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Exact date of signing ETCA cannot be mentioned Chief ETCA negotiator

10 August 2017 12:00 am - 0     - {{hitsCtrl.values.hits}}

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Ahead of the next round of talks on the Economic and Technology Cooperation Agreement (ETCA) with India, Sri Lanka’s Chief Negotiator K.J. Weerasinghe said that he could not stipulate when the agreement could be signed exactly. However, Mr. Weerasinghe, who is also the Consultant to the Ministry of Development Strategies and International Trade, hinted that it might be at the end of this year or early 2018. The excerpts:

  • It may be end of 2017 or early next year  
  • While ETCA talks progress, attention drawn to address Indo-Lanka FTA   issues 
  • SL seeks removal of quota system  
  • SL imports fabric, yarn, finished garments worth approx. US $ 450 mn annually from India  
  • Yet, SL’s exporting of garments stand at US $ 40 mn a year
  • We said ‘no’ to independent movement of professionals to provide services   
  • If professionals are to come, that should be linked to mode 3 or establishment of an entity   through investment  
  • Cabinet already approved National Trade Policy  
  • I can’t comment on any document I have not seen  
  • Six rounds of talks held with China over FTA

Q How far have you progressed regarding the Economic and Technology Cooperation Agreement (ETCA) with India?
So far, within a period of almost a year and-a-half, four rounds of talks have been held and we postponed the fifth round which was to be held in end June due to the demise of Dr. Kalegama. The next round, is now scheduled for the middle of this month.   

Q But, how far have you progressed in terms of agreements on key areas of concern and all?
It should be mentioned that we have a Free Trade Agreement (FTA) already in place with India – the Indo-Sri Lanka Free Trade Agreement  (ISLFTA) signed in 1998, which came into force in 2000, covers only trade in goods. It does not include other areas like services, investment, customs cooperation, trade remedies and trade facilitation. The ETCA in addition to Goods will cover these areas as well. Therefore it is comprehensive in scope. In the case of ISLFTA, tariff liberalization programme has been completed. Sri Lanka eliminated customs duties on a large number of items approximately covering 70 percent of tariff lines over a period of eight years which ended in 2008, and we have close to thirty percent in the list with approximately 1180 tariff lines that are not subject to tariff reduction which include among others, fisheries and agriculture sector. In the case of India, they reduced tariff and completed their tariff liberalization programme in 2004. India has listed around 196 items in the negative list.   However, India has imposed quotas on apparel of eight million pieces under the ISLFTA and there is a quota of 2500 MT on pepper and 2500 MT for Vanaspathi. If you add these items India’s negative list is around 962 tariff lines. What we say, firstly, under the current negotiation India has to remove quotas and open the market. Secondly, there are a large number of issues arising out of the implementation of the ISLFTA where exporters are facing difficulties due to non-tariff barriers, delays in clearance at ports, non-acceptance of standard certification issued by Sri Lanka and related testing issues etc. Therefore both sides agreed that while discussing ETCA, issues arising out of the ISLFTA should be addressed in parallel. During our negotiations on ETCA, the first session is devoted to address issues of exporters.   

For example, during previous rounds, 16 company specific issues were tabled. In the last two rounds, we tabled five additional company specific issues. Some of these issues have already been resolved and this process will continue under each round.   

Furthermore, under the ETCA negotiations, we have proposed an early harvest programme which has three components. One is the removal of quotas, on apparel, pepper and Vanaspathi. In case of Vanaspathi there are administrative delays in allocating quotas.  

The second is to address day-to-day operational issues faced by Sri Lankan exporters We have proposed establishment of a structured Grievances Redress Mechanism under which nodal points at ports in Chennai, Mumbai to be established and a specific custom officer will be identified so that issues faced by importers/exporters can be referred to that nodal point. The officer concerned is required to provide solutions in a time-bound manner. If it cannot be resolved at that nodal point, it will be referred to the relevant department or ministry in New Delhi, again in a time-bound manner. The draft on this redress mechanism has been discussed and is at the final stage which we believe could be implemented even before the ETCA is signed.   

The third element is completion of Mutual Recognition Agreement between the two countries. There are problems such as the non-acceptance of certification issued by Sri Lanka Standard Institution by the Indian authorities. We are proposing to sign a Mutual Recognition Agreements between Sri Lanka Standard Institution and relevant counterparts in India.Once this is done if an accredited laboratory in Sri Lanka issues certification on processed food or other items that will be accepted by the Indian side. In this regard collaborative work is being undertaken between EDB and the FSSI in India to resolve problems faced by our exporters.  

With China, we have had six rounds of talks including two sessions held under the previous govt. With Singapore, we have had six rounds of talks and the sixth round was concluded last week.  

It was on the Ministry website. Most trade chambers have sent in their comments. Those comments have been taken into account in finalizing the NTP and Dr. Ravi Rathnayake played a key role with late Dr. Saman Kalegama in formulating this policy document.  

This NTP is the policy document of the government as it has already been approved by the cabinet.  

 

Q When the quota system is removed, you mean to say that SL would gain unlimited access to India?
Now, there is a quota of eight million pieces on the apparel sector. In 2016, we have exhausted this quota. Therefore there is insufficient quota and a company would not undertake launching a market development programme unless the Indian market is open. SL imports fabric, yarn, finished garments worth close to US $ 450 million annually from India.Yet, on the contrary, SL’s exports of garments stand at US $ 40 million. Thus there is a very good rationale for removal of the quota system.   

