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Sri Lanka and India in trade talks in Colombo next week

Lanka Business Online, Sri Lanka

Sri Lanka and India in trade talks in Colombo next week

22 March 2007

March 22 (LBO) - Sri Lanka and India will hold another round of trade talks in Colombo next week on liberalizing professional services, investments and trade in goods.

The talks on a Comprehensive Economic Partnership Agreement or CEPA, has been ongoing for three years, to widen trade to include areas like professional services.

The two sides also want to trim their negative or sensitive lists, with Sri Lanka identifying 57 industrial goods like fish, some spices and fruits that it can free up.

"We are reviewing the existing negative lists and want to reduce the size as far as possible. We are still finalizing the list with the Treasury," Saman Udagedara, Acting Director of Commerce told businessmen on Thursday.

This would include items not produced locally or those used as raw materials or inputs in Sri Lankan industries.

"Sri Lanka has identified 57 items that it can remove from its negative list, while India has agreed to consider 118 tariff lines, which constitutes 57 industrial items and 61 apparel items."

The two sides will also look at restrictive rules of origin on some goods or the extent of local value addition needed to qualify for tax breaks.

India has asked that the number of ’non-qualifying’ operations under the existing Indo-Lanka free trade agreement be increased, which Sri Lanka has objected to.

The Indo-Lanka trade deal in operation has had its share of controversy, with India raising trade barriers on some goods like vegetable oil and spices despite a duty free arrangement, due to surging local exports.

The trade dispute blocked CEPA negotiations last year and completely stopped local exports of vegetable oil, until early this year.

Talks in Colombo will also look at customs co-operation and restrictions on entry, especially for Sri Lankan goods trying to enter India’s multiple ports.

For services, talks will also look at opening up areas like health, shipping, tourism, the retail trade, finance and insurance, aviation, energy, education and information technology.

India also wants Sri Lanka to open up access to Indian professionals like accountants, architects, doctors, nurses, midwives and engineers, a still controversial area in talks.

Globally, just 1-2 percent of world trade is in movement of people, while bulk of trade or 50 percent is in commercial enterprises set up by foreigners.

Sri Lanka has linked professional services to investment in the country and has still not made a decision to fully liberalise, though it is willing to consider some flexibility in areas of skills shortage, Saman Kelegama, Executive Director of think tank, the Institute of Policy Studies, said.

Several Indian businesses currently operate in Sri Lanka like Indian Oil Corporation, Apollo Hospitals, Taj Hotel, Jet Airways, Sahara Air, Godrej and Bajaj.

The countries have exchanged request lists, while ’schedules’ or details of the extent to which the countries will open up and other regulations, are being prepared.

The two sides have been trying to sign the Comprehensive Economic Partnership Agreement since 2004, but say they are closer to tying up a deal this year.

The agreement, when it comes into effect will widen trade ties beyond the existing Indo-Lanka Free Trade Agreement, which covers trade in goods.

"Finally all indications are that we can get CEPA activated by June 2007," Kelegama, says. The trade talks are to be held in Colombo on March 28, 29 and 30.