceuticals.
The medical device manufacturing industry has also seen sustained growth
over the last few years. Due to the preferential market access that Mauritius
enjoys with the EU, leading medical device manufacturers (mostly from France
and Germany) have established operations here. They produce high-precision
medical devices such as catheters/stents; cardiovascular, orthopaedic, and
ophthalmic equipment; dental implants; artificial skin; and biomedical products.

eventual transition to international
exhaustion of trademark rights
The economic benefit to consumers of the eventual transition to the

international exhaustion regime depends, in the first place, on the difference
between the current prices of pharmaceutical products in Mauritius and the
prices at which they could be imported in parallel. The price differences vary
greatly between medications, as shown in the examples in the attached table,
provided by someone manifestly in favour of the transition.

_____________________________________________________________________________________________
Name License holder Parallel import Price increase
(Rs) (Rs) (Rs) (%)
Lipanor 260 170 90 53
Lasilix 40mg 124 101 23 23
Gaviscon 125 85 40 47
Bactrim Forte 220 88 132 150
Prices = CIF + Customs clearance fees, at date Nov 2018.
Given the dispersion of prices, the information included in The Pharmaceutical

Country Profile will be used for calculations of the eventual benefit to
consumers, from which the following quotation is extracted:57
Pricing
The Median Price Ratio is used to indicate how prices of medicines in

Mauritius relate to those on the international market. That is, prices of
medicines have been compared to international reference prices and
expressed as a ratio of the national price to the international price. For
example, a price ratio of 2 would mean that the price is twice that of the
international reference price. Since prices have been collected for a
predefined basket of medicines, the Median Price Ratio has been
selected to reflect the situation in the country.
As for patient prices, the Median Price Ratio in the public sector was 0 for
originators and 0 for generics as all medicines are provided for free. On
the other hand, prices in the private sector are high (19.3 for originators
and 6 for generics).
Public sector availability of originator medicines was 0%, while availability

of the Lowest Priced Generic (LPG) medicines was 68.6 %. Availability in
the private sector was higher for originator medicines but lower for the
LPG (55.7% for originator and 54.9% for generics).
On the other hand, said document indicates that the participation in market
value of generic pharmaceutical products is 65%.
57 Ministry of Health and Quality of Life-World Health Organization, Pharmaceutical Country

Profile. Mauritius.

_____________________________________________________________________________________________
In order to obtain more recent statistical values, the calculations were made
using the absolute values of 2017 and the percentages of the Pharmaceutical
Country Profile of 2011. In addition, part of the imports is of products with
current patent, so it will be assumed that the international exhaustion of Brand
rights will only impact on generic products.
Regarding the amount of pharmaceutical imports (the value reported for the
year 2017 is Rs Million 4148), the Ministry of Health represented 25%, so that
only the reduction of the average price of the private import of pharmaceutical
products implies an annual benefit of Rs Billion 10.11 for patients in Mauritius.
An alternative estimate can be obtained considering the turnover of the largest

companies in the health sector (5,308 Rs Billion), the percentage of 65% of
generic products and the median price ratio of the 2011 Pharmaceutical
Country Profile; which implies an annual cost of Rs Billion 2.88 for stakeholders
and a benefit of 3.22 Rs Billion to patients in Mauritius.
The total annual benefit of consumers must be greater, as prices and quantities
of domestic production must also decrease, and that the reduction of prices will
cause an increase in imports.
Part of this benefit is a transfer to consumers of domestic producers and those

who currently import, so that the net social benefit for Mauritius depends both
on the volumes produced and imported and on the value of price and supply
elasticities of medicines.
In terms of employment, no significant impact is expected in the services of

import and distribution of pharmaceutical products, since these services will be
replaced by those needed to carry out parallel imports. The employment
provided by the current activities would not be reduced if they are replaced by
parallel imports that require employing a similar number of people.
National manufacturing could be affected, depending on the value of the supply

elasticity of production. But it should be borne in mind that the starting point is
relatively small because, as indicated in the Survey of Employment and
Earnings, it has been excluded from the statistics because its weight in the
General Index is not significant. To register a worthwhile figure, it has been
necessary to add other productive sectors to pharmaceutical products, as
shown in the attached table, where there is no exclusive employment figure for
the manufacture of pharmaceutical products.

_____________________________________________________________________________________________
Employment in large establishments1 by Industry group
March 2013 - March 2017
NSIC 2013 2014 2015 20162 20173
Coke and refined petroleum products / Chemicals and chemical products / 2,456 2,378 2,433 2,429 2,328
Basic pharmaceutical products and pharmaceutical preparations
1 Excluding government ministries and departments. 2 Revised 3 Provisional
Source: Survey of Employment and Earnings. Digest of Industrial Statistics-2017

http://statsmauritius.govmu.org/English/Publications/Documents/Regular%20Reports/industry/Di
gest_%20Industrial_Prod_Yr17.pdf
The number of large establishments in the same industrial group NSIC in the
previous table, has remained between 34 and 36 in the years 2013-2017, the
value added in 2016 was 2095.3 million Rupees, and the tax payment of 12.1
million.
In the Export Oriented Enterprises (EOE) Group the pharmaceutical sector is

also grouped in statistics such as chemicals and chemical products / basic
pharmaceutical products and pharmaceutical preparations; and among the Non-
EOE appears together with the group of rubber and plastic products; therefore,
the values corresponding to the national production of pharmacists are not
indicated, with any precision; and it is only clear that these values do not
exceed those corresponding to the total of activities of the NSIC, which are
relatively small.
Likewise, parallel imports should not be expected to affect the research and
development activities of pharmaceutical products in Mauritius, because they
are activities aimed at developing export products, or services to cater the
growing healthcare needs of both national and international patients.
As for the expenditure on advertising that has been incurred to publicize the
foreign brand in the domestic market, the experience of other countries that
have gone through the regime of international exhaustion of the trademark right,
suggests that it is likely to increase, since the companies must invest to
maintain the loyalty of their customers and inform consumers of possible quality
differences between products; as well as to make changes in the labeling or
marking, packaging, color or special shape of the products, and all this without
greatly increasing the price58.
58 Philip Kitchen, Lynne Eagle, Lawrence Rose and Brendan Moyle. 2003. The Impact of Gray
Marketing and Parallel Importing on Brand Equity and Brand Value. Research Memorandum
38. The University of Hull Business School, UK, available at:

_____________________________________________________________________________________________
It should be remembered that, although the exclusive right over the trademark is
exhausted internationally, its owner maintains the right to prohibit third parties
from making acts of using the trademark that may harm the value of the
trademark or confusing the consumer public about the true origin of the
trademark product.
On the other hand, the use of trademark law to prevent access to products that
save or preserve lives, as is the case of pharmaceutical products, would require
a different response, one that takes into consideration not the value of the
trademark, but rather the value of the underlying product or service.59
9. Textile and Clothing Industry
In the 70s of the XX century, Mauritius began its export promotion strategy with
the enactment of the Export Processing Zone (EPZ) Act, that attracted foreign
and national investments beginning in the textiles sector.
The government took further steps:
1. Sustainable export growth through five successive stand-by

arrangements and two structural adjustment programmes between
1980 and 1986
2. Establishment of key institutions like the Mauritius Export

Development and Investment Authority for export promotion.
3. Monetary measures such as the devaluation of the rupee to make

Mauritian exports internationally competitive.60
The policy of trade liberalization and export promotion was successful in the
textile and garment industry in terms of income generation, job creation and
capacity building for local entrepreneurs. The export-oriented policies led to the
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_
Parallel_Importing_on_Brand_Equity_and_Brand_Value
59 Ghosh, Shubha, The Implementation of Exhaustion Policies: Lessons from National
Experiences. ICTSD Programme on Innovation, Technology and Intellectual Property, 2013,
available at: https://www.ictsd.org/sites/default/files/downloads/2014/01/the-implementation-
of-exhaustion-policies.pdf
60 Joomun, Gilles, The Textile and Clothing Industry in Mauritius, in: Herbert Jauch / Rudolf
Traub-Merz Eds. The Future of the Textile and Clothing Industry in Sub-Saharan Africa.
Friedrich-Ebert-Stiftung, Bonn, 2006.

_____________________________________________________________________________________________
fact that for some thirty years the textile and clothing sector in Mauritius was the
most developed in Africa South of the Sahara61.
In addition to these policies, other factors contributed to the success of the

textile and clothing sector in Mauritius:
1. The European Union and the United States imposed import quotas on
exports from third countries, while Mauritius had preferential access
to these two main markets through trade agreements the
Benin/Cotonou Convention and The African Growth and Opportunity
Act (AGOA), respectively.
2. The appreciation of the Taiwanese dollar and the devaluation of the

Mauritian Rupee reduced the competitiveness of Taiwan and
increased that of Mauritius in the world market, which encouraged
Taiwanese investment in Mauritius.
3. During the 1990s, political uncertainty about the future of the

reintegration of Hong Kong in China encouraged investors to seek a
safe haven and move to Mauritius.
Aveeraj S. Peedoly describes the rapid result of the policy followed and the
environmental factors:
At the turn of the twenty-first century, Mauritius was the world’s second-
largest fully fashioned knitwear producer, the third-largest exporter of
new wool products and Europe’s fourth-largest supplier of T-shirts62.
At the beginning of the current century, this situation changed, because the
labour cost was raised and the margin of preference enjoyed by Mauritian
textile exports to the EU and the United States was reduced. 80% of the
Mauritian textile products (sweaters, tee-shirts, trousers) were not in the high-
quality category and faced stiff competition from Chinese, Indian or Bangladeshi
producers. Most Hong Kong investors moved elsewhere after the ending of the
61 Ghosh, Shubha, The Implementation of Exhaustion Policies: Lessons from National

