EU asks SL to respect WTO rules; urges not to put country’s exports at risk

• Says EU not worried about negative trade balance with SL; but asks SL to respect int’l trading rules
• Urges govt. to officially communicate difficultues it faces in lifting import restricions to WTO
• EU accounts for over 22% of SL’s exports;  Lankan exporters enjoy GSP Plus access to the region 

The European Union (EU) envoy in Colombo recently fired a warning urging Sri Lanka to respect World Trade Organization (WTO) rules as import restrictions currently in place are hurting trade with partner countries.
“Our problem is not about the trade deficit we have with Sri Lanka, it’s about the rules” pointed out Denis Chaibi, Ambassador of the Delegation of the EU to Sri Lanka and Maldives.

“The last 10 years, Sri Lanka has enjoyed a large trade surplus with the EU, and the EU has never tried to change the situation. It’s the private sector at work. But with the import restrictions, 2020 was the lowest exports EU had to Sri Lanka. That is not right, because it’s not according to the rules,” he said, adding that addressing the import restrictions are very high on the EU agenda. 

The envoy made these comments at a recent seminar organised by the Advocata Institute, a Colombo-based free market think tank.  Ambassador Chaibi said the EU understands that Sri Lank, like many other developing countries is experiencing Balance of Payments (BoP) and hard currency shortage challenges owing to the COVID-19 global pandemic. However, he sterssed that the government of Sri Lanka should communicate the problems it faces via the official channels to the delegation.

“We fully understand the Balance of Payment issues Sri Lanka faces. If the restrictions can be explained for this reason, it should be done using the proper channels which means notification to the World Trade Organisation (WTO) with a rationale. If no more action is taken on this, we have to coordinate with likeminded partners in the WTO,” he stressed.

Due to Sri Lanka’s heightened BoP crisis and other policy decisions, the recent months saw a severe tightening of restrictions of imports into the country.  These restrictions have been imposed through import bans, quantitative restrictions, licensing and higher border taxes. The government is also following a nationalistic approach to grow and manufacture, but the import void has resulted in a surge in prices of daily household consumables such as food. 

This is not the first time the EU, which accounts for 22.4 percent  of Sri Lankan exports, had publicly voiced its concern over the arbitrary import restrictions, which it feels undermines the international trading rules.

 Sri Lanka’s largest export markets include the EU, United Kingdom and the United States, while much of it is imports are derived from China, India and the Middle East for energy requirements.  

Sri Lanka’s largest export industry and private sector employer, the apparel industry, has a huge dependency on the aforesaid export markets and is a beneficiary of GSP Plus, a preferential tariff system that is given to underdeveloped and developing countries by EU member states.