Economic and Technology Cooperation Agreement Sri Lanka yet to heed India’s request for appointing chief negotiator

SL’s request for apparel quota hike to 50 million units to be considered under ETCA only

Rule of origin to be observed strictly to make sure that no third country benefits  

By Kelum Bandara  

Despite requests by India, the Sri Lankan government is yet to appoint a chief negotiator for the resumption of talks on the Economic and Technology Cooperation Agreement (ETCA) which is now at a standstill after 14 rounds of discussions carried out under different successive governments in the past for expansion of trade and investments with India, an informed source said.  

In the wake of U.S. trade tariffs, the Sri Lankan leaders stressed the need to enhance trade cooperation with other countries for diversification of its export destinations. After U.S. President Donald Trump slapped reciprocal tariffs, Sri Lanka requested India to expand the quota to export apparel products under the Indo-Lanka Free Trade Agreement to 50 million units from the current eight. However, India is keen that it can be considered only in the evolution of ETCA.  

The FTA is now considered by both sides to be revisited since the trade landscape between the two countries and globally has changed dramatically since then.  

In the resumption of ETCA talks, the situation is heading to be more complex because India is keen to be strict on ‘rule of origin’. Rules of origin determine whether a good is originating and qualifies for preferential tariff treatment under an FTA. The work towards developing rules of origin ensure that the benefits of an FTA go to products made in the countries involved. India is keen that this facility is not used by a third country which targets the Indian market through Sri Lanka where some form of value addition is done by them.   

“This is to make sure that no third country benefits from the facility to be given to Sri Lanka,” the source said.   

According to the source, the Indian authorities have requested Sri Lankan to appoint its chief negotiator for talks on ETCA. The FTA between Sri Lanka and India was signed in 1998 and entered into force in March 2000.  

As a result of the FTA, currently 4150 Indian tariff lines have been made zero duty for Sri Lankan exports to India. Similarly, 3,932 tariff lines have been made zero duty for Indian exports to Sri Lanka. In addition to these steps, India has offered quotas to Sri Lanka on certain tariff lines (a) 15 million tonnes of tea (5 tariff lines) with 50% margin of preference and no port entry restrictions since June 2007; (b) Textiles, where there is a 25% tariff reduction for 528 textile items; and (c) Garments where there is 50% margin of preference on 8 million pieces over 233 tariff lines.   

The Sri Lankan government has stressed the need to revisit the FTA .