Colombo Telegraph

Common Economic Partnership With India – Some Comments

By R.M.B Senanayake

R.M.B Senanayake

There is much opposition to CEPA among various people. But I could not find any concrete arguments put forward by any one as to why they oppose. We seem to be inhibited by fears of domination by big brother. But we are living in a globalised world and India being our closest neighbor will have the cheapest cost of supply of goods and services to us.

Hasn’t this Agreement been worked out through exhaustive negotiations between officials of both sides that have taken years of study and consultation? Didn’t they not ensure a ‘level playing field’ that does not give undue advantage to India apart from the fact that she has the advantage of being the numerically bigger partner? But don’t we trade with other big countries like USA and China? What then is our fear of India?

We have over generations developed a fear of India because of the South Indian invasions that took place from the 12th century. But the world has changed and the South Indian Kingdoms have been replaced by a much larger Indian State who is a member of the UN bound to uphold the UN principles. With or without CEPA India could invade Sri Lanka if she chose to do so and we will have no way to preserve our Independence as the food drop by air showed.

But economic links can strengthen good relations between countries for their arise a group interest among traders who want to maintain peace for their trade to flourish. In the past the colonial invasions took place largely for safeguarding economic interests although once the imperial country took control it could not bail out easily. This problem was faced by the British Labor government after 1945. So we should not allow the past to distort our current perceptions.

Photo – Prime Minister Ranil Wickremesinghe with Nirmala Sitharaman, Minister of State (Independent Charge) for Commerce and industry

Trade promotes the economic interests of both countries and both trading partners benefit even if the size of the two countries is vastly different. This is a fundamental economic principle under-lying international trade. Trade arises from the free bargaining of traders and not from the actions of governments. So each party will safeguard his interests. These interests often coincide with the economic interests of the country as a whole. Where they don’t is a case for State intervention but not otherwise.

Trade flourishes between countries which are situated close to each other. The world is developing through international trade and regional trade is particularly useful. So there is ASEAN where Singapore took the initiative to promote. Like Singapore we are a small country. Europe is promoting Economic Unions and there is a global movement for regional trade development. We need to do the same and India is our best market because of its geographical, closeness. True we are able to export our products to the West and don’t need more or better markets for the present. But we must look at the future. We are too far from our Western markets and European countries are moving towards closer integration. So the trade policies of these European countries can change as they prefer to have closer economic links with countries closer to them. We must therefore look not only at the present or even the immediate future but the more distant future. Didn’t we have trouble with our export-import trade during the Second World War? Can we predict the future? Shouldn’t we prepare for any eventuality? Of course India too could be aggressive but this could take place with or without CEPA. In any case if there is war whether it is nearby or distant, trade will be disrupted. In such circumstances it will be easier to trade with countries nearby. We still import a lot of food for consumption just as it was in the period of the Second World although we are self sufficient in rice.

To come back to CEPA I find there is no official report of what is offered by India. But I have made notes from my readings from which I reproduce the following:

“According to an unassailable authoritative source, in the Goods Sector, India would reduce its negative lists by another 114 items while Sri Lanka would be reducing only 32 items. This is despite the fact that under the Indo-Sri Lanka FTA Sri Lanka was allowed to have a larger negative list (1180 tariff lines) than India (429 tariff lines).

“India has also offered additional concessions on garment quota of 8 million pieces that was granted under the FTA. Besides the three million pieces granted at zero duty earlier, India has agreed to allow another three million pieces more at zero duty and the remaining two million at 75% margin of preference. Port entry restrictions and conditions of sourcing fabrics from India have also been removed”.

In the Services Sector, too, India has agreed to larger and deeper openings than Sri Lanka. India will open far more sectors upfront (about 80 sub-sectors) and grant deeper concessions in each of these areas. In return, Sri Lanka has been allowed to have a more gradual approach, open only selected areas (about 20 sub-sectors), and to restrict openings in these sectors to levels it is comfortable with.

“Openings on various modes of supply, including Mode 4 that pertains to movement of natural persons is much more limited in Sri Lanka’s schedule of commitments than India’s. India will allow unlimited number of visas to executives, managers and specialists to work in India. Sri Lanka has not reciprocated and allowed restricted concessions in this regard. Only in two sectors, ICT and related services and maritime services, where Sri Lanka has shortages, Indians will be able to work in Sri Lanka and this concession too is linked to investments by India and limited to a small percentage of jobs involving high-level of skills. The fear of influx of Indian professionals into Sri Lanka as a result of CEPA, therefore, is unfounded.

“The Services Sectors opened by India include some of the areas where Sri Lanka has proven expertise and acknowledged advantages. These include: architectural and engineering services, tourism and travel related services, ITC and related services, transport, and maritime services.

Concessions granted by India are unconditional and not time-barred unlike GSP+ concessions that are temporary, subject to periodic review and come with prescriptive non-trade considerations.
Beyond sect oral concessions, an opening by India is by itself a larger concession owing to larger size of its markets.

Apart from direct benefits, CEPA also aims at creating a more facilitating environment for Sri Lankan exports and seeks to remove perceived impediments to exports from Sri Lanka. These were all based on Sri Lankan demands and Indian side has agreed to all such requests recognizing the true spirit of free trade between India and Sri Lanka. These include:

A provision to identify and root out all non-tariff barriers;

Sri Lankan exporters have been complaining about Indian Customs. CEPA provides for a close cooperation mechanism between the Customs Authorities; for transparency of laws, rules and regulations through prompt publication, adoption of risk management techniques to allow expeditious clearance to low risk consignments, adoption of paperless trading methods, adoption of advance ruling system etc. It also establishes direct points of contact on both sides for quick resolution of any possible problems.

Another problem faced by Sri Lankan exporters has been delays owing to testing and certification requirements for certain products in India. CEPA provides for a Mutual Recognition Agreement (MRA) as well as adoption of common Sanitary and Phyto-sanitary standards. As a result, delays due to lab testing and certification processes will be avoided allowing Sri Lankan exports to enter India unhindered. Testing and certifications done in Sri Lanka would be recognized in India. The products that will benefit include: Ayurvedic products, fish and fishery products, coffee, tea and spices, edible fruits and nuts, vegetable fats and oils, all kinds of animal and animal products, plant and products of plant origin, and other agricultural and related items.

Some exporters in Sri Lanka felt that the FTA rules of origin criteria were far too stringent in respect of certain commodities leading to effective denial of export possibility. At Sri Lanka’s request, India has agreed to ease rules of origin criteria for 346 products. This will enable Sri Lanka to export these items of priority interest and also to be more competitive in the Indian market. Some of the products included are apparel items, jewellery, furniture, machinery, electrical and other appliances, agricultural and agro-processed items, fishery products, non-ferrous metals, and so on.

In order to ensure that problems in bilateral trade receive priority attention and are resolved promptly, a Standing Committee at the level of Commerce Secretaries has been set up. It will meet every six months to address all outstanding issues and concerns and resolve them promptly. Besides, the Commerce Ministers will meet annually to deal with unresolved issues ensuring that all concerns are addressed at a very high level and on a regular basis.

The CEPA also provides for redress through non-governmental means by providing for a dispute resolution mechanism;

The CEPA also envisages economic cooperation in a wide range of areas selected by Sri Lanka alone. These include: Energy; Manufacturing; Services; Transport & infrastructure; Science and technology; Human resource development; and SMEs. This would help in creating capacities and developing human resource potential in Sri Lanka to better leverage the new openings envisaged in the CEPA.

Are these not substantial benefits?

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