NAIROBI, Aug 5 (Reuters) - The United States and Mauritius kicked off formal talks on Wednesday 5 August for a treaty aimed at boosting investor protections and trade between the two countries.

Mauritius

U.S. Secretary of State Hillary Clinton, in Nairobi for a trade conference with sub-Saharan countries, praised Mauritius for its economic reforms so far and said the Indian Ocean island was a good example to other nations struggling with good governance and corruption issues.

The bilateral investment treaty under negotiation provides a means of safeguarding foreign investment and sets up a mechanism for disputes to be resolved by an independent tribunal, instead of local courts, further bolstering investor confidence.

"A better investment climate helps create jobs, sparks new industries and drives broad-based inclusive growth, especially during this global economic crisis as countries on every continent strive to recover," said Clinton at a ceremony to mark the opening of the treaty negotiations.

For a nation of 1.3 million people far from its markets, Mauritius packs an economic punch well above its weight and Clinton said there had been more investment in the past three years in the island than over the preceding two decades.

However, the economic downturn in its core European and Asian markets and depressed demand at home have slowed the roughly $9 billion economy.

Mauritius' Foreign Minister Arvin Boolell said he hoped the treaty would further promote investment, particularly in such a difficult global economic climate.

"We must stay vigilant to a global economic situation that is getting worse and could put our government's resilience to the test," said Boolell.

"We hope this will increase investor confidence and create even better prospects for business," he added of the treaty, without indicating how long it would take for the negotiations to be completed.

Total two-way trade between Mauritius and the United States was $227.7 million in 2008. Leading Mauritian exports included textile and apparel, cut diamonds and jewellery, live animals, prepared fish, optical and medical instruments.

The leading U.S. exports to Mauritius include wheat, diamonds and machinery. (Reporting by Sue Pleming)