Q How soon would the ETCA be finalized from your point of view?
Four rounds of talks have already been held. The fifth round would take place during the middle of this month. It is difficult to fix a time as dynamics of negotiations would guide the time. There may be a few more rounds needed. It depends on how the negotiation progresses. We cannot determine the exact date. But, it may be towards the end of the year or early 2018.   

Q The most controversial part which is subjected to criticism is the opening up of the service sector. How are you going to do it?
The principles and concepts should be understood here. Any trade in services negotiations have to be consistent with General Agreement on Trade in Services (GATS) of the World Trade Organization. It is very clear in this WTO agreement that immigration policy of a country is independent and is excluded from the scope of the agreement. The countries such as the US, Canada and Australia have made commitments on service at the WTO under GATS. Yet, their immigration policies are independent. They have undertaken commitments to liberalize services. It does not mean that they have liberalized their immigration policies and have very clear immigration policies to determine the flow of people into their countries. Foremost importance in Sri Lanka is to strengthen immigration regulations/laws. Sri Lanka currently does not have the necessary regulatory framework in many areas to ensure that the movement of foreign professionals is regulated. At the Ministry of International Trade, there is a unit- the Regulatory Reforms Committee headed by a team from the Attorney Generals Department who have had a constructive dialogue with professional organizations such as Institute of Engineers, Architects, Accountants, Surveyors , Medical Council, UPM etc. to obtain their inputs and to identify gaps in order to introduce necessary reforms. This regulatory reforms committee, in collaboration with the controller of immigration has almost completed their work. When these regulations are implemented they will address many concerns of professional organizations with whom we have had consultations.  

Under GATS, or for that matter under ETCA, is not about liberalization of labour markets. It is about temporary movement of persons and is not related to the unskilled or skilled labour market. On professional services, delivery of services happens in four subcategories. The first is the cooperate transferees. It means a branch of a foreign entity in Sri Lanka will have a manager or specialist transferred to work in that branch. For example, a particular bank has its branch in Sri Lanka. The head office can send a manager for a specific period. This is a transfer and it has been taking place for many years. The second is contractual supplies. This is, a foreign company getting a project to supply a particular service and to fulfil that contract, maybe allowing some professionals to come. This has also been happening for many years under the Board of Investment projects. The third category is business visits and like the previous two this has also been taking place in the past and currently. In addition to these three, there is another-the movement of sindependent professionals across borders to provide services. The first three have always taken place. The debate is about the fourth category allowing independent professionals visiting to provide services.We have categorically said that independent movement of professionals to provide services will not be allowed under the FTAs that are being negotiated.   

If professionals were to come, that should be linked to the mode 3 or establishment of an entity through investment. Linked to that investment, a certain number of professionals can be allowed. And further conditions could be stipulated that managers or specialists are allowed subject to a minimum threshold salary. In addition for every foreign professional a minimum number of employment should be provided to Sri Lankan nationals.   

Q There is fear here that the independent movement of natural persons may be seen because of SL’s commitment given under GATS to the WTO. They say the immigration law would facilitate it. How do you see this?

In the GATS of WTO, Sri Lanka had made commitments in a few areas - hotels and restaurant services, telecommunication services and financial services and has not made commitments on movement of natural persons.  

Q How keen are both sides to complete the process?
Both sides agreed that the current ISLFTA should be upgraded by broadening and deepening the current economic engagement and have committed to negotiate ETCA. Otherwise, we would not have started negotiations. It is a decision by both the governments at high political level that ETCA should be negotiated and completed it being an important component of economic development strategy. We are working on early harvest programme as I said earlier. That is essentially to address issues arising from the previous agreement. There are genuine issues faced by exporters. Those need to be addressed to build confidence among stake holders. If these issues are resolved, it will build confidence on the ETCA process. We have proposed the removal of quotas, the establishment of a structured mechanism to address grievances and mutual recognition agreement.   

Q There is a school of thought that SL should have a proper trade policy before signing trade agreements. What is your position?
A team of experts have been working on National Trade Policy for the last one and-a-half years. There has been a wide range of consultations on this document and will provide guidance to FTA negotiations. This document on National Trade Policy has already been approved by the cabinet.  

Q How inclusive is that process?
It was on the Ministry website. Most trade chambers have sent in their comments. Those comments have been taken into account in finalizing the NTP and Dr. Ravi Rathnayake played a key role with late Dr. Saman Kalegama in formulating this policy document.  

Q Outside the govt, a group of independent professionals and experts are also working on a trade policy. How are you going to reconcile both?
This NTP is the policy document of the government as it has already been approved by the cabinet. I cannot comment on a document that I haven’t seen.  

Q How far have you progressed in regard to the FTA with China?
With China, we have had six rounds of talks including two sessions held under the previous govt. With Singapore, we have had six rounds of talks and the sixth round was concluded last week.  

Q How do you compare and contrast the trade negotiations with China and India?
Unlike with China, we have experience with India as we have negotiated ISLFTA which is limited to goods. We are moving towards ETCA with India covering trade in goods, services, investment, custom facilitation etc.  

In the case of China, it is a new experience. We are focusing on the extent of tariff liberalization programme whereas with India TLP will be on review of negative list and to agree on the liberalization level. On China, SL has sought immediate market access with zero tariff for products covering apparel, gem and jewellery, rubber based products, tea, ceramics and fruits and vegetables, the day the agreement comes into force. With both India and China the trade balance is fairly large in favour of those two countries and with these two agreements it is expected that our exports will increase to these two large markets and investment from China and India will lead to increased exports, thus contributing to expand exports and reduce trade imbalance.  

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