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Reuters: Talks between China and Sri Lanka for a free trade agreement have hit major hurdles, mainly because Beijing will not agree to Colombo’s demand for a review of the deal after 10 years, Sri Lanka’s top negotiator said. China has invested billions of dollars building ports and roads and power stations in the Indian Ocean island nation just off the southern toe of India as part of its Belt and Road Initiative to increase its trade and other connections across Asia and beyond.
But concerns have grown in recent months that such investments can drive the country of 21 million people deeper into debt and undermine its sovereignty, prompting greater scrutiny of deals with China.
China’s exports to Sri Lanka dwarf the trade that goes in the other direction, leaving Colombo with a big deficit with Beijing. Sri Lanka’s chief trade negotiator K.J. Weerasinghe said this week that Colombo was insisting on a right to review the free trade pact after 10 years, but China was not ready to agree that.
Ministerial level discussions about an agreement have not been held since March last year. Lower-level discussions between officials have made little progress, according to Weerasinghe.
“The talks have come to a standstill. China wants to remove the review clause,” Weerasinghe told Reuters. Beijing was opposed to such an option because it wanted longer-term stability, he said.
China’s commerce ministry did not respond to Reuters requests for comment.
The review clause that Sri Lanka wants would allow it to change some of the deal terms if they were hurting the island nation’s local businesses.
Another contentious issue
Weerasinghe said another point of contention was that China wanted zero tariffs on 90% of goods the two countries sold to each other as soon as an agreement is signed while Colombo would rather it started with zero tariffs on only half of the products concerned and expanded gradually over 20 years.
China has been pushing for free trade pacts with countries in the region and last year sealed an agreement with the Maldives that drew criticism from opposition political groups in the tropical islands’ nation. They said it had been rushed through parliament with less than an hour of debate.
Sri Lanka has previously said it wanted more time to negotiate the free trade deal with China as it is concerned about the economic impact of a rushed deal on its economy.
Sri Lanka imported $ 4.2 billion worth of Chinese goods in 2016, mostly raw materials for garments, machines and electronics, metals, transport equipment and chemicals. Its exports to the world’s second largest economy were just $ 211 million the same year, which included textiles, tea and vegetables, footwear and rubber.
The 2017 figures for China trade have still not been released by the Sri Lankan authorities.
The trade deficit with China accounted for nearly half of the nation’s total deficit in 2016, adding pressure on the country’s current account deficit, Central Bank data showed.
Sri Lanka’s foreign debt rose nearly 17% to Rs. 4.72 trillion ($ 30 billion) last year, a fifth of that coming from loans from China to finance the massive construction program across the island.
Colombo is separately negotiating a trade pact with India, but that is also moving slowly because Sri Lankan businesses fear they will face competition from a flood of cheap goods made by Indian firms.
By Charumini de Silva
Considering the recent concerns raised by top professional bodies regarding the newest free trade agreement (FTA) between Sri Lanka and Singapore, the Government is now making arrangements to work through their issues during an implementation review meeting in the near future.
President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and Development Strategies and International Trade Minister Malik Samarawickrama have agreed to give due consideration to the issues raised by several professional associations.
“The comments made by several professional bodies on a constructive manner will soon be reviewed by the Government,” Development Strategies and International Trade Ministry Secretary Chandani Wijewardana told the Daily FT.
A cluster of seven professional organisations, including the Institute of Engineers Sri Lanka (IESL), Sri Lanka Institute of Architects (SLIA), Institution of Incorporated Engineers Sri Lanka (IIESL), Institute of Quantity Surveyors Sri Lanka (IQSSL), Institute of Town Planners Sri Lanka (ITPSL), Institute of Landscape Architects and Institution of Surveys (ILAIS) called on the Government to present the recently signed SLSFTA to Parliament and step up engagement with professionals on other trade deals to be signed in the future.
The Government Medical Officers’ Association (GMOA) called on President Sirisena to stop the ratification of the SLSFTA and demanded a National Trade Policy be established.
The professional associations faulted the Government for fast-tracking the SLSFTA when concerns were raised over many issues, including visa access for workers, accreditation of qualifications and identification of professional shortages in the Sri Lankan economy, which had remained unaddressed.
According to Wijewardana, most of these allegations from these professional bodies are on the same issue with different interpretations. Therefore the Ministry is planning to get help from the Attorney General’s Department as the associations submit their concerns in written form.
The Daily FT learned that President Sirisena had given instructions to the GMOA to submit a report listing out their main concerns to National Economic Council (NEC) Chairman Prof. Lalith Samarakoon. These will then be taken up by the relevant ministry. With regards to the issues raised by other professional bodies, particularly IESL and the SLIA, Minister Samarawickrama and the Prime Minister had directed them to submit their written concerns.
Among the requests by the professionals had been an appeal to tighten visa regulations for workers and implement a system similar to other countries, where qualifications for professionals would be vetted by Sri Lankan organisations before they were allowed to obtain a work visa.
They pointed out that an inspection of the Singapore FTA, which was published by the Development Strategies and International Trade Ministry in April, showed the difference between the strongly structured Singapore side and the less elaborate stipulations of Sri Lanka.
She stressed that although the FTA had already been signed, within a year’s time from its signing there was an opportunity to take up the strong concerns of the two countries at an implementation review meeting, which needed to be agreed upon by Sri Lanka as well as Singapore.
