FTZMA urges Govt. to act swiftly, strategically and wisely

• Says members including key players in apparel, tea, rubber industries are bracing for ripple effects of reduced competitiveness in US market
• Fears of mass layoffs, factory closures loom large over thousands who rely on sectors for their livelihoods
• Warns tariff move could severely undermine Sri Lanka’s trade balance while creating domino effect of reduced production and foreign investment
• States choices made today will determine if SL sinks under weight of protectionist policies or rises above economic headwinds
• Proposes potential strategies SL could explore to mitigate impact of US tariff and strengthen trade relationship with US

The Free Trade Zone Manufacturers’ Association (FTZMA) yesterday said Sri Lanka, being an unsuspecting player in this global trade confrontation, finds itself grappling with an unprecedented challenge that threatens to derail its export-driven industries following the US’s reciprocal tariffs. 

In a seismic move shaking Sri Lanka’s economic foundations, US President Donald Trump on 2 April unleashed a sweeping 44% reciprocal tariff targeting nations with trade imbalances. 

The FTZMA, representing over 300 enterprises across Sri Lanka’s Free Trade Zones, has raised the alarm about the devastating impact this tariff could have on the nation’s economy. FTZMA members, including key players in the apparel, tea, and rubber industries, are bracing for the ripple effects of reduced competitiveness in the US market. Fears of mass layoffs and factory closures loom large over the thousands who rely on these sectors for their livelihoods.

FTZMA Chairman Dhammika Fernando stated that the Association has convened an emergency meeting to address the crisis, whilst noting that the Association is actively engaging with Government authorities to formulate strategies that will safeguard the interests of its members and mitigate the fallout.

The apparel industry – long celebrated as Sri Lanka’s golden goose of foreign revenue responsible for approximately 56% of total industrial exports to the US – has been thrust into the crosshairs. 

Meanwhile, the tea industry, responsible for about 9% of exports, and glove exports, being the third largest export commodity to the US representing about 5%, are some of the economic staples of Sri Lanka; other exports to the US, such as tyres, coconut products, cinnamon, and gem and jewellery, risk losing their stronghold in the American consumer landscape.

The FTZMA warned that this tariff could severely undermine Sri Lanka’s trade balance while creating a domino effect of reduced production and foreign investment. As the dust settles on Trump’s bold move, the battle lines in the trade war have never been clearer.

The FTZMA now stands at the forefront of this economic battle, rallying its members to navigate the storm and emerge stronger. The choices made today will determine whether Sri Lanka sinks under the weight of protectionist policies or rises above the economic headwinds.

The FTZMA proposed some potential strategies Sri Lanka could explore to mitigate the impact of the US tariff and strengthen its trade relationship with the US since there is still hope that the Trump administration is open for negotiations.

Bullets

1. Reciprocal reduction in tariffs: Engage in diplomatic discussions with the US to negotiate a mutual reduction in tariffs. Highlight Sri Lanka’s economic recovery efforts and its commitment to fair trade practices. This could involve showcasing Sri Lanka’s willingness to lower its import tariffs on US goods to create a balanced trade relationship.

2. Comprehensive Free Trade Agreement (FTA): Propose a US-Sri Lanka Comprehensive FTA to establish long-term trade stability. This agreement could include provisions for tariff reductions, improved market access, and investment incentives. It would also strengthen economic ties and encourage US businesses to invest in Sri Lanka.

3. Increase import of raw materials from the US: Boost imports of raw materials and intermediate goods from the US to reduce the trade imbalance. This could include items like cotton for the apparel industry or advanced machinery for manufacturing. Such measures would demonstrate Sri Lanka’s commitment to fostering a reciprocal trade relationship.

4. Diversification of export markets: Reduce dependency on the US market by expanding exports to other regions, such as the European Union, ASEAN, and South Asia. This could involve leveraging existing trade agreements and exploring new partnerships.

5. Strengthen domestic industries: Invest in innovation and technology to enhance the competitiveness of Sri Lankan products. This could include adopting sustainable practices in the apparel and tea industries to appeal to environmentally conscious consumers.

6. Leverage GSP benefits: Advocate for special trade concessions under the Generalized System of Preferences (GSP) to offset the impact of US tariffs.

7. Public-private collaboration: Collaborate with industry associations like the FTZMA to develop a unified strategy. This could include joint lobbying efforts, sharing market intelligence, and pooling resources for trade promotion activities.

8. Promote US investments in Sri Lanka: Create incentives for US companies to set up operations in Sri Lanka, such as tax breaks, streamlined regulations, and access to Free Trade Zones. This would not only boost local employment but also strengthen bilateral economic ties.

These strategies, implemented collectively, could help Sri Lanka navigate the challenges posed by the US tariff and emerge stronger in the global trade arena.