The Chief Economist of the Ceylon Chamber of Commerce Anushka Wijesinha, in an interview with Dailymirror by email, says the proposed Economic and Technology Cooperation Agreement (ETCA) is an important agreement for Sri Lanka. He says the key ongoing issue in trading with India is the non-tariff barriers. Following are excerpts of the interview:
Q The full potential of the Free Trade Agreement with India is yet to be realized. Then, how do you see the relevance of a broad agreement in the name of ETCA?
This is debatable - how do we know that the full potential of the existing FTA is yet to be realised? The tariff reduction exercise under the existing FTA is pretty much done. Nothing further to do on that count. It’s up to business from both sides to utilise it. Of course, the key ongoing issue with trade with India is the non-tariff barriers issue. This is not an unusual issue for bilateral trading partners. But it’s also too much to expect all that to get resolved from an FTA that both sides signed 15 years ago, when it was the first FTA for both countries. Which is why now the ETCA is important (and the earlier incarnation, the CEPA), because it is through this new process that we can begin to resolve the outstanding issues with non-tariff barriers, mutual recognition of standards, quota removal, trimming the remaining negative list, etc. Without this new process, there would be no progress on it. We are told that as part of the ETCA the SL side would push for an ‘early harvest’ agreement on these key pain points, and get early commitment from the Indian side to resolve it. We must push for this, as this is the priority. Resolving these can have big benefits for traders on both sides, and increase the overall volume of bilateral trade.
Q How can the fears of local entrepreneurs be allayed in this case?
Local entrepreneurs are not all in fear. There are different groups in the private sector. Many are very optimistic on the new opportunities that deeper trade and investment integration with India can provide. Meanwhile, some are interested, but unsure or uncertain. Others are worried. Each of these groups has its own legitimate reasons for their viewpoint. It depends on their current business and whether they can adapt and compete. it depends on whether they have had, as individual businesses, bad experiences in trading with India. For some others its purely ideological and emotional, and not based on fact. So the government must understand these dynamics, and engage with all groups to ensure that they are well heard. A government can’t allay all fears of everybody. Ultimately, a trade agreement depends on implementation in practice. There can be firms that lose in the short-term, but there will be many others who win in the medium to long term. We have to look at the medium to long term agenda in all this, and ask ourselves, will deeper trade and investment integration with our neighbours help create more business opportunities and create more interest among foreign investors?
Q It is learnt that some modes of service trading will be covered under ETCA. How will it impact local economy?
From what the negotiating team tells us, Modes 1, 2 and 3 will be open under the ETCA, and not Mode 4 (which is the free movement of people). Anyway, 1,2, and 3 are open now under BOI rules. So the ETCA brings in an additional framework of rules. I personally believe that very soon the private sector will have to firmly look at Mode 4 as well, in sectors where there are shortages of professionals, in sectors in which we want to grow and compete. In any case, under any agreement there can be rules specifying what kind of professionals, how many each year, what qualifications are recognised by Sri Lanka etc. All of these can be calibrated in a well-written agreement. These are done around the world. In fact, SL is a late-comer in all of this. Goods and services agreements aren’t futuristic, they are done everywhere. Sri Lanka is simply catching up.
Q In your view, what are the reasons for the failure of the FTA?
I don’t believe that there is a failure of the FTA. Sri Lanka’s has increased the number of product lines it exports to India, under the FTA. Imports from India are largely in items OUTSIDE the FTA.
Refer my answer earlier. What now needs to be done is to go beyond the tariff exercise, to cover NTBs, standards, etc.
Q In general, how important is it to access the Indian market?
Very much. The Indian middle class alone is ten times our entire population. Businesses in Sri Lanka can’t succeed by catering to our small domestic market. And we have this growing consumer market right across from us. Moreover, SL is well positioned to attract global operations that want to tap into India but don’t want to deal with the hassle of India. We have met many investors who are waiting to see what kind of integration we have with India, so that they can come and invest hear, employ people, and create exports for the