Lanka Needs to Change its Stance on Free Trade Agreements - EDITORIAL - Opinion

Lanka Needs to Change its Stance on Free Trade Agreements - EDITORIAL

21 February 2024 12:01 am Views - {{hitsCtrl.values.hits}} 4 Bookmark

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For over five years, we the Lankans have been dabbling with the idea of entering into Free Trade Agreements (FTAs) with India and other countries in the Asia region. Today, once again, we are at the point of inking an agreement on Economic and Technology Cooperation Agreement (ETCA) with India.
Negotiations for a FTA with Thailand have reached fruition, while discussions with India, Bangladesh and China are currently in progress. Additionally, trade negotiations with Indonesia and Malaysia are set to commence shortly. Sri Lanka has submitted a Letter of Intent to become a member of the Regional Comprehensive Economic Partnership (RCEP).
Since the changed economic policies in 1977 led to a partial dropping of protectionist policies, various interest groups from professionals to trade unionists have been up in arms against the idea of FTAs in general and with India in particular.

The common thread running through their arguments has been that Indian workers will flood this country to the detriment of local workers. Lanka will become the dumping ground for cheap ‘inferior’ Indian goods. Indian educated students do not meet international standards, etc., etc.
It’s time we brought ourselves up to date. India today is challenging both China and the US – the present day economic giants. Indian educated professionals play a leading role in Silicon Valley (the global hub for high technology and innovation). Indian scientists are using Indian technology to send rockets to the moon and beyond. Indian medicines are widely sought after by responsible medical institutions like the WHO.

In our little island, we have not yet been able to produce a quality razor blade, and lest we forget, we pay some of the lowest wages to needs worldwide.
Furthermore, today many Indian expatriate workers in the Middle East and even in the US are leaving their lucrative employment in those countries to return to India where they receive better packages.
Now, why oh why, should Indian professionals rush in to take up our low ‘paying jobs’ unless we are ready to raise our wage levels? If that happens does it not auger well for our workforce as well?

FTAs are no magic mantra to develop our economy. But they do provide an opportunity to shift away from exporting low-tech manufacturing products and primary goods to more complex high-tech goods like electronics, machinery, vehicles and medical devices, and thereby increase our foreign exchange earning capacity.
They help boost our export competitiveness by diversifying its sourcing partners through larger trade networks and cheaper imports of intermediate goods from partner countries.
In Vietnam for example, trade agreements like the RCEP and EVFTA, extend Vietnam’s trade integration partners well beyond Asia, allowing that country to take advantage of the reduced tariffs, both within the ASEAN Economic Community (AEC) and with the EU and US to attract exporting companies to produce in Vietnam and export to partners outside ASEAN.
The partnership with foreign firms helped transfer knowledge and technology needed to enter higher value-added production. An example of this is the Vinfast electric automobiles manufactured by Vietnamese conglomerate Vingroup.

Vinfast’s gains represent how Vietnam developed its own products from the transfer of know-how and technology, and enhanced its foreign exchange capacity.
Our country is still in debt to its external creditors, and this debt keeps growing. In September 2023, our external debt stood at US$ 52.7 billion as compared with US$ 52.3 billion in the previous quarter.

We need to work our way out of this debt situation. Economy Next statistics show Sri Lanka’s Gross Official Reserves went up by 829 billion rupees to 4.4 billion US dollars in December 2023, helped by loans from multilateral lenders including the International Monetary Fund.
In plain language our present export earnings are not sufficient to repay our creditors any time soon. Therefore, we need to find ways and means of ensuring we are able not only to meet repayment deadlines, but also to ensure we never fall into bankruptcy again.
Free Trade Agreements are a possible way out. The Vietnamese experience proves this. It is time to shed long held, outdated prejudices, and take the country forward.

Comments - 4

FredSnr Wednesday, 21 February 2024 09:59 AM

We had many of these experts just that we did not use them the way the Indians did, they had a national pride, worked under a wall of protection in India till about 1990 when they opened out the country, did not abandon English as the medium of instruction for higher studies so a completely different scenario.Take that case of razor blades above, the university taught material science as a subject in 1969 thereabouts at engineering faculty Peradeniya. Around 1974 it became a full 4 year course at University Katubedde campus, around 1973 74 with funding from UK Leeds University? so when the first batch passed out at Katubedde they were assessed by Leeds university? in 1977 78 Their assessment was that they would rank with the best in the world so SL was producing world class graduates in the field almost 50 years ago.You don't have to accept what I say you can check all this out for yourself thanks

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Suren Sarathkumara Wednesday, 21 February 2024 11:30 AM

In an atmosphere where both market dominance and political dominance are wielded by India, it is difficult to believe that we have adequate bargaining power or negotiational balance at the FTA discussion table. International trade agreements are irreversible and would have an uncontrollable chain effect on our economy if not executed with acumen, The present political system is proven to be more self-serving than serving the nation though it is duty-bound to do the latter. The alleged suger scam, bond scam, and medicine scam are only a handful of evidence to disprove the hopes of success with FTAs in present Sri Lanka. The same criminal dishonesty and impunity will prevail in every bit of the process throughout. It is very likely that the FTAs would be signed in favor of the other party for the personal gains of the politicians in power. We should consider past experiences and present track records of the decision-makers before taking these serious economic steps.

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Sokrates Wednesday, 21 February 2024 12:26 PM

Sri Lanka as an economic dwarf must secure itself with free trade agreements in order not to be taken advantage of and exploited. This affects all countries from Thailand, India, UK, Germany and especially China. Free Trade means trading without customs duties. This is only possible to a limited extent for Sri Lanka. Despite Free Trade, Sri Lanka has to impose protective tariffs in the following cases. For example, if China exports highly subsidized agricultural products to Sri Lanka, Sri Lanka should impose protective tariffs equal to the Chinese subsidies. For example, if imports from Germany exceed exports to Germany, protective tariffs would have to be levied on the excess imports. This is the only way Sri Lanka can conclude free trade agreements on an equal footing.

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NV Jen Wednesday, 21 February 2024 08:02 PM

FTA's with Checks and balances are good, that affords some protection to local industries. More than FTA's country needs FDI. For that to happen the bureaucracy and corruption should be eliminated. However the canards regarding FTA's are created by people with vested interests and mostly trade unions are their pawns in this. Remember the pea-brained Padeniya led GMOA, one time was opposing FTA with Singapore!

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