JAAF urges expansion of current export quota in India-Sri Lanka FTA

The Joint Apparel Association Forum (JAAF) yesterday stressed the need to go beyond the current export quota in the India-Sri Lanka Free Trade Agreement (ISFTA) for the apparel sector to reap any real benefits.

While under the current FTA, Sri Lanka is permitted to export eight million pieces of ready-made apparel to India without applicable duties, the apex body of Sri Lanka apparel is hopeful this will be expanded, as the FTAs carry the propensity to offer immense trade opportunities for both countries.  

“Unfortunately, the apparel industry is showing a decline of 20 percent in exports of textiles and apparel, driven mainly by a reduction in demand in the primary apparel export markets. We believe that India, as our closest trading partner, could offer a lifeline to the country, whilst also benefiting Indian fabric manufacturers,” said the JAAF in a statement yesterday. 

It pointed out that as Sri Lanka recovers from the worst economic crisis since independence, the role of the merchandise export sector has never been more important. 

Since the operationalisation of the ISFTA, Sri Lanka’s export trade has multiplied 18 folds from US $ 47 million in 1999 to US $ 815 million in 2021. Sri Lanka has also been able to promote a diverse range of products under the ISFTA.

Moreover, nearly 70 percent of Sri Lanka’s exports to India use the FTA provisions.  However, despite these many successes, the aforementioned eight million export quota acts as a hindrance to the apparel industry’s ability to reap the full benefits of the ISFTA, the JAAF said.

It pointed out that, for instance, Sri Lanka imports more from India, than it exports. In 2022 alone, while the total earnings from apparel exports to India stood at just US $ 149.28 million, yarn worth US $ 146.47 million, knitted fabrics worth US $ 311.78 million and woven fabrics worth US $ 278.38 million were imported from India.

“This highlights a serious sectoral imbalance of trade between India and Sri Lanka with the overall balance of trade continuously favouring India, allowing Indian companies to grow their footprint on the island with greater access for Indian mills to the Sri Lankan market,” the JAAF said.

It is also important to note that the limited eight million quota has to be shared by all Sri Lankan exporters, leaving exporters compromised to negotiate any meaningful orders with Indian buyers under the current restrictions.

However, the JAAF welcomed the talks between India and Sri Lanka on an FTA that are ongoing and is confident that this will bring benefits to both countries.  Pending the finalising of the FTA, the JAAF requested that the quota of eight million pieces be removed to give Sri Lanka an opportunity to use this as an avenue to increase its exports of apparel to India.  “Sri Lanka requires such flexible trade arrangements now more than ever, given the state of the current global market conditions, the resulting drop in demand for the apparel industry and the country’s prevalent economic crisis,” the JAAF said.