International Trade: Is Sri Lanka sleeping at the switch

May 30, 2012 (LBO) – Bangladesh is upset because India is about to sign a free trade agreement with the European Union. Its mission in Brussels has been instructed to monitor developments and it appears that the issue is being discussed bilaterally as well.

Once India signs the agreement, India’s apparel exports to Europe will be subject to zero duty. Bangladesh enjoys this status now. It is concerned that leveling the playing field for India will result in a reduction of its exports.
Perhaps Sri Lanka should be concerned as well. Sri Lanka did not enjoy preferential status in Europe, but a huge economy like India qualifying for zero duty could dramatically change the playing field for our exporters.

Now that the Doha Round of multilateral talks to liberalize international trade is dead, all the action has shifted to bilateral and plurilateral (more than two but less than WTO membership) trade negotiations. One of the problems with bilateral agreements is that they can shift advantages, as in the above example.

Given Sri Lanka is a country that is heavily dependent of international trade, should we not be monitoring developments such as the India-EU negotiation. Bangladesh’s response is not the right one; but at least they are on the ball.

There are developments to the East that we should be paying attention to as well. On May 13th, China, Japan and South Korea initiated discussions on a trilateral free trade area.

This is seen as a first step toward something really huge that would include ASEAN, something that was written about in this column (http://www.lankabusinessonline.com/sri-lankas-strategic-and-economic-policies-walk-the-talk/).

India is signing economic partnership, cooperation and free-trade agreements at a pace. Perhaps this is in response to being left out of the ASEAN-plus discussions.
Do the authorities understand that these actions in far-away capitals could have serious repercussions on Sri Lanka’s exporters and through them for all of us? Isn’t it time that the government starts paying attention to international economic policy, other than in terms of placating narrow interest groups within Sri Lanka.

The action is not all in Geneva. Even Bangladesh knows that Brussels is important. But we pull our representative from Brussels without even talking about who will replace him.

Rohan Samarajiva heads LirneAsia, a regional think tank. He was also a former telecoms regulator in Sri Lanka. To read previous columns go to LBOs main navigation panel and click on the ‘Choices’ category.