Experiences. ICTSD Programme on Innovation, Technology and Intellectual Property, 2013,
available at: https://www.ictsd.org/sites/default/files/downloads/2014/01/the-implementation-
of-exhaustion-policies.pdf
62 Aveeraj S. Peedoly. 2009. The Textiles and Clothing Industry and Economic Development: A
Case Study of Mauritius. In Innovation Policies and International Trade Rules. K. Lal et al.
(eds.), Palgrave Macmillan, Macmillan Publishers Limited, available at:
https://link.springer.com/chapter/10.1057/9780230246201

_____________________________________________________________________________________________
favourable tax regime. Some estimates point to a loss of 22,000 jobs in the
EPZ63.
This forced investors and the government to rethink the textile and clothing
sector in the country. In 2003 the Textile Emergency Support Team was set up
and an independent assessor analysed the textile and clothing sector of
Mauritius to formulate a diagnosis of companies using Ramsey Productivity
Models (RAPMODS).
The analysis led to the implementation of measures to facilitate the transition of

textile companies to produce superior quality goods and compete successfully
in the international market. According to Aveerag: The experience, quality and
reliability of Mauritian producers has allowed them to secure market niches,64
Another effect was the investment in other countries with lower wage costs.
According to James: The growth of Madagascar’s clothing industry is also
largely attributed to foreign investment from Mauritius, which was attracted by
Madagascar’s cheap labour supply.65

b r a n d s 66
Ran-king Company Name Turnover Rs Profit Before Tax Rs
Million Million
1 Ciel Textile 10500.00 562
2 Cie. Mauricienne de Textile Ltée. 5937.80 196.30
3 Esquel (Mauritius) Ltd 2980.00 -
4 Fire Mount Textiles Ltd 2040.33 111.26
5 World Knits Ltd 1670.54 8.88
6 Denim de L’lle Limited 1444.90 155.05
63 OECD. African Economic Outlook 2005-2006, available at:

https://www.oecd.org/dev/36741476.pdf
64 Aveeraj S. Peedoly,The Textiles and Clothing Industry and Economic Development: A Case
Study of Mauritius. In Innovation Policies and International Trade Rules. K. Lal et al. (eds.),
Palgrave Macmillan, a division of Macmillan Publishers Limited, 2009, available at:
https://link.springer.com/chapter/10.1057/9780230246201
65 James, William E., Status of Protection Facing Exporters of Textiles and Clothing from Asia
and the Pacific in the North and South Markets. In Economic and Social Commission for Asia
and the Pacific (ESCAP), 2008.

_____________________________________________________________________________________________
7 RT Knits Ltd 1393.90 40.10
8 Tex Services Ltd 1279.26 -21.60
9 Laguna Clothing (Mauritius) Ltd 945.79 80.45
10 FM Denim 882.28 24.88
11 REAL Garment 728.90 -42.07
12 Star Knitwear Group Ltd 453.39 219.80
13 St Malo Exports Ltd 452.81 14.71
14 Tara Knitwear Ltd 247.74 11.80
15 Filao Limitee 233.09 46.25
16 Universal Fabrics Ltd 214.27 -57.28
17 Jack Agencies Ltd 208.82 4.87
18 Soniawear Ltd 178.21 6.58
19 Wensum Ltd 176.47 16.03
20 Hong Kong Garments Co Ltd 172.25 0.81
21 Associated Services Textiles Ltee 168.19 15.14
22 Prosimex Industrial Company Limited 153.41 -11.84
23 Hardy Henry Textiles Ltee 114.44 26.81
24 Texto Ltee 98.19 -0.991
25 Bassa’s Textile Ltd 73.29 13.82
26 Leisure Garments Ltd 72.42 -1.41
27 Strategic Garments Manufacturers Ltee 54.50 2.04
28 Victory Garments Ltd 53.49 3.17
29 Tropical Garment Ltd 49.50 2.08
TOTAL 32,900 1,390

_____________________________________________________________________________________________

and innovation
In 2015, the textile industry group represented almost 30% of gross

manufacturing domestic product of Mauritius. Textiles and Textile Articles
Section was the most important exporter in Mauritius, and its FOB exports were
2.2 times its CIF imports. As can be observed in the attached table, taking into
account only chapters 58 to 65 of the classification, the textile sector is much
more exporter than importer, since the total value of exports and re-exports is
five times greater than imports. In chapters 61 and 62 (Articles of apparel and
clothing accessories) this ratio is 20 to 1 and more than 7 to 1, respectively. 67
Trade 2015 by Chapter (Rs. Million)
Chapter Description Imports Domestic Re-Exports

(CIF) Exports (FOB) (FOB)
58 Special woven fabrics; tufted textile fabrics; lace; tapestries; 579 84 22

trimmings; embroidery
59 Impregnated, coated, covered or laminated textile fabrics; textile 273 6 18

articles of a kind suitable for industrial use
60 Knitted or crocheted fabrics 373 1,264 3
61 Articles of apparel and clothing accessories, knitted or crocheted 678 13,111 274
62 Articles of apparel and clothing accessories, not knitted or 1,687 12,010 279
crocheted
63 Other made up textile articles; sets; worn clothing and worn textile 511 49 136
articles; rags
64 Footwear, gaiters and the like; parts of such articles 1342 22 237
65 Headgear and parts thereof 74 11 3
TOTAL 5,517 26,557 972
Source: The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis
There were 30 large companies in 2017 in the Industrial Textiles Group, Section
13 NSIC, National Standard Industrial Classification of all Economic Activities.
In 2013 there were 33, a reduction of 9%. In the Industrial Group Wearing
apparel, the reduction in the number of large companies was greater (17%),
since it went from 152 in 2013 to 126 in 2017.
67 The Mauritius Chamber of Commerce and Industry. 2017. MCCI Annual Report 2015-2016,
available at:. https://www.mcci.org/media/139082/mcciannualreport2015-2016.pdf

_____________________________________________________________________________________________
However, employment in large textile establishments increased by 6.4% from a

minimum in 2014 to 5,595 in 2017, while employment in the wear apparel group
had an inverse evolution, reaching a maximum in 2014 and decreasing 8% to
34,350 in 2017.

_____________________________________________________________________________________________
Employment in large establishments1 by Industry group
March 2000, and march 2013 - 2017
NSIC 2000 2013 2014 2015 20162 20173
Textiles 9,210 5,355 5,256 5,312 5,477 5,595
Wearing apparel 72,810 36,921 37,305 36,588 35,550 34,350
1 Excluding government ministries and departments. 2 Revised 3 Provisional
Sources: Mauritian Central Statistical Office. Cited by: Sawkut, Rojit. 2008. The Textile and
Clothing Sector in Mauritius. The World Bank, Washington. www.worldbank.org (2000).
Statistics Mauritius. Ministry of Finance and Economic Development. Digest of Industrial
Statistics-2017. Port Louis. (2013-2017).
Employment in the industrial group wearing apparel is more than six times that
of the textile group, and this ratio has decreased from 7.10 times in 2014 to 6.14
in 2017.
It should be noted also that, comparing the figures of 2017 with those of the
year 2000, the number of companies and employment has been reduced by
half.
The compensation to employees in 2016 was 4.27 times higher in the industrial
group wearing apparel than in the textile group, as can be seen in the following
table, which reflects lower remunerations in the first group due to the greater
employment of not qualified workers. The values of production indicators (gross
output, Intermediate and value added) more than tripled those of the textile
group.
The added value represents around 40% of gross output in both sectors, and
only compensation to employees represents 24% in the textile group and 31%
in the wearing apparel group.

_____________________________________________________________________________________________
Production account of the Industrial Sector by industry group, 2016

(R Million)
Industry group Gross output at Intermediate Value added at Compensation of

basic prices Consumption basic prices employees
Textiles 8,125.3 4,942.4 3,182.8 1,965.4
Wearing apparel 26,993.7 15,535.3 11,458.4 8,392.2
Production account of the EOE Sector by industry group, 2016
Preparation and spinning of textiles 4,652.0 3,063.9 1,588.1 774.4

fibres / weaving of textile
Finishing of textiles 2,562.5 1,462.3 1100.2 936.6
Other textiles 3,19.0 147.0 172.0 128.0
Wearing apparel, except fur apparel 24,465.8 14,160.8 10,305.0 7,707.4
Knitted and crocheted apparel 1700.3 996.1 704.2 422.4
Production account of Non-EOE Sector by industry group, 2016
Textiles 591.8 269.2 322.5 126.4
Wearing apparel 827.6 378.4 449.2 262.4
Source: Ministry of Finance and Economic Development. 2018. Annual Digest of Statistics –
2017. Port Luis, Mauritius.
While employment remained practically unchanged, fixed capital formation fell

sharply in 2015, and it seems that investment prospects for 2019 are negative
among entrepreneurs.68
Gross Domestic Fixed Capital Formation at current prices by type and use
2012 2013 2014 2015
Manufacturing 5,179 4,865 5,958 3,738
Annual real growth rates (%) -14.2 -6.5 +21.1 -38.5
Textile Employment (‘000) 54.2 53 53 53.6
Source: The Mauritius Chamber of Commerce and Industry. MCCI. 2017. Annual Report 2015 | 2016. Port-Louis
68 News on Sunday. Janvier 2019. Textile Investment News. Perspectives 2019 - Textile and Manufacturing Industry -
Ahmed Parkar: ―The market is very unstable‖

_____________________________________________________________________________________________
The crisis endured by the sector must be considered a crisis of growth, because
at the end of the 20th century the employment grew and wages increased, and
this contributed to the loss of competitiveness; but this was also an important
contribution to the well-being of the population. Hourly labor costs increased at
an average of 5 percent per annum over the period 1990–2000, from $0.76 to
$1.17.69

A characteristic of the textile sector, and in particular of the industrial group

wearing apparel in which the production of Mauritius is concentrated, is the
heterogeneity of its products. For example, a dress designed by a famous
French dressmaker can cost hundreds of times more than a dress for everyday
use. In the first case the demand is very inelastic and, on the contrary, in the
second case the demand is very elastic to the price.
That is why it is difficult to estimate monetary costs and benefits with a study
based on supply and demand curves, because "the product" to be studied
(female dress, following the example) includes products that in no way fulfil the
hypothesis that they are perfect substitutes, which implies the hypothesis that a
woman who buys a dress from the Dior trademark is willing to receive a diary
dress.
On the other hand, after the crisis of growth, the textile sector of Mauritius has
concentrated on the export of high-end products, and this trend should continue
in the future according to the indications of several experts, among others
Sawkut (2007) in the page 107 of the cited study70 of the World Bank:
Mauritius is working to position itself as a supplier of quality products,

that is, as a niche producer in the fashion market and in other segments
of the industry where the use of technology is intensive. Advanced,
technology-based production, complemented by Mauritius’ educated and
skilled labor force, should open a window for the successful production
and export of high-end products.
69 Sawkut, Rojit, The Textile and Clothing Sector in Mauritius. In: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank,
Washington, 2008.
70 Sawkut, Rojit,The Textile and Clothing Sector in Mauritius. In: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank,
Washington, 2008.

