Eliminating Non-Tariff Measures on Sri Lanka affecting trade within SAARC countries

By Ayanthi Gurusinghe

With the world’s growing demand for an efficient trade increase with new changing industries particularly in South Asia, improving the efficiency of international trade by reducing the burden of NTMs is becoming increasingly important. At present, NTMs have created significant legal and regulatory obstacles to market access, hurting the competitiveness of exporters and delaying (and sometimes even preventing) businesses from entering into new markets and taking advantages of new opportunities. 

SAARC – NTM Desk of Sri Lanka was instituted at Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) to identify Non-Tariff Measures and Non-Tariff Barriers (NTBs) which exist and restricts trade between Sri Lanka and rest of the SAARC countries. The objective of the desk is to identify the NTMs/NTBs and to propose recommendations to regulators of trade and commerce to take counter measures to reduce these barriers.

The NTM Desk has identified products which Sri Lanka could increase in exports into SAARC countries including traditional exports such as spices and rubber. Furthermore, it was identified floriculture and ornamental fish as potential exports/imports to Sri Lanka in 2020 including fresh fruits, fruit juices and apparel products that were identified as part of SAARC regional value chains by SAARC TPN.

The NTM Desk of FCCISL together with Karpos Consultants Ltd. carried out a series of forums, interviews and field visits to understand the issues faced by the selected sectors on non-tariff measures affecting when trading within SAARC region. It was clearly understood that non-tariff measures (NTMs) continue to create major challenges for exporters, importers and policymakers. Defined as ‘policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both’, there is a wide spectrum of NTMs used in international trade today.

Within the region, India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership with bilateral trade growing rapidly in the last decade and a number of leading Indian private sector companies investing in Sri Lanka and establishing a presence in this country. Sri Lanka is India’s largest trade partner in SAARC. India in turn is Sri Lanka’s largest trade partner globally. Much of the impetus for the current level of our economic interaction stemmed from the signing and entering into force of the Free Trade Agreement (FTA) in 1998 and 2000 respectively.

While Sri Lankan exports to India have increased substantially during past 12 years since 2000 when ISFTA came into force, they have lagged behind the high growth in India’s exports to Sri Lanka, resulting in a widening of the trade balance. This is largely because of the lack of export capacity from Sri Lanka to service Indian requirement and also due to increase in imports from India because of competitiveness of our exports. Interestingly, over 80% of our exports to Sri Lanka are outside the list of products covered by the FTA, thereby indicating their overall competitiveness in the Sri Lankan market.

Most of the issues identified and highlighted during the interviews were related to India and Pakistan. Despite Sri Lanka having FTA’s with both countries, the effectiveness of the agreements needs to be revisited. The chamber conducted a series of meetings (focus group meetings) with each sector identified in consultation with trade associations, exporters and importers to find out the persistent NTMs affecting when trading within the region. 

On 9 February, all highlighted trade issues were addressed with the policy makers at the ‘Policy Advocacy Group’ to verify all issues identified and to seek possible mechanisms to be applied to eliminate barriers. Unfortunately, some of the issues continued to exist for a long time.

However, an effort was made by all representatives of the policy group where most departments confirmed and stated their plans to address most of the NTMs to support trade. “We look forward to share all identified NTMs through a publication which will be handed over to Department of Commerce,” said the NTM desk from FCCISL. They further thanked SAARC Trade Promotion Network (SAARCTPN) and (GIZ) GmbH for the project extended to Sri Lanka and to the region in their support to eliminate non-tariff barriers affecting trade with the SAARC countries.