FTA with Thailand most timely

Sri Lanka and Thailand on 3 February signed a Free Trade Agreement marking a significant development in opening up commerce through an increase in access to markets between the two countries and the greater Southeast Asia region. After several years of negotiations, the agreement was signed during the visit of Thai Prime Minister Srettha Thavisin and his delegation of business dignitaries.

Sri Lanka has been oscillating between opening trade and instinctive protectionist policies. After having signed a remarkably progressive Free Trade Agreement with India in 1998 which gave favourable access to over 7,000 products from Sri Lanka, the trade had stagnated due to the inability to elevate this relationship into a comprehensive economic partnership. Numerous attempts to finalise the Indo-Lanka Comprehensive Economic Partnership Agreement (CEPA) had been scuttled by a few influential stakeholders, including trade unions. India entered the FTA with Sri Lanka at a time it was under international sanction after testing a nuclear weapon in the late 1990s. The FTA with Sri Lanka was one of its very first, and the generosity and flexibility demonstrated by the Indian side has not been witnessed in its later FTAs with other nations.

The story regarding the FTAs with Pakistan and Singapore are the same. Despite entering into mutually beneficial trading arrangements, Sri Lanka has failed to utilise them to the fullest potential. Years of protectionist policies have made the private sector uncompetitive. With the tentacles of crony capitalism penetrating deep into the economy, the benefits of the political client system, with a few winners both in business and politics seems to be the preferred option.

It is hoped that this new agreement with Thailand will be different. It should not only be seen as a gateway to one of the most vibrant developing countries but an inroad into the vast ASEAN region. Its economy is half a trillion dollars with a population of three times that of Sri Lanka. It is a giant in agriculture and innovation in the agriculture sector. While agriculture remains one of the most sensitive sectors of any economy, protectionism and welfarism, as done in Sri Lanka, can only result in an unviable sector which neither benefits the consumer nor the producer. It is time to learn these lessons from Thailand and look towards creating an economically viable agriculture sector that depends less on welfare and subsidies from the State. The FTA with Thailand and with Singapore should be explored to expand trade with the ASEAN region. Sri Lanka for too long has ignored this vital region.

The new FTA with Thailand should be an opportunity for Sri Lanka to finally leave behind its failed and self-destructive protectionist policies. The CEPA with India should now be a priority. Despite hysterical, nationalist sentiments, there should be greater connectivity and integration of the economies. Similarly, the FTAs with Pakistan and Singapore should be fully operationalised. Sri Lanka having two very favourable FTAs with both India and Pakistan, with a combined population with 1.7 billion people should be a means of trade between these two countries, which have their own troubles and numerous barriers for trade.

Sri Lanka for most of its recorded history has been an economic hub and a location for free trade. It is but natural that this trading tradition be revived for the benefit of its people.