_____________________________________________________________________________________________
Consequently, for most of Mauritian textile production the market is the world,
not the country; and this market will not be affected (positively or negatively) by
parallel imports that may reach Mauritius.
However, it is possible that the smaller companies that sell in the domestic
market competing against low cost producers, have to go through a process of
adaptation to the new conditions. If this is the case, the Mauritian government
could adopt temporary policies and measures that help the industry correct
weaknesses; particularly to restructure its operations, improve technology,
improve quality and design, innovate, and focus on the production of high
added value for niche markets.71
The aforementioned argument of Aveerag, raised ten years ago, could be

inscribed in the theory of industrialization by substitution of imports, applied to
countries that maintain a reduced exchange rate due to the inflow of foreign
currency from the export of natural resources. Theory that, after decades, was
presented as the Dutch disease; because of the abundant foreign exchange
income generated by the exploitation of the North Sea oil. But the basic
argument is different, because it is not a matter of compensating a high
exchange rate, but rather facilitating the transformation of the textile production
of Mauritius, of competition via prices (based on cheap labour) to the
competition for quality in high-end products.
In 2018, after nine years, in the opinion of the Manufacturers Association of

Mauritius (AMM), a local manufacturer often competes locally with international
products and brands, and proposes a temporary collaboration between the
public and private sectors:
… the AMM has identified its added value for local manufacturers with
four thrusts leading to collaborative projects over the next three years:
train, innovate, internationalise, maximise the social and environmental
responsibility.72
In principle, parallel imports of textiles would increase foreign competition with

those produced for the domestic market, but these are currently competing with
EOE without the natural protection of freight, so that in practice parallel imports
will not have an impact on the current high level of competence.
71 Aveeraj S. Peedoly, The Textiles and Clothing Industry and Economic Development: A Case
Study of Mauritius, , in: Kaushalesh Lal and Pierre A. Mohnen (Eds.), 2009, p.141.
72 https://defimedia.info/bruno-dubarry-manufacturing-sector-needs-national-strategy

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10. Food and beverages
About half of the territory of Mauritius is used for agriculture, most of it

dedicated to the production of sugar cane and a quarter covered in forests. In
addition, Mauritius has an Exclusive Economic Zone of the largest in the world,
1.9 million km2 of the Indian Ocean and manages another 395,000 km2 along
with the Seychelles.
The main concern of the government in relation to food and beverages is to

guarantee the supply of basic food products at affordable prices, thus
controlling domestic production and imports of staple foods; like onions,
potatoes, garlic and its seeds, wheat flour, bread, rice and fish. Mauritius is a
net importer of food and beverages73.
In order to control the exploitation of the fishing resource, the government

developed a Fisheries Master Plan. The main beneficiaries of the program are
the fishermen and the coastal communities of the region74.

brands
A large part of agricultural primary products, domestic or imported, are not sold
under a registered trademark; companies that operate with foreign brands
import processed foods, which are distributed to consumers in supermarkets.
These companies also sell other products, but most of their sales correspond to
the food and beverages sector, so that their economic activity indicates
approximately that of the sector and, therefore, the attached list corresponds to
companies engaged in distributive trade.
Some of these companies belong to important business groups that work in

different sectors of the economy. For example, the Leal Group includes
companies in the sectors: medicine, consumer goods, automotive, information
technology, engineering and tourism. Its Consumer Goods department (66% of
the group's total turnover) represents multinational companies such as Danone,
Unilever, Diageo, GSK or Beiersdorf. In addition, it creates new products in
73 World Trade Organization Secretariat, Trade Policy Review. Report by the Secretariat.
Mauritius, 2015, available at: https://docsonline.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-
DP.aspx?language=E&CatalogueIdList=130110,127036,51175,61348,65698,8452&CurrentCa
talogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSp
anishRecord=True
74 FAO. Mauritius and FAO, available at: http://www.fao.org/3/a-az485e.pdf

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infant nutrition, baby care, personal care, feminine hygiene, products for the
care of the home, food, wine and liquors75.
Ran-king Company Name Turnover Rs Profit Before Tax Rs

Million Million
1 Pick and Buy Limited 6,056.17 110.51
2 Udis Ltée (Super U) 4,630.30 255.70
3 Seven Seven Co Ltd 3,749.33 41.74
4 Somags Ltée 2,367.60 66.30
5 Shoprite (Mauritius) Ltd 1,140.00 -68.0
6 Family World Ltd 1,071.00 84.06
7 Bagatelle Distribution Ltd 1,017.60 41.51
8 Sik Yuen Limited 973.32 52.00
9 Inas & Co Ltd (Lolo Supermarket) 898.42 59.73
10 Tang Wang and Co Ltd 617.92 20.36
11 London Supermarket Ltd 617.01 36.61
12 King Savers Ltd 576.88 12.23
13 Save Mart Trading Ltd 356.24 2.41
14 Vk & K’s Supermarket Ltd 334.26 2.97
15 Expressmart Distribution Ltd 284.83 5.19
16 M. Savers Ltd 284.33 6.78
17 Simla Supermarket Co Ltd 279.64 4.37
18 Super Unic Co Ltd 243.75 11.28
19 Supercash Ltd 230.89 5.77
20 Antonio Maurer Ltd 177.77 -2.49
21 London Distribution Co Ltd 175.54 1.12
22 Discounters Supermarket Co Ltd 137.06 2.20
23 Express Mart Ltd 103.56 1.95
75 http://www.lealgroup.com/default.aspx

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TOTAL 26,323.42 754.3
Edition. La Sentinelle Editions.
10.2 Contribution of companies in terms

of employment, added value,
investment and innovation
A measure of the contribution of companies to the economy of Mauritius is the

figure of more than 26 billion annual sales, indicated in the previous table.
There is a significant national production of food and beverages, which

competes with the imports of companies that operate with foreign trademarks,
and employs 13,873 people, including those who work in NSIC 10 and 11 of the
table shown below. However, according to the work cited (p. 68), 39.2% of
these people (5,444) worked in export-oriented companies in the food group.
Number of large establishments and employment,1 by Industry group
March 2013 - 2017
NSIC 2013 2014 2015 20162 20173
10 Food products 110 109 109 108 107
10 Employment 11,313 11,567 11,772 11,448 11,478
11 Beverages 16 16 14 13 13
11 Employment 2,634 2,686 2,500 2,332 2,395
Total
Establishments 126 125 123 121 120
Employment 13,947 14,253 14,272 13,780 13,873
1 Refer to establishments employing 10 or more persons, excluding government ministries and

departments. 2 Revised 3 Provisional
Source: Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and
Economic Development. 2018. Digest of Industrial Statistics-2017. Port Louis. (2013-2017),
available at:
As shown in the previous table, the number of large food and drink companies
in Mauritius decreased by 5% between 2013 and 2017, while the reduction in

_____________________________________________________________________________________________
employment was lower (0.5%); it increased 1.5% in the industrial food group
and decreased 9.1% in the beverage group.
It should be noted that there was a relatively large reduction in the number of
sugar mill workers, because it was reduced by 238 (18%) in the same period
and, nevertheless, employment in the sector it remains practically constant.76
Production account of the Industrial Sector by industry group, 2016

(Large establishments. R Million)
Gross Interme-diate Value Compen-sation of Taxes on Gross

output77 at consu-mption added79 at employees produc-tion operating
Industry group surplus
basic basic prices
prices78
Food products (incl. 40,148.7 30,440.2 9,708.4 2,738.2 51.5 6,901.5

sugar)
% 30.00 38.08 18.01 12.34 16.87 22.01
Beverages 12,311.60 4,781.50 7,530.00 1,033.50 41.7 6,435.00
% 9.20 5.98 13.97 4.66 13.66 20.53
Food products & 52,460.30 35,221.70 17,238.40 3,771.70 93.20 13,336.50

beverages
% 39.19 44.06 31.98 17.00 30.54 42.54
Manufacturing 133,850.0 79,943.5 53,906.4 22,189.7 305.2 31,351.6
Source: Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and
Economic Development. 2018. Annual Digest of Statistics – 2017. Port Luis, Mauritius.
The market value of the food produced represents an important 39.2% of the
national manufacturing. On the other hand, compensation to employees is 17%,
reflecting the greater occupation of unskilled labour in food production.
76 Mauritian Central Statistical Office. Statistics Mauritius. Ministry of Finance and Economic
Development, Digest of Industrial Statistics-2017. Port Louis. (2013-2017), 2018, p. 60,
available at:
http://statsmauritius.govmu.org/English/Publications/Documents/Regular%20Reports/industry/
Digest_%20Industrial_Prod_Yr17.pdf
77 Gross output of industries covers the market value of goods and services produced, including
work-in-progress and products for own use.
78 The basic price is the amount receivable by the producer, exclusive of taxes on products but
including any subsidy on these products.
79 The value added for a particular producer is equal to the gross output at basic prices less the
value of intermediate consumption at purchaser's prices.

