Brexit wind down gives two year breathing space for FTA with UK: Harsha

By Hiruni Dabarera

Downplaying the Brexit impact on Sri Lanka a top official yesterday said about 40% of exports to Europe will remain intact as the Government has at least two more years to negotiate a Free Trade Agreement (FTA) with Britain. 

Foreign Affairs Minister Dr. Harsha de Silva expressed confidence in the strong relations enjoyed between Sri Lanka and Britain and emphasised breathing space for the Government to ride on GSP+ while negotiating a potential FTA with Britain once Article 50 is implemented. 

“The appointment of Liam Fox as the UK Secretary for International Trade will be quite favourable to Sri Lanka. He has been a friend and was closely associated with political relations between UK and Sri Lanka in the past,” Dr. De Silva said, addressing the Brexit Forum organised by the Shipppers’ Academy Colombo, as the keynote speaker. 

“Sri Lanka is going to enter into as many beneficiary trade agreements as possible in future. The Prime Minister is scheduled to leave for Singapore next week and hopes that trade with Singapore will speed up Sri Lanka’s trade income growth. Further, the highly controversial ECTA will be confirmed. By August the Government will have a national trade policy,” he added. 

The Minister went on to note how once UK leaves the European Union (EU), Sri Lanka will no longer enjoy duty free access to the European market. “We are certain to get GSP+ within the next six to nine months. Until the Brexit is sorted out and the exit is ratified in 27 odd parliaments which will take close to two years, we will have access to free trade. 

After Great Britain leaves the EU we are certain to enter into fresh but similar duty free trade agreements with them owing to amiable relations with new state officials,” he substantiated. 

As much as 40% of Sri Lankan exports to Europe were earlier absorbed by UK. In this context the challenge is the need to be a part of the common market and also the limitation of migration to Europe (free movement of work force within Europe). The Minister believes that the latter challenge is not something unique to Brexit but common to the whole world. 

“Even in Sri Lanka we want to access the Indian market but do not want free movement of labour within the sub-continent,” De Silva emphasised. “In USA too this is met with in relation to Mexico and Canada”, he further explained. However, primarily the focus is on exports. According to economists British per capita income will be reduced by 5000 Sterling Pounds during the next few years. The Sterling Pound has lost close on 13% to the US Dollar. 

Yet, there is also stability in the British financial market. Even though experts expected bank interest rates to fall with Brexit, it has not happened. The Minister believes the UK government will come up with stimulus packages around August to tackle such challenges. In addition, British unemployment rates have been the lowest in the world for the last twenty years. UK is also a prominent member of the United Nations Security Council, G7 and the Commonwealth organisation. 

When it comes to the Sri Lankan tourism sector, British tourists are reported to spend the most for a fortnight stay in Sri Lanka. With the depreciation of the Sterling Pound the tourist sector needs to be braced towards a fall in its revenue from British tourists. However, with increased travel cost for the British within the European continent, Sri Lanka can also expect a boost in the arrival of British travellers.