Director General of Commerce outlines SL’s foreign trade policy regime and way forward at NCE AGM

Director General of Commerce Nimal Karunathilake

In his keynote address as the Guest of Honour at the Annual General Meeting of the National Chamber of Exporters (NCE) held on 28 January at the Hotel Galadari in Colombo, Director General of Commerce Nimal Karunathilake traced Sri Lanka’s trade policy regime since implementation of the General Agreement on Trade and Tariff ‘GATT’, and the way forward in keeping with modern international trade. 

He provided an overview of the key trade policy instruments adopted by Sri Lanka from the outset which comprised of Tariffs, and other Non-Tariff Measures (NTMs), related to quotas, Sanitary and Phytosanitary Measures (SPS) and Technical Barriers to Trade (TBT). 

He stated that Sri Lanka was a Founding Member of GATT, which dealt with merchandise trade only, where all products were not covered. The objectives of GATT were the progressive reduction of tariffs, quotas and subsidies. The garment sector of Sri Lanka was able to develop as a major sector over the plantation crops tea, rubber, and coconut due to the quotas available under GATT. Subsequently quotas under the Multi Fibre Agreement (MFA) were phased out under the Agreement related to Textiles and Clothing of the World Trade Organization (WTO). Sri Lanka was a Founder Member of the WTO as well.  

The Director General of Commerce stated that the measures formulated and implemented by Sri Lanka under the WTO in terms of its Foreign Trade Policy included the following:

• Fixing Tariffs and Other Direct Costs (ODCs) in respect of Products and Services under the concept of the ‘Most favoured Nation’ (MFN)
• Fixing of Para Tariffs and other Non-Tariff Measures (NTMs)
• Measures formulated with Trading Partners including Free Trade Agreements (FTAs), and Preferential Trade Agreements (PTAs) on a Bilateral and Regional Basis. Accordingly, Sri Lanka entered into FTAs with India and Pakistan and Bilateral and Regional Trade Agreements such as the South Asia Preferential Trade Agreement (SAPTA), and the Asia Pacific Trade Agreement (APTA). Sri Lanka has recently entered into an FTA with Singapore.

The WTO Agreement unlike the GATT covers both Trade in Goods and Services under a single package. It also covers Trade Related Intellectual Property Rights (TRIPS), and Trade Related Investment Measures (TRIMS). Further under the WTO the Tariffs in respect of Products and Services Sectors were bound in respect of the Agreements with individual Member Countries including Sri Lanka. Also under the WTO quotas were progressively phased out and subsidies were also reduced. 

Additionally, unilateral measures have been implemented by certain developed Countries in respect of their Trading Partners under a General Systems of Preferences (GSPs). Sri Lanka has such GSPs with countries such as the USA, Australia, etc. 

Sri Lanka has also been a beneficiary under the GSP+ Scheme of the EU Countries under which a large number of Tariff Lines enjoy Duty Free Access to the EU market. This concession is however due to lapse at the end of 2023, since Sri Lanka has reached Upper Middle Income Status in terms of Per Capita Income. 

Challenges faced by Sri Lanka both internally and externally 

The Director General Commerce outlined the following in respect of the above challenges.

• The nature of the Export-Basket of Sri Lanka where there is a heavy dependence on a few product sectors and also a few markets.
• Production capacity limitation including limitations in respect of Capital, Expertise, and Human Resources related to a shortage of specific skills required particularly for Hi-Tech products, as well as labour shortages in specific product sectors.
• Issues related to deficiencies in quality and competitiveness in respect of Sanitary and Phytosanitary measures (SPS) and Technical Barriers to Trade (TBT).
• An adequate of lack of exposure to International Trade of Sri Lankan Entrepreneurs.
• Most Sri Lankan Entrepreneurs being primarily defensive and not offensive in regard to opportunities that arise in International Trade.
• In regard to external challenges, the changing overseas market trends, developments related to e-commerce, volatile exchange rates as well as developments arising out of BREXIT, since the EU is the most important trading block for Sri Lanka, were cited. 

The way forward for Sri Lanka 

The Director General Commerce, concluding his address outlined the following in regard to the way forward for Sri Lanka in terms of Foreign Trade Policy.

• The need for a consistent economic policy related to trade, industry and agriculture. This is necessary for confidence building among entrepreneurs and investors and particularly to attract Foreign Direct Investments (FDIs) with the required Technology Transfers to produce Hi-Tec products that have opportunities for exploitation in international markets. In this regard he stated that the current National Export Strategy (NES) is limited only to a few identified product sectors. 
• The necessity for capacity building for export production. In this regard he mentioned the assistance received under the EU Sri Lanka Trade Assistance Project.
• Importance of the implementation of trade facilitation measures. In this regard he mentioned the need for effective implementation of the Sri Lanka Trade Information Portal (SLTIP), as well as the need for speedy implementation of the National Single Window (NSW) that is being implemented with the assistance of the World Bank.
• The need to improve the business climate to facilitate local entrepreneurs to expand international trade activities, especially related to exports.
• The need for implementation of effective trade financing measures to facilitate expansion of international trade.