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However, the contribution to collection exceeds 30% and the rate of profit is
even higher, 42.54%.
The sector’s added value is 32% of the total manufacturing, much lower than
44% of intermediate consumption, probably due to the high content of
agricultural inputs in the production of poorly prepared food.

The majority of consulted businessmen who oppose the adoption of the regime
of international exhaustion of trademark rights, consider that there are no
notable differences between the prices of the products sold in the domestic
market and international prices; which implies a contradiction because, if there
is no substantial difference between these prices, there will be no parallel
imports and, therefore, no effect to be feared.
On the other hand, those who support the transition to the new regime consider
that there are notable differences in prices, which would be affecting the
country's competitiveness. The fact that companies in the sector have applied to
be included in the Single Amnesty Program of the Competition Commission is
an indication that their domestic sales prices are higher than international ones,
because this is a particular form of restrictive commercial practice known as
resale price maintenance80.
Whoever is right in this discrepancy of opinions, there do not seem to be strong

economic reasons for those who engage in distributive trade to oppose the
regime of international exhaustion. In fact, assuming that there are large price
differences and parallel imports occur, it is possible that distributive trade
entrepreneurs have greater gains in the new situation. For example, if they take
advantage of parallel imports to expand the range of products they offer and
attract new customers for products with famous brands at reduced prices. In
fact, this has happened in the automotive market of other countries, where the
same exclusive distributors of luxury brands sell cheap cars made in China and
obtain higher profits.
80 Competition Commission of Mauritius, available at:

http://www.ccm.mu/English/Documents/News_2019/MR-
First%20batch%20of%20RPM%20Amnesty%20Decision.pdf.

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In the denied assumption that distributive trade entrepreneurs do not take any
action to adapt to the new situation, they could see their sales level reduced if
there are parallel imports.
The merchants who are exclusively dedicated to the activity of importing, who
sell the products without any transformation, will not be negatively affected by
the legalization of parallel imports.
On the other hand, the State could be affected if the greater diversity in the
supply of products that would bring parallel imports implies a higher cost to
maintain the validity of quality standards and prevent the entry into the country
of counterfeit products.
Domestic producers could be affected by parallel imports, depending on the

impact of the type of activity. Those who sell in the domestic market would be
affected, depending on the impact of the degree of substitution between their
products and those imported in parallel:
• Those who sell primary products, from the countryside or the sea, in the
domestic market and without marks that distinguish them, would be less
affected.
• Those who sell products made in the domestic market and with national
brands would be more affected.
Those who export or re-export would not be negatively affected. Rather, they
could be positively affected if the prices of their inputs are reduced due to
parallel imports.
Consumers would benefit from the arrival of products at lower prices than
current ones. However, they will face some drawbacks, especially in the short
term after the opening of the market to parallel imports:
• When there is no trademark monopoly in the market, it is more difficult

for the consumer to establish responsibility in the event of a quality
problem.
• This greater diversity of products with the same trademark could affect
the understanding of consumers at first, which would lead distributors to
invest more in advertising to differentiate their products from the
competition generated by parallel imports.
• Parallel importers generally do not have the ability to offer the level and
scope of services that local brand owners offer their consumers in:

_____________________________________________________________________________________________
customer information, after-sales service, response to complaints,

promotion campaigns, traceability, etc.
The evaluation of pros and cons led one of the interviewees to conclude that, in
the long term, an isolationist system is not good for the economy of the country.
11. Perfumery, cosmetic or toilet

preparations
In relation to parallel imports, one characteristic of cosmetics that should be

surveyed is their location between the two groups of goods, tradable and non-
tradable, of the usual classification in the economic analysis of international
trade.
This dichotomous classification is a great simplification of reality, because there

is no doubt that there are goods that are more tradable than others and that
there must be very few that can be traded internationally.
That some goods are more or less tradable depends, above all, on the
relationship between the cost of transfer and the value of the product, and a
measure of this relationship is the percentage difference between the CIF and
FOB prices, which is normal to represent 20%.
In the case of the importation of cosmetics, the incidence of transfer costs is

very low because, in general, they are products of little weight and volume in
relation to their monetary value. In fact, in 2017 the difference between the CIF
and FOB prices represented 6.6% of the FOB, a percentage lower than that of
most imported products.81
Also, the fact that cosmetics do not deteriorate easily, reduces transfer costs
and makes products more tradable than perishable goods; such as fruits,
flowers and vegetables; whose freight rates are so high that in Mauritius it was
considered necessary to create a compensation mechanism, the Export Freight
Cost Reduction Plan.
This explains why there are pages on the Internet that offer a wide variety of
cosmetic products directly to the consumer, so that the product arrives from the
factory (anywhere in the world) to the address of the final consumer with only
one intermediary.
81 See Picture of cosmetics imports of 2017 by country of origin.

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For example, an office in Lisbon ―Care to Beauty‖82 offers more than 3,000
products of the best international brands, with free and fast shipping for high
value orders: ―✈ Mauritius Deliveries in 4 Days Free and Fast Shipping for
orders above 117.07USD”. And continues to introduce new brands and
products to its offer, according to the latest trends and to what consumers
request. Inform the client with experts trained by representatives of beauty and
hairdressing brands, such as Mesoestetic, Institut Esthederm, Nuxe, Sesderma,
Bioderma, ISDIN, Phyto, Lierac, Crescina, Viviscal and Heliocare. Currently all
its products come from Europe, are 100% original and are purchased directly
from the manufacturer or authorized distributor.
Another example is CosmoStore,83 which offers a greater number of brands

than Care to Beauty, and shipments at a cost of US $ 6.00 for orders whose
amount is less than US $ 35.00 and without cost for larger amounts, although
the delivery times of the product are higher.
Finally, even in Mauritius, an online makeup products store (Simple.mu from

Keytech Ltd.) has been headquartered since 2003, with a customer service
team available every day, including Saturdays, Sundays and holidays.84
And it is expected that, with the expansion of telecommunications services,

international competition will increase further in the future.

brands
In other sectors considered in the present consultancy, it was found that the list
of companies of the publication The TOP 100 Companies85 includes the
majority of those that operate with foreign trademarks, reason why it was used
as a base to locate them. However, said publication does not include a
cosmetic sector, and it was necessary to look for other sources of information.
The statistics of the State (as it will be specified later) do not distinguish a
cosmetic sector, but include products in larger groups. There is information on
imports that, as shown in the following table, is by countries of origin, without
82 See
https://www.google.com/aclk?sa=L&ai=DChcSEwiQ9oyy1v_hAhXKJIYKHUxZDq8YABAAGgJ
2dQ&sig=AOD64_0WY28N-
ZopSYjSigOP4SjVXKNs3A&q=&ved=2ahUKEwjr0Iay1v_hAhXMslkKHQ-
GBccQ0Qx6BAgKEAE&adurl=
83 https://www.cosmostore.org/
84 https://www.simple.mu/about-us/

_____________________________________________________________________________________________
reference to the companies involved. The main imports (exceeding one million
CIF in 2017) come from France, the United Kingdom, South Africa, China,
Thailand, Spain, the United States and Greece.

_____________________________________________________________________________________________
Imports of Cosmetics, 2017, by country of origin
HS Code: 33079090, SITC: 553599086
CIF
Country Quantity (Kg) FOB (MuR) CIF-FOB (%)
(MuR)
AE - United Arab Emirates 412 107,128 126,903 18.46
AU - Australia 165 140,833 152,099 8.00
BE - Belgium 68 62,801 73,619 17.23
BG - Bulgaria 21 4,302 4,968 15.48
CH - Switzerland 126 171,037 193,136 12.92
CN - China 30,677 3,428,580 3,687,001 7.54
DE - Germany 69 61,868 63,651 2.88
ES - Spain 4,383 1,908,341 2,019,485 5.82
FR - France 15,296 7,875,378 8,385,794 6.48
GB - United Kingdom 19,330 4,771,105 5,067,558 6.21
GR - Greece 2,304 1,081,406 1,170,448 8.23
HU - Hungary 3 4,004 4,119 2.87
ID - Indonesia 982 165,282 185,993 12.53
IE - Ireland 486 662,475 673,669 1.69
IN - India 2,396 315,598 339,592 7.60
IR - Iran (Islamic Republic Of) 22 29,734 30,178 1.49
IT - Italy 3,457 633,809 753,451 18.88
JP - Japan 234 81,850 84,923 3.75
LV - Latvia 80 47,918 57,921 20.88
MY - Malaysia 6,675 548,341 587,129 7.07
NL - Netherlands 682 326,572 341,000 4.42
PL - Poland 1,673 316,411 334,490 5.71
SG - Singapore 1,599 230,095 259,629 12.84
TH - Thailand 4,795 2,987,265 3,133,465 4.89
TR - Turkey 12,351 700,893 784,082 11.87
TW - Taiwan 365 158,466 164,819 4.01
US - United States 2,161 1,313,066 1,371,399 4.44
ZA - South Africa 13,190 4,187,275 4,412,815 5.39
TOTAL 124,002 32,321,833 34,463,336 6.63
According to information collected on the Internet,87 there are 40 cosmetics

stores in Mauritius, some dedicated exclusively to the sale of a single foreign
trademark. Another source of the Network allows interested parties to include
86See
http://statsmauritius.govmu.org/English/Documents/External%20Trade/DetailedTradeData/Tot
alImports/Total_Imports_Yr17.zip.
87 See https://maps.me/catalog/shops/shop-beauty/country-mauritius/.

