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17th April 2015

NCE organises awareness seminar on Sri Lanka's FTAs with India and Pakistan and proposed FTA with China

The National Chamber of Exporters of Sri Lanka (NCE), the only private sector chamber which exclusively serves exporters, conducted an awareness creating and knowledge dissemination seminars on the existing FTAs of Sri Lanka with India and Pakistan, and the proposed FTA with China on 7 April at the Hotel Taj Samudra, Colombo. Nearly 120 participants were present at this event to listen to the speakers, and engage in the panel discussion which followed.

The NCE is the ‘Voice of the Exporter' and is the forum as well as a strong platform, to present the views and concerns of the exporter community to the relevant State authorities regarding issues which impact their exports businesses.

Although Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) as well as other forms of bilateral and multilateral trade agreements are legitimate means to enhance trade and economic benefits, their outcomes are dependent on the terms and conditions of the agreements that are negotiated, and their effective implementation.

From the above standpoint, the NCE created the platform to disseminate knowledge, and experiences related to the existing FTAs, and safeguards that require to be ensured by the negotiators of agreements, and relevant state authorities, to address the interests of exporters.

The objective of the above seminar was to widen the awareness of exporters and service providers to exporters, regarding the various aspects and issues related to the FTAs, their potential to expand trade between the partner countries for mutual benefit to achieve more balanced trade, as well as to create opportunities to diversify, develop, and expand exports of Sri Lankan products and services.

In his keynote address Dr. Indrajith Coomaraswamy, Deputy Chairman of the Pathfinder Foundation, analysing the current growth model of Sri Lanka stated that external debt is 74% of GDP (as opposed to 44% of GDP for Peer Group Countries) while debt servicing exceeds 100% of Government revenue. He added that exports were the only way out to achieve the expected annual GDP growth of 8%. Currently exports account for 17% of GDP having declined from 34%, while for similar economies it is 74% of GDP.

In this background FTAs were are effective means to address the disadvantageous of a small country like Sri Lanka to engage with, and exploit market opportunities in large economies such as India and China, since the issues related to asymmetry could be addressed through non-reciprocity, and preferential treatment. A good example is NAFTA where Mexico has gained the most out of the FTA with the USA and Canada.

He stated that the present growth model of India is to realise peace and stability in the neighbourhood, and therefore India is looking at the neighbourhood in a different way. And therefore, Sri Lanka should not be left behind. He added that negotiations with India should address:

  • Impediments related to the current FTA
  • Reducing the existing Negative List
  • Extension of the FTA to cover services and investments

He further noted that Services was Sri Lanka's strength, and India was willing to open trade related to Services, based on non-reciprocity. It was also necessary to attract Foreign Direct Investment (FDI) from India for re-export.

In this context the proposed Comprehensive Economic Partnership Agreement (CEPA) assumes importance related to the following:

  • India which is the fastest growing large economy will create opportunities for trade.
  • Infrastructure facilities in both India and Sri Lanka have improved in recent times to support trade.
  • Opportunities for intra firm trade in South and South East Asia, to plug into supply chains.

In regard to the FTA between Sri Lanka and Pakistan, he stated that the level of trade was disappointing in spite of the FTA, and there was a need to rationalise the negative list. Sri Lanka should also look into the possibility of acting as a bridge related to trade between India and Pakistan. Sri Lanka could also use Pakistan to access the Central Asian Market for transhipment of goods.

In regard to the proposed FTA between Sri Lanka and China, he stated the following:

Since the yuan was appreciating, China was encouraging companies to invest overseas. Sri Lanka was strategically located to attract investments related to the Maritime Silk route. Since China will import more consumer goods, investments could be attracted from China to increase production capacity.

He emphasised there were opportunities for Sri Lanka to be a bridge between the larger economies in the region by attracting investments to support trade on the require scale.

Hassan Ali Zaigham, Commercial Secretary of the Pakistan High Commission, stated that although the FTA between Sri Lanka and Pakistan was 10 years old, bilateral trade between the two countries was not at the expected level, although trade between Pakistan, India, Bangladesh and Afghanistan, was at a much higher level. He stated that Bilateral Trade Agreements have proliferated with the failure of the Doha round of negotiations of the WTO.

In this context the vision of Pakistan was to be the Economic Corridor for the region. In regard to the FTA with Sri Lanka he emphasised that 5,000 tariff lines were duty free for both countries. A certain amount of diversification of exports has occurred due to the FTA. However, the volumes were small.

He noted that the private sectors of both countries were not utilising the concessions under the FTA related to the level of market access that was available. In this context Pakistan was ready to receive proposals from Sri Lanka to balance trade between the two countries. He went on to state that investments from Pakistan to Sri Lanka has picked-up, and that Pakistan wishes to broaden the FTA to include Services and Investments. Further, Pakistan was a gateway, to CIS countries in Central Asia as well.

Dr. Sivaguru, 2nd Secretary Commercial of the Indian High Commission of Sri Lanka presenting the Indian perspective of the India Sri Lanka FTA and the experiences to date, stated that bilateral trade has expanded under the FTA. However, issues still remain related to NTBs, Customs, quota restrictions, Rules of Origin, testing of products, etc.

The panel discussion was moderated by Sean Van Dort, Chairman, Sri Lanka Shippers Council who was able to facilitate a lively discussion amongst the panellists, while eliciting responses to the questions rose during the discussions, and initial surveys.

During the panel discussion, Tuli Cooray, Secretary General of JAAF, stated that due to the quota restrictions for apparel products under the India and Pakistan bilateral FTAs with Sri Lanka, the sector has not benefitted in any way. He added that since apparel prices are sensitive in the global market, expectations under the China-Sri Lanka FTA is also minimal.

Subashini Abeysinghe, Head of Economic Research at Verite Research, stated that lack of trade information and market intelligent was a serious problem in the country which needed to be addressed soon as Sri Lanka was dependent only on a few markets such as the US and the UK.

Niraj de Mel, former Chairman of the Sri Lanka Tea Board, and the former Director General of the Tea Exporters Association, stated that although Pakistan was the fifth largest importer of tea and Sri Lanka was a major exporter to the market, Pakistan switched to low cost Kenyan teas and Sri Lanka lost the market.

R.D.S. Kumararatne, Director General of Department of Commerce, stated that although concerns against as well as for CEPA were a hot topic these days, the Department of Commerce had not been informed of any pending negotiations related to CEPA in spite of media reports regarding the appointment of a high-powered bilateral committee to prepare the framework for negotiations.

Jagath Wijeweera, Director General of Customs, stated that the recent agreement on Customs Cooperation between Sri Lanka and India facilitates a cordial relationship between the Customs of the two countries to resolve any issues which hamper trade.

P.D. Fernando, CEO of the Institute of Exports, stated that Sri Lanka cannot be considered to be small related to trade between the larger neighbours because the reality was that larger countries like India and China were exporting in a big way to Sri Lanka, although Sri Lanka could not access their larger market effectively.

Sarada De Silva, President of the NCE, stated that the overall view of the Chamber related to the FTAs and CEPA was not negative. However, he noted that the existing problems related to trade under these agreements which affect Sri Lankan exporter's needs to be addressed if trade is to be expanded.

Source: DailyFT Article on 17 April 2015
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