Trump tariffs and Government’s lack of credibility

Last week, US President Donald Trump informed his Sri Lankan counterpart that his administration would impose a 30% import duty on all goods exported from Sri Lanka to the US, effective 1 August. This blanket tariff, separate from existing sector-specific duties, is expected to have serious implications for Sri Lanka’s merchandise exports.

In response, Sri Lankan Government officials oddly celebrated the decision, highlighting that the 30% rate was lower than the previously announced 44%. Treasury Secretary Dr. Harshana Suriyapperuma even claimed that Sri Lanka had negotiated the highest tariff reduction in the region – an assertion which collapses under scrutiny. Vietnam, an Asian state which competes against Sri Lanka in the US market, has secured a highly beneficial trade deal from Washington. As per the deal, Vietnamese exports to the US would be taxed at a 20% rate as opposed to the initial 46% tariff. 

Over the last three months, it was obvious to many that the Government was involved in gross falsification about the negotiations with the US authorities on this highly sensitive matter to the country’s economy. Unfortunately, dissemination of falsehood has more or less become the administration’s go-to modus operandi whenever it encounters a critical issue. In June, at the Parliament, Minister of Labour Prof. Anil Jayantha declared Sri Lanka was the only Asian state which was holding discussions with the US to revise the tariffs introduced by President Trump last April. But it was public knowledge that countries like India, Bangladesh, and Thailand were having extensive deliberations with Washington to achieve favourable trade deals. Disseminating such blatant lies is unbecoming for a person like Jayantha who has taught thousands of university students during his stint as an academic. 

Apart from false statements, question marks arise whether the Government team which negotiated with the Office of the United States Trade Representative (USTR) possessed the required technical depth and rigour. The effectiveness of the coordination between the political leadership and officials during the process too was far from ideal. It is also unclear why Governor Nandalal Weerasinghe was part of the negotiating team, as tariff negotiations fall squarely within the remit of trade and commerce authorities, not monetary policy.

Given Trump’s unorthodox style of diplomacy, a direct interaction with the White House too would have been useful besides talks with the USTR. Some leaders reportedly took the opportunity to engage Trump informally at Pope Francis’s funeral last April over the tariff matter, underscoring the value of direct diplomatic outreach. Sri Lanka’s failure to pursue such channels reflects an absence of initiative and diplomatic agility. Lack of experience within the top echelons of the NPP’s political leadership in terms of dealing with the West did not help the cause either.

By contrast, India’s delegation represented the highly comprehensive and inclusive approach in their dealings with Washington, which was bolstered by political commitment at the top, strong ministerial backing, input from seasoned technical negotiators and legal specialists, as well as high-level administrative coordination. Last month, India’s Minister of Commerce Piyush Goyal held ministerial-level discussions with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer. On the contrary, not a single cabinet minister from Sri Lanka took part in the negotiations with the US. Trade Minister Wasantha Samarasinghe, to whose purview the Department of Commerce (DOC) falls under, was conspicuously absent from the process while the non-involvement of the Director General of the DOC too was baffling.

Indications are both Vietnam and India – which compete against Sri Lanka within the US market for apparel products, the country’s largest export commodity – will obtain considerably favourable deals from the Trump administration. Such a scenario would be a huge setback to the local apparel industry as America is their largest export market.

With the US being Sri Lanka’s largest export destination – particularly for apparel – it is critical that the Government adopts a more professional, coordinated, and honest approach to the trade negotiations. The stakes are too high for complacency, misrepresentation, and amateurism.