_____________________________________________________________________________________________
data of their companies, where companies operating with foreign trademarks or

producing cosmetic products in Mauritius were selected. In addition, the search
for private information made it possible to detect other companies, which
allowed the following table to be drawn up:88
Company Name Business Type Product/Service Employees
Sobratty Sayeed Exporter Cosmetic and essential oils 5
Sportville Co Ltd Trading Company, Beauty Products Fewer than

Distributor/ Wholesaler 5
Harley Street Fertility Centre Trading Company Not Provided Not

(Mauritius) Ltd Provided
Herbaline (Mauritius) Ltd. Manufacturer Skin Care, Make Up 5 - 10
Star Agency Distributor/ Wholesaler Cosmetic products Not

Provided
Jean-Michel Janvier Trading Company, Perfume, hair shampoo, skin lotion, beauty Not
Distributor/ Wholesaler mask, nail varnish, lipstick Provided
Amenities Product Resource Distributor/ Wholesaler wooden hangers & craft, bath & toilet, hotel 5 - 10
Ltd linen, slippers, caps
Henkel Chemicals (Mauritius) Manufacturer Detergents, Adhesives, Chemicals 51 - 100

Ltd
Avahna Co Ltd Trading Company Beauty Products, Rooibos 5 - 10
LC Manufacturer, Distributor/ Soap, Detergent, Candles 101-500

Wholesaler
MAMORO Manufacturer Laundry Soap 51-100
Mauritius Cosmetics Ltd Distributor/ Wholesaler Health & beauty care, food 101-500
Mopirove Ltd Manufacturer Toilet Soaps, Laundry Soaps, Detergents 101-500

liquids
Antz Design Ltd Distributor/ Wholesaler Health & Nutritional Products, Cosmetics and 5-10
Network Marketing
Luimeme Manufacturer Soap, detergent, candles 51-100
Cosmo Products Co Ltd Distributor/ Wholesaler Cosmetics, perfumes, baby products (powder, 5-10
cream, etc)
IBL Ltd (BrandActiv) Distributor/ Wholesaler/ Food & Beverage, Frozen & Chilled and 101-500
Exporter Personal & Home Care
88 See https://www.gmdu.net/join-31-join-118-p1.html.

_____________________________________________________________________________________________
PNL – Pharmacie Nouvelle Distributor Food & Beverage, Cosmetics, Textile and 101-500
Ltd Pharmaceuticals
In addition, companies engaged in distributive trade sell cosmetic products, but

the most important item in their sales is usually food and beverages, not
cosmetics; so here they are included only as a reference. For example;
BrandActiv, a company of the IBL Group, markets a wide variety of fast-moving
consumer goods in Mauritius, Madagascar and Seychelles; it is divided into 3
commercial categories: food and beverages, frozen and refrigerated, and
personal and domestic care.
11.2 Contribution of companies in terms

of employment, added value,
investment and innovation
The companies included in the previous list employ approximately 1,850

people.
The statistical information of the cosmetic sector is included in the industrial

groups 19-21 Coke and refined petroleum products / Chemicals and chemical
products / Basic pharmaceutical products and pharmaceutical preparations;89
so, it does not reflect with minimum accuracy the reality of the sector.
Statistical information of the production index is available for the sub-group

2023 Soap and detergents, cleaning and polishing preparations, perfumes and
toilet preparations, which increased by 2.1% in 2017.
As for the production of the companies, they can offer a wide variety of
products; such as Archemics90, a chemical products company, whose cosmetic
production is marginal, since it also produces adhesives; goods for industrial
cleaning, the textile and construction sector, and professional hair care.
Likewise, the IBL Ltd group, which includes 280 companies, is located in nine
sectors: agriculture, construction, commerce, financial services, hospitals,
logistics, manufacturing, real estate and, finally, in the IBL Life sector that
includes businesses that offer clinical research and development for the
cosmetic and pharmaceutical industries, in an international expansion strategy
based on innovation:
89 Ministry of Finance and Economic Development, Annual Digest of Statistics – 2017. Port Luis,
Mauritius, 2018.
90 See https://www.archemics.mu/content/about-us.

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 CIDP performs clinical research and research and development for the
cosmetic and pharmaceutical industries. It operates in three areas of
activity: pharmaceutical, cosmetics and nutraceuticals. Its clients for
clinical trials now include world leaders in cosmetics and
pharmaceuticals. CIDP is present internationally for its subsidiaries,
namely, in India, Singapore, Brazil and Romania, and works for more
than 70 clients in more than 20 countries.
 QuantiLAB offers analytical testing services (food, environmental,

pharmaceutical and cosmetic and others), as well as consulting and
auditing services with the help of a strategic partner. Currently, he works
with 223 clients in 21 countries.91
In contrast, Mauritius Cosmetics Limited,92 MCL, which is listed on the Stock

Exchange; is specialized in the manufacture and marketing of cosmetic
products, hygiene products, perfumes, cologne and toilet water.
In 2015, MCL stopped producing Blendax toothpaste under the license of P & G
and launched its new brand, Dentamax, which became the market leader in
Mauritius. He also manufactures Kamill cosmetics under the license of Burnus
GmbH (Germany) and has a licensing partnership with Beauté Diffusion (Paris)
for perfumes such as Eau de Cologne and Eau de Toilette. In addition, it
produces soap and is an official supplier of GM products (France), which
manufactures and distributes exclusive brands such as Yves Rocher, Blaise
Mautin, Azzaro, Clarins, etc. to hotels.93 It distributes products manufactured by
sister companies: toothpaste, creams and lotions, perfumes and paper
products. It has internal marketing and commercialization support, and a fleet of
13 trucks for deliveries to more than 2,500 customers in the country. In addition,
it exports to Madagascar.

Since the cosmetic sector of Mauritius is very varied, the impact of parallel
imports will also have to be very varied, and it is convenient to review the
impact that could arise in each of the different areas:
91 https://www.iblgroup.com/sites/default/files/IBL_INTEGRATED_REPORT_2017.pdf
92 http://www.mcbstockbrokers.mu/downloads/News/MCOS%20Rights%20Issue%20160718.pdf
93 https://www.marketscreener.com/MAURITIUS-COSMETICS-LIMIT-20705910/company/

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In the first place, it is necessary to distinguish between national production

destined for export and that destined for the domestic market.
Exporters would not be affected, unless there were parallel imports of cheaper
inputs, which would make the impact positive.
Domestic producers, whose market is not the world but the island of Mauritius,
would be affected by increased competition if cosmetic products enter the
country at a lower price. However, it must be taken into account that these
domestic producers have already had to endure competition from exporters
from Mauritius itself, as it is normal practice for export balances to be sold at a
reduced price in the country of origin, which makes it difficult that parallel
imports enter to compete massively in the national market.
In this sense, it should be noted that the national production benefits from the
findings made in phytotherapy research centres created to supply the demand
for new ingredients for the cosmetic and pharmaceutical sectors, sectors where
it is necessary to innovate to compete in the world market. This makes the
national producers interested in bringing new aromas, cosmetics, medicines
and therapies of local medicinal plants to the world.
By using their expertise to add value to ancestral traditional knowledge

on locally-used and lesser-known plants, they promote the sustainable
use of biodiversity and provide leads for the above-mentioned sectors.
Mauritius’ objective is to validate the rich biodiversity in this unique eco-
region, and to propose comprehensive portfolios for the above-
mentioned sectors, and help promote the development of innovative
products.94
It is difficult, therefore, that domestic producers with such a level of

competitiveness may be affected by the eventual additional competition from
parallel imports. Thus, the impact on national production and employment would
be minimal in this sector.
Those that only import and do not produce would be affected, if the basic
condition for parallel imports is met: if there is a sufficiently large difference
between prices in other countries and the prices paid by consumers in
Mauritius.
In this sense, those who import and sell in the domestic market when they
oppose parallel imports incur an apparent contradiction and, at the same time,
affirm that there is no difference between their domestic prices and the
94 CIDP Group Communication & Business Development. 2014. Editorial - Journal for Clinical Studies – April.

_____________________________________________________________________________________________
international prices of their products. In effect, if there is no price difference

there are no parallel imports and there is no impact.
On the other hand, the importer who has the monopoly on the sales of the
marked product loses control of the availability of stocks in the market, since
many importers would supply the same product.
But it would be somewhat forced to conclude that products with a shorter shelf
life will be exhausted and, therefore, stocks will be depleted. For example, in the
case of typically perishable products, such as fruits; if there are numerous
importers from several countries, with products of different qualities; the
probability of shortages should decrease and not increase.
The marketing and communication campaigns of the marked product would be

reduced, since the parallel importers would benefit from them. On the other
hand, the interest in maintaining a price higher than that of the competition, as
well as the interest in maintaining its market share, could increase marketing
and communication campaigns to differentiate the market from the original
product that it would enter with parallel imports.
If imports increase and the number of importers; It can increase the number of
quality problems and, consequently, the number of cases in which it will be
necessary to determine who is responsible for the quality problem.
In this sector of importers that sell in the domestic market, it is expected that the
appearance of parallel imports will result in an increase in the total volume of
imports of cosmetic products, an increase in import operations and,
consequently, a higher level of imports job.
Finally, given the greater magnitude of the world market, it is convenient that
the country concentrates on the production of high-end goods, those whose
high prices make the incidence of the transaction costs of exports lower. As we
have seen, this is the case of many cosmetic products, and the growth of
production in recent years shows that entrepreneurs have responded accurately
to the particular conditions of geography, so it is convenient to facilitate their
evolution by means of a greater freedom of commerce.
12. Global assessment of costs and

benefits
According to the proposed model, those directly affected by the transition from
the national regime to the international exhaustion of trademark rights would be:

