US-Sri Lanka economic ties

LAST week we saw a flurry of US-Sri Lanka engagement especially on the bilateral trade aspect. One was the successful conclusion of the eighth Round of Talks of the US-Sri Lanka Trade and Investment Framework Agreement (TIFA) Joint Council. The country also had an opportunity to hear US sentiments at several public fora including a breakfast meeting organised by the American Chamber of Commerce (AMCHAM) Sri Lanka. A second annual conference to attract U.S. investors to Sri Lanka was also held under the initiative of the Embassy of Sri Lanka in Washington, D.C. and the Office of the U.S. Trade Representative, U.S. Department of Commerce, U.S. Embassy in Colombo and the Sri Lanka Trade Ministry.

A top level US officials’ delegation was in town whilst a team of representatives from American companies based in India visited Sri Lanka as well. Engagements included a visit to Jaffna and meeting with business leaders in Colombo.  The US Embassy, together with the US Commercial Service and the US Small Business Administration also kicked off a ‘Doing Business’ road show countrywide. This is a highly commendable move and a first of its kind by a development partner.

As per joint statement issued following the TIFA talks, the two countries had focused on a number of subject matters pertaining to securing enhanced access for Sri Lankan and US exports in each other’s markets, promotion of US investment into Sri Lanka, intellectual property rights and exchange of technical cooperation.

After detailed deliberations, the two sides agreed to work towards a comprehensive plan of action that would guide appropriate follow-up on areas of mutual interest through engagement of the respective private and public sectors.

In addition to their discussions on issues relating to trade and investment policy, the two Governments continued their talks on how best they could promote private-public partnership cooperation between the two countries.

The delegations also discussed the avenues available to them for involving the private sector stakeholders in the numerous investment opportunities available to them in post-conflict Sri Lanka. The two sides agreed to pursue their concerted efforts in further enhancing US-Sri Lanka commercial and economic relations as well as promoting private sector involvement in the island’s post-conflict development efforts.

The renewed optimism on US Lanka trade ties is welcome but the two countries continue to fail to strike a Free Trade Agreement, which is the follow up to TIFA. When TIFA talks started several years ago there was confidence and hope that an FTA will follow soon. However partly because of strained political relations as well as preoccupation with other matters the US-Lanka FTA had remained elusive.

We have often emphasised that US is an important partner for Sri Lanka and there is much to gain than lose from a stronger ties with the world’s biggest economy. One could allege that bashing of the West by the Mahinda Rajapaksa administration may have further distanced the US from Sri Lanka whilst Uncle Sam also ran the risk of interfering too much into the internal affairs of Colombo.

Nevertheless, as much as Sri Lanka cannot ignore the US, the same applies to the Obama administration. Given the strategic importance of Sri Lanka and its post-war rebound and equal challenges, the US has to ensure it takes a proactive role. To its credit, the US despite the seemingly hostile treatment has enhanced its humanitarian, financial and technical assistance to Sri Lanka. Since 1956, USAID/Sri Lanka has invested nearly Rs.230 billion to benefit all the people of Sri Lanka. This is significant, and had the bilateral relations been dynamic the quantum would have been higher apart from Sri Lanka enjoying greater access to its exports as well as a much larger investment in Sri Lanka by US companies.

What came out strongly during last week’s engagement is that, that the US is certainly convinced by the post-war economic potential of Sri Lanka whilst challenges remain daunting in terms of rehabilitating and rebuilding the war torn areas and communities in the North and East. Whilst the US is right in emphasising that greater democracy and good governance are crucial in Sri Lanka’s way forward, it is important for Washington to realise that higher trade and investments are equally critical to economically empower Sri Lanka.