The Nation (Colombo) | 22 September 2013

Chinese FTA evokes mixed reactions

By Crystal Koelmeyer

The proposed Free Trade Agreement (FTA) between Sri Lanka and China, which is slated to be inked this November ahead of the Commonwealth Heads of Government Meeting, is a ‘wakeup call’ for the country’s exporters to identify and exploit opportunities available in China, the country with the second largest economy in the world, Chairman of the Ceylon Chamber of Commerce (CCC) Suresh Shah told The Nation Gain.

In this regard, he further said that the CCC is fully supportive of government’s move, and is hopeful that the blueprint of the agreement will be prepared accordingly, reflecting the asymmetrical nature of the two economies. “In principle, allowing Sri Lankan goods to enter the Chinese markets on zero duty, will reflect positively on local exports. Also, instead of being overly dependent on traditional markets like Europe and the United States, it seems timely and appropriate to expand trade to other parts of the world,” the Chairman said. From an exporter’s point of view, he remarked that trade agreements, in general, can be identified as tools that open up local goods to competitive foreign markets.

Meanwhile, former Chairman of Joint Apparel Association Forum (JAAF) Ajit Dias, speaking to The Nation Gain said that the FTA is a brilliant opportunity for country’s exports, especially in the apparel sector, to reach the Chinese markets of which the duties are otherwise high. “Since the country is not applying for the GSP plus concession either, this FTA is seemingly a brilliant opportunity to cater to the Chinese market which is considerably large. In my opinion, the local apparel sector has the potential to cater to the demand that is set to rise subsequent to signing of the pact,” he said. On the contrary, Managing Director and Chief Executive Officer of Chevron Lubricants Lanka PLC, Kishu Gomes, cautioned that the Trade Agreement is likely to generate certain negative consequences, thereby making Sri Lankan products uncompetitive in the local market itself. “The FTA will pose a threat to the local economy because we neither have economies of scale, nor powerful brands to compete with the Chinese goods that will start coming in,” Gomes asserted.

However, taking the sizes of the economies in to account, he said that Chinese goods can have a bigger impact on the Sri Lankan market; as opposed to the meager market share local products could acquire in Chinese market. Also, since China imports goods from various countries world over, Sri Lankan goods will have a bigger and an unhealthy competition there, which will, in turn, discourage investment on local industries, he added.