_____________________________________________________________________________________________
1. Those who operate with licenses of foreign brands or those who

distribute exclusively foreign branded products.
2. Domestic producers of substitute goods of those imported with licenses

of foreign brands.
3. Consumers of th e goods indicated in 1 and 2.
Before discussing the costs and benefits of each of the three groups affected, it
is important to take into account the market conditions that impact the three
groups:
For grey markets to operate there must be a source of supply, easy

access from one market to another, and price differentials that are large
enough to make the venture financially viable.95
Therefore, in the cited document there are two conditions for parallel imports to
exist: easy access between the market of origin and Mauritius, and a substantial
difference between the prices of both markets.
Access to Mauritius is not easy, because its insular geography increases

transport costs, so that those threatened by competition from parallel imports
have natural protection. The level of this protection depends on the relationship
between transportation costs and the price of each particular product. But, in
reality, this is a condition for imports to exist in general, not only parallel imports
and, as in the sectors studied there are imports, it is evident that parallel imports
can occur.
The main driver of parallel imports is the difference between the prices in the
market of destination and the price of origin of parallel imports; engine that acts
when the importers can earn in the operation, that is, when the difference
between prices is substantial, high enough to cover the costs and risks of the
import operation. If there is no substantial difference between these prices,
there are no parallel imports and there are no costs or benefits.
Therefore, a basic datum to estimate costs and benefits is that price difference,
but, only in the case of the pharmaceutical sector (in which the International
95 Kitchen, Philip/Eagle, Lynne/Rose, Lawrence/ Moyle, Brendan, The Impact of Gray Marketing
and Parallel Importing on Brand Equity and Brand Value. Research Memorandum 38, The
University of Hull Business School, UK, 2003, available at:
https://www.researchgate.net/publication/242642165_The_Impact_of_Gray_Marketing_and_Pa
rallel_Importing_on_Brand_Equity_and_Brand_Value.

_____________________________________________________________________________________________
Health Organization collects data on national and international prices of a

basket of medicines), there is reliable information on the percentage difference
between these prices.
That is to say, if domestic prices in Mauritius are not much higher than in the
rest of the world, there is no reason to fear or congratulate if the international
exhaustion of trademark rights is applied, because there will be no costs, no
benefits. But, if the parallel imports generate a substantial reduction of the
domestic price of the products they import, the representatives of foreign brands
could be adversely affected.
With the objective, among others, of knowing the companies that would be
directly affected by the parallel imports, exclusive importers were interviewed,
who indicated that their companies would be seriously affected.
However, most representatives of foreign brands in Mauritius do not accept that

there is a price difference, and none of those who accepted that there was a
difference provided an estimated percentage on the average of said difference.
In the pharmaceutical sector it has been possible to apply the relationships

between internal and external prices to the turnover of the main companies. In
the other sectors, in the absence of information, it was necessary to apply
values similar to the usual price differences in other countries96. Likewise,
average values of the elasticities of other countries were taken for the other
sectors97.
According to the proposed model, the benefit that consumers would receive
would be greater than the sum of the losses of representatives of foreign brands
and domestic producers, plus the impact of price elasticities. It was not possible
to apply this scheme to the cosmetic industry for not having the turnover data.
The data used and the results of the calculations performed are shown in the
attached table.
Industry Turnover Costs Price elasticity Delta expense Consumer benefit

Automotive 14,317.64 1,861.29 2.0 558.39 2,140.49
Pharmaceutical 5,308.00 2,875.17 0.2 690.04 3,220.19
Textile and Clothing 32,900.00 4,277.00 1.0 855.40 4,704.70
Food and beverages 26,323.42 3,422.04 1.0 684.41 3,764.25
96 NUMBEO. Cost of Living Comparison Between Two Countries, available at:

https://www.numbeo.com/cost-of-living/compare_countries.jsp
97 Martinez, Lauren A., The Country-Specific Nature of Apparel Elasticities and Impacts of the
Multi-Fibre Arrangement, Honors Projects. Paper 49, 2012, available at:
http://digitalcommons.macalester.edu/economics_honors_projects/49

_____________________________________________________________________________________________
TOTAL 78,849.06 12,435.50 2,788.24 13,829.62
In addition, if the substantial price difference occurs in a product with patent

rights in force, there is no reason to fear or congratulate, because what is at
stake is not the international exhaustion of patent rights but the right of
trademarks.
In general, consumers of products from all sectors would benefit from lower
prices in the market. However, they will face some disadvantages, especially in
the short term after the opening of the market to parallel imports:
• It will be more difficult to establish the responsibility, in case of a quality

problem, when there is more than one supplier of the product with a
brand in the market.
• The greater diversity of products with the same brand could affect the
understanding of consumers for a while.
• Parallel importers generally do not have the ability to offer the level and
scope of services that local brand owners offer their consumers in:
customer information, after-sales service, response to complaints,
promotion campaigns, traceability, etc.
In terms of employment, no significant impact is expected on the services of

import and distribution of products, since these services will be replaced by
those needed to carry out parallel imports. The employment provided by current
activities would not be reduced if they were replaced by parallel imports that
require the employment of a similar number of people, or could increase, as
export activities increase to meet the increase in consumption.
It is not clear that the companies that represent foreign brands will suffer a
significant economic impact, since they will be in a privileged position to assume
the trade of parallel imports, and thus expand their offer in the market with
products of different qualities and prices with the same brand.
As for advertising expenses incurred to publicize the foreign brand in the

domestic market, the experience of other countries that have gone through the
regime of international exhaustion of the trademark right, suggests that the
expenditure is likely to increase, since the Companies must invest to maintain
the loyalty of their customers and inform consumers of possible differences in
quality between products.
It must be remembered that, although the exclusive right over the brand is
exhausted at the international level, its owner maintains the right to prohibit third

_____________________________________________________________________________________________
parties from making acts of using the trademark that may damage the value of
the brand or confusing the consumer about the true origin of the product.
The merchants who are exclusively dedicated to the activity of importing and
selling the products, without any transformation, will not be negatively affected
by the legalization of parallel imports. Rather, they could benefit from the
increase in imported volume.The state may incur a higher cost of control to
maintain the validity of quality standards and prevent the entry into the country
of counterfeit products.
Parallel imports should not be expected to affect the research and development
activities of pharmaceutical products in Mauritius, because they are activities
aimed at developing export products, or services to cater the growing
healthcare needs of both national and international patients.
Total imports (C.I.F) of main commodities by section, 201798

SITC section/description 181,021
0 - Food and live animals
Dairy products and bird's eggs 3,679
1 - Beverages and tobacco 3,986
4 - Animal & vegetable oils and fats 1,593
5 - Chemicals and related products, n.e.s.
Medicinal & pharmaceutical products 4,148
6 - Manufactured goods classified chiefly by material
Pearls, precious & semi-precious stones 2,474
7 - Machinery & transport equipment
Office machines & automatic data processing machines 3,198
Road vehicles 12,129
8 - Miscellaneous manufactured articles
Articles of apparel and clothing 3,314
Footwear 1,430
Watches and clocks & optical goods 1,088
Jewellery, goldsmiths' & silversmiths' wares, n.e.s 646
TOTAL 37,685
98 External Merchandise Trade Statistics – 2nd Quarter 2018, available at:

http://statsmauritius.govmu.org/English/Publications/Documents/2018/EI1403/Ext_Trade_2Qtr
18.pdf.

_____________________________________________________________________________________________
The net benefit to society would be about 2,100 Ru Billion per year, according
to the data of the previous table, and taking into account that the national
production will not be reduced in the sectors in which this is not relevant.
The employment in the services of import and distribution of products should

not be affected, since these services will be replaced by those needed to carry
out the parallel imports. Rather it is possible to increase, given that the total of
imports must increase.
Likewise, those who carry out parallel imports will also require the services
associated with these activities, such as marketing, which will offset the
reduction in the advertising demand of the companies affected negatively.
But the exclusive importers interviewed stated, all of them, that if a regime of
international exhaustion of trademark rights in Mauritius were introduced, it
would immediately stop investing in the development of the trademarks,
especially in the image and promotion of the brands. This would imply giving up
work to a series of companies, mainly SMEs. None of the exclusive importers
could give an exact or approximate number of companies with which they would
stop working, but indicated that this would have an impact on advertising
agencies, printing companies, polling companies, market research companies,
radio, television, among others.
As a second measure in the medium term, the exclusive importers commented

that they would probably be forced to fire all their employees who worked in the
area of development of the imported brands. In concrete this would mean:
Exclusive importer Total number of employees Employees that will be affected

Innodis 1,300 40
PNL 350 35
Edendale 200 20
Scott 400 50
Leal Group 1,300 130
Brand Activ
Phoenix Beverages 1,400 210
Panagora 600 240
TOTAL 5,550 725
However, it is difficult to imagine that companies representing foreign brands

will not develop adequate strategies to face the challenge of parallel imports,
and take advantage of the possibility of expanding and diversifying their market

_____________________________________________________________________________________________
offer by doing parallel imports on their own, which is a possible advantage that
will include the new competition scenario.
From another point of view, it should be noted that Mauritius has concentrated
on high-end production, and this trend should continue in the future, so that
what was affirmed in a World Bank study applies to several productive
sectors:99
Mauritius is working to position itself as a supplier of quality products,

that is, as a niche producer in the fashion market and in other segments
of the industry where the use of technology is intensive. Advanced,
technology-based production, complemented by Mauritius’ educated and
skilled labor force, should open a window for the successful production
and export of high-end products.
For most of Mauritian production, the market is the world, not the country; and
this market will not be affected (positively or negatively) by parallel imports that
may reach Mauritius.
However, it is possible that the smaller companies that sell in the domestic
market competing against low cost producers, have to go through a process of
adaptation to the new conditions. If this is the case, the government could adopt
temporary policies and measures that help the industry correct weaknesses.
In the opinion of the Manufacturers Association of Mauritius (AMM), a local

manufacturer often competes locally with international products and brands,
and proposed in 2018 a temporary collaboration between the public and private
sectors:
… the AMM has identified its added value for local manufacturers with
four thrusts leading to collaborative projects over the next three years:
train, innovate, internationalise, maximise the social and environmental
responsibility.100
The danger that must be avoided is that, after three years, the beneficiary
companies try to maintain indefinitely those collaborative projects, which would
be a permanent burden for the other sectors of the economy, given that "there
is no free lunch". To compete in the world market, it is convenient that all
productive sectors are highly competitive because, if not, exporters (and the
99 Sawkut, Rojit, The Textile and Clothing Sector in Mauritius, in: Knowledge, Technology, and
Cluster-based Growth in Africa, edited by Douglas Zhihua Zeng. The World Bank.
Washington, 2008.
100 See https://defimedia.info/bruno-dubarry-manufacturing-sector-needs-national-strategy.

