Protect local exports

Sri Lanka’s ever-deepening relationship with China could have negative effects that go beyond the mere political as the recent “bicycle dumping” allegations have brought out.

The European Union (EU) has lodged a protest with Sri Lanka over Colombo being used as a base for export of Chinese-made bicycles to avoid the payment of anti-dumping duty.

The EU protest was handed over to Sri Lanka’s Embassy in Brussels by EU’s Director General of Trade. Even though local EU representatives are yet to receive a reply from the Government it gives a hint as to the extent that Sri Lanka’s involvement with China can extend.

The European Commission has already begun investigations on whether Chinese exporters were shipping bicycles to the 27 EU countries through Sri Lanka, Indonesia, Malaysia and Tunisia. The intention is to determine whether exports from Sri Lanka are genuine or bypassing the regulations.

According to the EU, the main thrust of the investigation is to find out if Chinese exporters were shipping bicycles to the EU via the four countries to avoid paying a 48.5 per cent anti-dumping duty. The levy, in place for 19 years, is meant to punish Chinese exporters for selling bicycles in Europe below cost.

The allegations come as Sri Lanka’s Cabinet approved a USD 500 million loan to build more roads as well as flyovers around the country and reflect the intensely close ties that would hinder the Government from protesting against potentially illegal trade practices. Yet the damage to Sri Lanka’s reputation and trade relations cannot be ignored since the EU remains one of the country’s largest export markets while China still has less than 1 per cent of this share.    

One of the most lucrative developments for the Government was China’s entry as Sri Lanka’s largest funder since the end of the war with USD 1.2 billion in loans in 2009 and USD 821 million in 2010. Last year the amount fell to USD 784.7 million but China remains involved in almost all the large scale projects taking place.

Some of the biggest projects include a USD 1.3 billion coal power plant on the north western shore as well as a host of other investments in the south of the country including a USD 1.2 billion port and USD 209 million airport.

So close has the relationship become that Chinese Ambassador to Sri Lanka Wu Jianghao described it as being the “best in history” despite the two countries having diplomatic ties since 1955. During the recent visit of top Chinese legislator Wu Bangguo Sri Lanka signed 16 agreements that included ports, telecommunication and infrastructure deals with the Government. This was one of three high profile tours to Sri Lanka in less than a month and reflects the increasing importance Beijing is placing on the island.

Having bought into China on such a deep level it is questionable whether the Government will protest about trade practices that will damage Sri Lanka’s trade reputation – or indeed even has the independence to do so without losing billions in potential loans. Yet there can be no argument on the fact that the Government has a responsibility to protect the interests of Sri Lanka’s trade and therefore must act decisively to prevent further issues. It is only right that the hard working and ethical Sri Lankan exporters should be left untainted. Government institutions such as customs and other trade regulators should remember that their loyalties are most deserved by the local entrepreneurs.