The Island | 26 May 2010
President says no deal to unfair trade agreements
Analysts say Sri Lanka has to fight for a better deal, trade agreement with India must improve not abandoned
By Devan Daniel
President Mahinda Rajapaksa on Tuesday said Sri Lanka would not enter into trade agreements that would have an adverse effect on the country’s economy when he met a group of protestors against the implementation of a comprehensive economic partnership agreement (CEPA) with India.
He said that any agreement should be fair and have equal benefits to both countries.
But this did not discount a revival of trade talks to either implement or change CEPA or modify the existing trade agreement with India.
"It would be foolish to let things stand as they are. If we can get a better deal we must go for it," an analyst told the Island Financial Review not wanting to be named.
CEPA was to be signed in 2008 by the heads of state of Sri Lanka and India but was shelved after some industrialists lobbied successfully against it. With the 30-year war ending last year and Sri Lanka’s growth prospects looking stronger than ever before, India has indicated that it wished to conclude the CEPA deal sometime this year.
The Institute of Policy Studies of Sri Lanka, together with think-tanks and business chambers from both countries organised a two-day conference to discuss the achievements, challenges and the future of the Indo-Lanka Free Trade Agreement (ILFTA) which came into being 10 years ago.
Economists, trade experts, public officials and businessmen said the ILFTA, although plagued with problems such as non-tariff barriers and various state-level taxes which made it difficult for Sri Lanka to export to India, was largely a success which gave access to more Sri Lankan exports into India, while India’s imports to Sri Lanka would have grown even without the FTA, given that more than 60 percent of imports are outside the ILFTA.
Many speakers, from both sides of the Palk Straits, academics, public officials and businessmen, said CEPA was the way forward. These comments irked some industrialists and protestors took to the streets and later met the president who assured them that there would be no deal if agreements were unfair to Sri Lanka.
The president’s media unit filed the following report yesterday:
"Spurred by the implementation of ISFTA in 2000, exports from Sri Lanka to India have increased over the years except for the year 2006. The value of Sri Lanka’s exports to India increased from US$ 55.7 million in 2000, (the year ISFTA became operational) to US$ 516.4 million in 2007.
"For the first time in history, the two way merchandise trade exceeded US$ three billion in 2007 representing 17% of Sri Lanka’s trade with the world.
"Accounting for 6.7% of Sri Lanka’s total exports to the world, India remained the island’s third largest buyer in the year 2007 after the US and UK. At present, more than 70% of the total value of Sri Lanka’s exports enters India under the tariff preferences offered through the ISFTA.
"In 1996, 1997 and from 2001 India became the largest supplier to Sri Lanka overtaking Japan. Sri Lanka’s share of imports from India during 2007 accounted for 24.4% of its total imports from the whole world.
"Export from Sri Lanka to India increased by 4.5 % from US$ 494.06 million in 2006 to US$ 516.40 million in 2007. It is observed that in 2007, several major product categories recorded increases, when compared with 2006.
"Imports from India to Sri Lanka increased by 52.8% from US$ 1.8 billion in 2006 to US$ 2.7 billion in 2007," the report said.
India’s economy is expected to boom and lead the global economy out of the recession, together with China, and various state agencies, including the Central Bank, economic and trade analysts have made a case for an economic partnership agreement that would seal Sri Lanka’s prospects of benefiting from being so close to such an economic power house.
The ILFTA has its bad side and hence the protests that were staged on Tuesday, but analysts said Sri Lanka was a sovereign nation and was well within her rights to negotiate a deal that would secure fairer terms and is not a docile nation so as not to fight for better terms.
The Indo-Lanka CEPA was negotiated over several years with the intension of solving the problems encountered in the ILFTA.
Sri Lanka’s negotiators ensured that vulnerable and infant industries were closed to India while a provision in the agreement provided for either country to withdraw from the agreement.
Liberalisation of services and investments was to be included in CEPA’s scope.
"Sri Lanka cannot and must not ignore India. It is up to us to negotiate a better deal. A deal that would work for us, and this must be done sooner or later. If people perceive it to be to our disadvantage then we should engage them and educate them on what really is in CEPA," an official said not wanting to be named.
"But if opposition is based on a phobia or bitterness over a bad experience, then what do we do? We have to take advantage of India’s growth prospects. This is for Sri Lanka. CEPA has turned into a dirty word, but genuine lovers of Sri Lanka should go into the CEPA document and see for themselves and not use the word ‘patriotism’ for their own narrow gains," he said.
"Agreements always have problems, but this does not mean we forget about it. Think of the benefits. We must try to maximise these benefits and not stay closed up in our comfort zones. The government is clear it would not enter into an agreement that is detrimental to Sri Lanka, no Sri Lankan wants this, but then every Sri Lanka should work hard for what is best for the country."