_____________________________________________________________________________________________
country) will be penalized by the higher cost of inputs purchased from less
competitive producers.
And it is expected that, with the expansion of telecommunications services,

international competition will increase further in the future.
Finally, an island in the middle of the ocean offers the natural protection of the
freight to the national production destined to the internal market, and it is also a
natural barrier for those who produce for the world market. And, given the
greater magnitude of this market, it is convenient that the country concentrates
on the production of high-end goods, those whose high prices make the
incidence of transaction costs of exports lower. In addition, exporters should be
able to purchase their inputs at the lowest prices on the world market, which
can be achieved through greater trade freedom from parallel imports.
13. Possible displacement of existing

industries in Mauritius
A few of the entrepreneurs interviewed stated that the authorization of parallel

imports would lead them to close their businesses.
However, from what has been seen in the previous pages, it is not expected a
significant impact of the eventual opening of the market of Mauritius to parallel
imports that could justify the abandonment of the market by the companies of
each of the sectors considered.
In fact, even in the pharmaceutical sector (where apparently parallel imports

could be important due to the large difference between domestic and external
prices) the impact would not be so high, given that the prices of products with a
current patent would not be affected by the parallel effect. Imports, and those
that import and distribute these products with patent in force would have no
reason to exit the market.
And in all sectors, unless employers decide not to take management measures
appropriate to the new situation, it seems unlikely that representatives of foreign
brands can be drastically affected by parallel imports. As indicated, one
possibility is to take advantage of their position in the market to expand their
offer by carrying out these parallel imports themselves. It is possible that this
happens in the automotive sector, given that:
… in Mauritius at the very least, car dealers manage to thrive by selling a

variety of different cars, ranging from luxury cars to compact cars suited to

_____________________________________________________________________________________________
the streets of Port Louis. ... For the time being, the industry has been better
off with the increased competition.101
Some vehicle importers have expressed concern about the increased

competition that parallel imports would generate. However, they have already
overcome a greater challenge, the unfair competition of the "Discharge of used
cars"; and a fortiori, they will not succumb to the lesser impact of parallel
imports.
Furthermore, as indicated, representatives of foreign brands can take

advantage of parallel imports themselves to diversify their offer and attract new
customers in the lower-income population; for which they have the advantage of
their positioning in the market. At this point, it is convenient to take into account
the experience of the Chinese free trade zones, (Shanghai Free Trade Zone,
Tianjin, Guangdong and Fujian) territories similar to the geography of Mauritius
that chose to admit the parallel imports of automobiles.
The textile sector of Mauritius, which has focused on the export of high-end
products, will not leave the business because of parallel exports, because these
will allow it to buy its inputs at the lowest prices in the world.
Domestic cosmetics producers, who have endured competition from sales of

export balances in the domestic market, will not leave the business because of
the minor challenge of parallel imports.
In general, it is difficult for companies that participate in the economic dynamics

of growth in Mauritius, to abandon the business perspectives that are open to all
sectors at present.
14. The Madrid Protocol
14.1 Objective
The Madrid Protocol is an international treaty, administered by the International

Bureau of the World Intellectual Property Organization (WIPO), that aims to
facilitate obtaining and maintaining trademark registrations.
States and intergovernmental organizations party to the Protocol are referred to

collectively as Contracting Parties. As of March 2019, the Madrid system has
101 Moorghen, Shanda, op. cit.

_____________________________________________________________________________________________
103 Contracting Parties, of which 102 countries and one intergovernmental

organization (the European Union) are members of the Protocol.102
It was adopted in 1989 and essentially provides a method of achieving

expanded international protection for a trademark that has already been applied
for or registered in the applicant’s home country (the country of origin).
An international registration can be extended to any of the contracting parties

(states or groups of states) of the Madrid Protocol that the applicant chooses to
designate at any time following the granting of the international registration.
The applicant need not select all jurisdictions to be covered by the international
registration at once, because additional designations may be made later.
If any country or group of countries join the Madrid Protocol after protection has
been obtained, then the trademark owner can apply to have its trademark
protection extended to the new contracting party by way of a subsequent
designation.
14.2 Advantages for the trademark owner
The main advantages for trademark owners consist of the simplicity of the
international registration system and the financial savings made (expenses
related to translation, exchange-related fees and fees for local representatives)
when obtaining and maintaining the protection of their marks abroad.
After registering the basic mark, or filing an application for registration, with the
Office of origin, the trademark owner has only to file one international
application, in one language, and pay one fee, in one currency.
This procedure takes place instead of filing separately in the trademark Offices
of the various Contracting Parties, in different languages and paying fees to
each Office, in different currencies. Different national/regional procedures,
involving different languages and fees payable in different currencies, give rise
to translation and exchange-related expenses.
Where trademark protection is sought by filing direct to national/regional

Offices, most of these Offices require the applicant to appoint a local
representative to act on his behalf before the Office, at the time of filing of the
application. With the Madrid system, the designated Contracting Parties may
only require that the holder appoints a local representative in case the holder
102 For a complete list of Contracting Parties, see:

http://www.wipo.int/export/sites/www/treaties/en/documents/pdf/madrid_marks.pdf.

_____________________________________________________________________________________________
has received a notification of a provisional refusal and the holder intends to

contest this decision before the Office concerned.
The companies most affected by the considerable cost involved in registering

and maintaining marks abroad are Small and Medium Enterprises (SMEs).
While a large company may afford to devote considerable funds to protect its
marks abroad, an SME can ill-afford the registration of marks abroad, due to the
high procedural costs. The Madrid system is used by one-third of worldwide
applicants seeking protection of their marks through the Madrid system. Of
these, about 80 per cent may be categorized as an SME, having a small
portfolio of one or two marks.
In the current economic context, the possibility of providing easy, low-cost

protection for marks provides a welcome advantage for companies and
individuals as a factor that will favour exports.
Moreover, the holder does not have to wait for the Office of each Contracting
Party in which protection is sought to take a positive decision to protect the
mark. If no refusal is notified by an Office within the applicable time limit, the
mark is automatically protected in the Contracting Party concerned. In some
cases, the holder does not even have to wait until the expiry of this time limit in
order to know that the mark is protected in a Contracting Party, since he may,
before the expiry of the time limit, receive a statement of grant of protection
from the Office of that Contracting Party.
A further important advantage is that changes subsequent to registration, such
as a change in the name or address of the holder, or a change (total or partial)
in ownership or a limitation of the list of goods and services may be recorded
with effect for several designated Contracting Parties through a single, simple
and centralized procedure with the International Bureau of the World Intellectual
Property Organization (WIPO) (the International Bureau) and with the payment
of a single fee. Moreover, there is only one expiry date and only one
registration to renew, which makes for easy portfolio management.
14.3 Advantages for the country and

trademark offices
The Madrid system supports the country’s exports to the extent that it simplifies
protecting trademarks abroad. Furthermore, it allows individuals and
companies established in other Contracting Parties of the Madrid system to
have easier access to the protection of their marks in the country/regional
territory, since they can seek protection of the mark in any of the applicable
Contracting Parties by merely designating these in the international application,

_____________________________________________________________________________________________
or in a subsequent designation. This facility helps to strengthen the climate for

foreign investment.103
International registration can also be to the advantage of trademark Offices.

The Offices do not need to examine for compliance with formal requirements, or
to classify the goods or services, or publish the marks, as such formalities will
have already been undertaken by the International Bureau, and they can focus
on their substantive examination. Here it must be differentiated between those
Offices that only do a formal examination of the application and those ones that
do a formal and a substantive examination.
Moreover, they are compensated for the work that they perform; the individual
fees collected by the International Bureau are transferred to the Contracting
Parties in respect of which they have been paid, while the complementary and
supplementary fees are distributed annually among the Contracting Parties not
receiving individual fees, in proportion to the number of designations made of
each of them.
14.4 Disadvantages
One of the challenging characteristics of the Madrid Protocol is the dependency

of the international registration on the home application or registration. This can
lead to a problem dubbed a "central attack." That is, if the basic application or
registration is amended, denied, withdrawn, or cancelled during the five years
after the International Registration (IR) is issued, the associated international
registration is treated likewise, and rights in the designated contracting parties
are similarly affected. That means that all foreign applications and registrations
that are based on the IR will be automatically be cancelled as well. The
cancelled local trademarks can be converted to standard national marks, but at
significant expense and effort.104 This ―dependency‖ lasts for the first five years
after an international registration issue.
Once the international registration has been in effect for five years, it becomes
independent from the basic registration. At that point, the possible limitation,
abandonment or cancellation of the basic application or registration no longer
has any effect on the international registration.
The Madrid Protocol provides for a limited period during which an international
registration may be transformed into new national or regional applications in the
103 See WIPO,

104 Wells, Nicholas, Eight Reasons Not to Use the Madrid Protocol for Trademark Protection in
the United States, available at: https://www.wellsiplaw.com/eight-reasons-not-to-use-the-
madrid-protocol-for-trademark-protection-in-the-united-states/.

