EDB Discusses Impact of EU–India FTA on Sri Lanka with EU-Appointed Consultants

A meeting was held recently between the Sri Lanka Export Development Board (EDB) and consultants to the European Commission, Paul Baker and Talal Rafi, to exchange views and insights on the potential impact of the EU–India Free Trade Agreement (FTA) on Sri Lanka’s export sectors.

Baker and Rafi have been engaged by the European Commission to assess the implications of the landmark trade agreement for Sri Lanka. Yohan Lawrence, Secretary General of the Joint Apparel Association Forum (JAAF), also joined the discussion, highlighting the challenges that Sri Lanka’s apparel industry could face once the FTA becomes operational.

Negotiations on the EU–India FTA were concluded on 27 January 2026, and the agreement is expected to enter into force following the completion of the required legal review, signature, and ratification procedures.

The FTA is expected to significantly improve the competitiveness of Indian exports in the European market. Key labour-intensive export sectors, including apparel, marine products, leather and footwear, chemicals, plastics and rubber, sports goods, toys, and gems and jewellery, will benefit from substantial tariff liberalisation, with many products gaining duty-free access from the date the agreement enters into force.

Addressing the meeting, EDB Chairman Mangala Wijesinghe emphasised the importance of the European Union to Sri Lanka’s export economy, noting that the EU remains Sri Lanka’s second-largest export destination after the United States and accounts for approximately 24% of the country’s merchandise exports. He also provided a detailed assessment of the potential implications of the EU–India FTA for Sri Lanka’s export sector, highlighting both the emerging challenges and opportunities for local exporters.

Sri Lanka’s exports to EU markets recorded strong growth in 2025, with major destinations including Germany, Italy, the Netherlands, France and Belgium registering increases over the previous year.

Wijesinghe also stressed the importance of safeguarding Sri Lanka’s preferential access to the EU market through the GSP+ scheme, particularly as Indian products become increasingly price-competitive following implementation of the FTA. He noted the importance of Sri Lanka continuing to meet the requirements of the EU’s revised GSP framework and securing preferential access under the new regime.

“We intend to position Sri Lanka as a reliable, sustainable and high-quality supplier to the global market, while encouraging local enterprises to move towards higher-value, differentiated products and strengthen compliance with EU standards,” Wijesinghe said, outlining some of the strategies the EDB intends to pursue to mitigate the potential adverse effects of the FTA.

Joining the discussion, European Commission consultant and international trade economist Paul Baker observed that economic projections and long-term modelling indicate that the EU–India FTA could substantially increase India’s exports to the European bloc while also strengthening foreign direct investment flows into India.

He noted that while Indian products are expected to become more price-competitive in the EU market following tariff liberalisation, the European Union’s increasing emphasis on sustainability, environmental performance, traceability and regulatory compliance would continue to create opportunities for exporters capable of meeting these requirements.

Baker therefore encouraged Sri Lankan exporters to reassess their product and market strategies, improve value addition and strengthen compliance with evolving EU sustainability and regulatory standards in order to remain competitive.

Yohan Lawrence, representatives of the apparel industry, meanwhile, raised concerns over the potential impact of the FTA on Sri Lanka’s apparel exports to the EU. Particular attention was drawn to the rules of origin and regional cumulation arrangements applicable to fabrics and other inputs sourced from India and subsequently used in garments manufactured in Sri Lanka for export to the EU under GSP+.

Industry representatives cautioned that any restriction on Sri Lankan apparel manufacturers’ ability to benefit from cumulation arrangements involving Indian-origin inputs could further weaken the competitiveness of the local garment sector at a time when Indian apparel exports are gaining improved tariff access to the European market.

The EDB emphasised that the Government of Sri Lanka would take the necessary steps to engage with the European Union on appropriate cumulation arrangements with India, with a view to safeguarding Sri Lanka’s export competitiveness and supporting greater integration of regional supply chains.

At the conclusion of the meeting, the European Commission consultants thanked the EDB and representatives of the apparel industry for their observations and industry insights. They indicated that the issues raised during the discussion would be taken into consideration in preparing the final study to be submitted to the European Commission.