_____________________________________________________________________________________________
designated contracting parties. But as already mentioned that could only be

done at significant expenses.
If issues arise during examination or following publication of an international

trademark application in a contracting party, this may reduce or eliminate
savings of professional fees if assistance from a local trademark agent is
required.
Another limitatation of the Madrid Protocol is that the owner of the International
Registration cannot transfer ownership of any dependent trademarks to an
owner that is not resident in a Member country. This means, for example, that
trademarks obtained under the Madrid Protocol cannot be transferred to a
South African owner without first withdrawing the marks from the Madrid
System at great expense.105
After a trademark has been submitted to WIPO to become an International

Registration under the Madrid Protocol, the trademark itself cannot be changed.
However some countries – like the United States - allow ―non-material‖ changes
to a mark, both during prosecution and after issuance of a registration (via
Section 7(e) of the Trademark Act).106
14.5 Accession Procedures
Any State which is a party to the Paris Convention may become a party to the
the Protocol. In addition, an intergovernmental organization may become a
party to the Protocol, where the following conditions are fulfilled: at least one of
the member States of the organization is a party to the Paris Convention and
the organization maintains a regional office for the purposes of registering
marks with effect in the territory of the organization.
A State or intergovernmental organization may become a party to the Madrid

Protocol by depositing an instrument of accession.
The instrument of accession must be signed by the Head of State or

Government, or by the Minister of Foreign Affairs, in accordance with the
country’s legal system, and deposited with the Director General of WIPO.
Annex I contain a model instrument of accession.
The treaty will enter into force three months after the date of deposit of the
instrument of accession.
105 Wells, Nicholas, op.cit.

106 Wells, Nicholas, op.cit.

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The instrument of accession may contain certain declarations. Some

declarations can be made only at the time of accession while others may be
submitted after the accession. It would therefore be very useful for the potential
member of the Madrid system to discuss possible declarations with the
International Bureau prior to acceding to the system.107
The most frequently made declarations are, in particular, the following:
 a declaration that, with respect to each international registration in

which the Contracting Party is designated and with respect to the
renewal of an international registration, it wishes to receive an individual
fee. The amount of that fee, in local currency, must be stated in the
declaration, but may be amended by a subsequent declaration.
 a declaration that, for international registrations in which the Contracting

Party has been designated, the period of one year during which its
Office must give notification of a provisional refusal of protection will be
replaced by a period of 18 months.
Domestic Legislative or Regulatory Implications
The main substantive obligation deriving from accession to the Madrid system
will be to give effect to Article 4(1) of the Agreement and the Protocol. Under
this provision, a mark registered in the International Register, in which the
Contracting Party has been designated, must be protected from the date of
international registration (or, in the case of a Contracting Party designated
subsequently, from the date of that subsequent designation), in the same way
as if that mark had been applied for directly with the national or regional
trademark Office. That Office is, however, fully entitled to carry out a
substantive examination of the mark and may, within the period stipulated,
refuse to grant protection to the mark (either totally or partially). If the Office
does not issue a provisional refusal within the applicable period, the mark is
deemed to be protected in the same way as if it had been registered directly
with that Office.
Then acceding to the Madrid system, the country must also be in a position to
give full effect to the provisions of the relevant treaty. The International Bureau
will provide any necessary advice and technical assistance required for that
purpose. One service that is offered to potential members of the Madrid system
is to analyse the domestic legislation and provide comments on its compatibility
107 For a complete list of possible declarations a Contracting Party may make in connection with
accession, please see:
http://www.wipo.int/madrid/en/madridgazette/remarks/declarations.html.

_____________________________________________________________________________________________
with the Madrid system. Model Provisions have been established to provide
information and assistance to these potential members. See Annex II for such
Model Provisions.
14.6 Effects of Accession
Statistics show that the accession of a country to the Madrid system will
gradually produce an increase in the total number of marks for which protection
is requested in the country (resulting from combining the number of applications
received at the national level and the designations received internationally) 108.
This can be explained by the fact that it is relatively easy and economical for the
owner of a mark to designate a country/regional territory in an international
application.
As regards the workload of the national trademark Office, accession to the

Madrid system has been seen not to bring an overwhelming number of new
applications, but rather a gradual increase in registration activity. Moreover,
although the Office should carry out, in respect of the marks filed through the
Madrid system, the usual substantive examination, it will not need to carry out
the formalities examination, or to publish the mark, since those procedures will
already have been conducted by the International Bureau.
108 See, for example, the experience of Japan. Madrid Experience Sharing Report. Japan’s
Experience in Joining and Using the Madrid System, available at:
http://www.ipo.gov.tt/downloads/Madrid_Protocol/wipo_pub_2014_madrid_japan.pdf.

_____________________________________________________________________________________________
15. Recommendations
15.1 Exhaustion regime of trademark law
The estimated annual benefit of adopting the international exhaustion regime is

close to 1,400 million Rs. The estimation made with a short-term partial
equilibrium model leaves aside long-term benefits and indirect effects and, on
the other hand, does not take into account costs of adaptation of the State and
employers to the new regime. The majority of these adaptation costs implies an
investment that is not repeated, while the social benefit is repeated and
increases each year along with the growth of the economy.
Recommendation 1: Begin the process of adopting the regime of international

exhaustion of trademark rights.
15.2 Capacity building programs
Representatives of foreign trademarks in Mauritius have expressed their fear of

losing their rights of defense if the regime of international exhaustion of
trademark law is adopted. It is not true that with an international exhaustion of
trademark rights a parallel importer can use the genuine trademark in a way
that can damage the reputation of the mark or modify the original product
without any restriction and maintain the genuine trademark.
Recommendation 2: Train the stakeholders of the intellectual property system

on the content and scope of trademark rights as well as the content and scope
of the international exhaustion of trademark rights.
Recommendation 3: Start a dissemination campaign to explain that, under the

international exhaustion regime, the protection of trademark rights remains fully
in force, stating in that campaign that:
 The owner may oppose the marketing of the imported product when
there is a risk of creating confusion in the public about the essential
characteristics of the product or its commercial origin.
 The authority will not allow a branded product to be presented with
substantial modifications that could damage the reputation of the brand.
 Neither is advertising permitted that could mislead the consumer about
the commercial origin of the product.
15.3 Enforcement
If the number of suppliers of the product with a brand increases, it will be more
difficult to establish responsibility in the event of a quality problem.

_____________________________________________________________________________________________
The current processing capacity of customs import operations may be

insufficient if the number of imports increases.
Recommendation 4: Train staff to meet the needs of the titleholders, whose

intellectual property rights are infringed.
Recommendation 5: Train Mauritian customs staff sufficiently in advance,

including with the advice of experts from other countries, so that, from the first
moment of the new legislation's validity, the entry of illegal goods is avoided.
Recommendation 6: Improve the procedures for the enforcement of intellectual

property rights, accelerating and making the processes more predictable.
Recommendation 7: Train specialists in the enforcement of intellectual property

rights

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Study To Assess The Socio-Economic Impact of The International Exhaustion of Trademark Rights in Mauritius

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Study To Assess The Socio-Economic Impact of The International Exhaustion of Trademark Rights in Mauritius

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THE EUROPEAN UNION’S FRAMEWORK CONTRACT:

FWC SIEA 2018: LOT 2: Infrastructure, sustainable growth and jobs

Study to assess the socio-economic

Specific contract 2018/398478/1

Interim Report (final)

This project is A project implemented by Consortium Partner

Interim Report (final)

GFA Consulting Group GmbH

Phone: +49 (40) 6 03 06 – 703

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

Interim Report (final), June 2019

11.1 Companies operating with foreign brands .............................................................................. 56

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

The objective of this study is to assess the socio-economic impact if Mauritius

The specific objectives of this assignment are:

 Identification of relevant stakeholders operating with foreign trademark

 A cost evaluation of the contribution of identified stakeholders to the

 Examination of implications of the exclusive rights enjoyed by identified

The choice between the regime of national or international exhaustion of

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

The Agreement on Trade-Related Aspects of Intellectual Property Rights

TRIPS is the first international agreement requiring Members to establish a

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

equity and democracy. The challenge consists of striking a new type of

The purpose of intellectual property is to generate sufficient incentives to

In accordance to Mauritius Trade Easy, a website supported by the Ministry of

4 Comisión Económica para América Latina y el Caribe (CEPAL), La propiedad intelectual

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

As can be seen in the following table, the trade deficit is permanent.

Mauritius merchandise exports and imports, and exports and imports of

6 World Trade Organization. https://www.wto.org/english/thewto_e/countries_e/mauritius_e.htm

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

3. Economic foundations of parallel trade

Parallel trade in trademarked products can be a significant component of trade

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

3.1 Causes of parallel trade

3.1.1 Price differences between import and

Demand conditions can vary considerably in different countries, and are

When national licensees, rather than holders of intellectual property rights,

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

Price differences in the pharmaceutical sector can also be caused by

3.1.2 Transaction costs, market entry barriers

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

licensing and licensing procedures and produce proof of conformity (testing,

3.2 Extent and importance of parallel

The tradability of protected products presupposes that they are transportable

15 OECD (eds.), Synthesis Report on Parallel Imports, 2002, p. 232.

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

in industrialized countries has not been significant.17 In individual sectors,

3.3 Economic assessment of parallel

The standardization of a specific parallel import rule is of particular economic

17 According to Frontier, Economics/Plaut, Erschöpfung von Eigentumsrechten, 2003, p. xvi, the

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

3.3.1 Interest of the TM titleholders and the

3.3.2 Interest of the parallel importer

In some cases, parallel importers benefit to a significant extent from parallel

3.3.3 Consumer interest

Allowing parallel imports to these countries through open parallel import

However, in the discussion on the authorization of parallel imports into

STUDY TO ASSESS THE SOCIO-ECONOMIC IMPACT OF THE

disadvantaged because of parallel imports. Since the system of unfair

In addition, consumers may to be indirectly disadvantaged as a developing

4. Arguments in pro of national