Sri Lanka’s Ambassador Designate to China, Dr. Palitha Kohona last week called for the expediting of the proposed Free Trade Agreement (FTA) with China but urged the Sri Lankan Government to ensure it would not be unfavourable to Sri Lanka.
He made these comments delivering the keynote address at an interactive session hosted by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL).
“The Free Trade Agreement with China has been on the table for the last few years since 2017. It’s about time we revisited it and every effort is made to finalise it over the next couple of years,” Dr. Kohona said.
He added that FTAs are not by nature evil and that Sri Lanka should ensure they serve the interests of both parties.
[caption id="attachment_107117" align="alignleft" width="200"]
Sri Lanka’s Ambassador Designate to China Dr. Palitha Kohona[/caption]
“A free trade agreement is not an easy thing. There are many people who say free trade agreements are not good. But I take a different view. The most important thing about a free trade agreement is that it should serve the interests of both parties.”
As an example, he pointed to the FTA Sri Lanka signed in 1999 with India, which he blamed for having led to a severe trade imbalance against Sri Lanka.
“Some of the current Free Trade Agreements are not in favour of Sri Lanka. India exports something like $ 4.5 billion worth of goods to Sri Lanka while the exports are around $ 600 million annually. So there is some imbalance somewhere. Either it was in the way we negotiated this agreement or in the way it has been implemented. Something has to be done to rectify the errors that we made or the things that we did not take into account.”
Former FCCISL President and current Ceylon National Chamber of Industries (CNCI) President Ruwan Edirishighe too said at the session that the China-Lanka FTA should be pursued.
In October 2020, State Minister of Regional Co-operation Tharaka Balasuriya told The Sunday Morning Business that Sri Lanka was carefully reviewing the provisions of the proposed FTA with China to ensure it would not turn out to be “another Singapore FTA”.
“The proposed China FTA is a huge document and there is a lot of negativity towards Sri Lanka. We are reviewing the contents and assessing the Harmonised System (HS) codes because we do not need a repeat of what happened with the Singapore FTA,” the State Minister said.
In the face of unrelenting opposition and lobbying, both in the political and professional spheres, former President Maithripala Sirisena appointed an independent committee to study the Sri Lanka-Singapore Free Trade Agreement (SLSFTA) and to submit a report, only a few months after it was signed.
China is the world’s second largest economy and an FTA with it has been coveted by Sri Lanka for many years. Negotiations on an FTA commenced in 2016, but came to a virtual standstill by 2018. This was reportedly due to Sri Lanka’s insistence on reviewing the agreement every 10 years, to which China was strongly opposed due to its willingness to have longer term stability, according to Sri Lanka’s then Chief Trade Negotiator K.J. Weerasinghe, as reported by Reuters in May 2018.
Nevertheless, during a meeting with Sri Lanka President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa on 9 October in Colombo and a high-level Chinese delegation, Sri Lanka and China agreed on the need to resume negotiations on the stalled talks on the FTA. According to Balasuriya, Sri Lanka is reviewing the agreement before getting back to China on resuming the negotiations.
Sri Lanka’s annual exports to China amount to approximately $ 450 million while China’s exports to Sri Lanka are much higher at approximately $ 2.5 billion.
Dr. Kohona said this trade deficit underlines the “tremendous” export potential to China, particularly because the Chinese economy has been affected far less by the Covid-19 pandemic and hence purchasing powers of their citizens are high.
“Every crisis creates new opportunities and even Covid-19 will create such opportunities, and local exporters should find ways to take benefit from this.”
Dr. Kohona also said that Lankan exporters need to become savvier and much more sophisticated in selling in the Chinese market.
“Nobody can come and sell anything unless you have a local partner. You need to cultivate relationships, you need to have language skills, and you need to be able to do the hard slog to get there,” he advised.
He added that Chinese buyers will look for high-end products with high-end packaging and for exporters to focus on those.
Sri Lanka’s Ambassador Designate to China Dr. Palitha Kohona[/caption]
“A free trade agreement is not an easy thing. There are many people who say free trade agreements are not good. But I take a different view. The most important thing about a free trade agreement is that it should serve the interests of both parties.”
As an example, he pointed to the FTA Sri Lanka signed in 1999 with India, which he blamed for having led to a severe trade imbalance against Sri Lanka.
“Some of the current Free Trade Agreements are not in favour of Sri Lanka. India exports something like $ 4.5 billion worth of goods to Sri Lanka while the exports are around $ 600 million annually. So there is some imbalance somewhere. Either it was in the way we negotiated this agreement or in the way it has been implemented. Something has to be done to rectify the errors that we made or the things that we did not take into account.”
Former FCCISL President and current Ceylon National Chamber of Industries (CNCI) President Ruwan Edirishighe too said at the session that the China-Lanka FTA should be pursued.
In October 2020, State Minister of Regional Co-operation Tharaka Balasuriya told The Sunday Morning Business that Sri Lanka was carefully reviewing the provisions of the proposed FTA with China to ensure it would not turn out to be “another Singapore FTA”.
“The proposed China FTA is a huge document and there is a lot of negativity towards Sri Lanka. We are reviewing the contents and assessing the Harmonised System (HS) codes because we do not need a repeat of what happened with the Singapore FTA,” the State Minister said.
In the face of unrelenting opposition and lobbying, both in the political and professional spheres, former President Maithripala Sirisena appointed an independent committee to study the Sri Lanka-Singapore Free Trade Agreement (SLSFTA) and to submit a report, only a few months after it was signed.
China is the world’s second largest economy and an FTA with it has been coveted by Sri Lanka for many years. Negotiations on an FTA commenced in 2016, but came to a virtual standstill by 2018. This was reportedly due to Sri Lanka’s insistence on reviewing the agreement every 10 years, to which China was strongly opposed due to its willingness to have longer term stability, according to Sri Lanka’s then Chief Trade Negotiator K.J. Weerasinghe, as reported by Reuters in May 2018.
Nevertheless, during a meeting with Sri Lanka President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa on 9 October in Colombo and a high-level Chinese delegation, Sri Lanka and China agreed on the need to resume negotiations on the stalled talks on the FTA. According to Balasuriya, Sri Lanka is reviewing the agreement before getting back to China on resuming the negotiations.
Sri Lanka’s annual exports to China amount to approximately $ 450 million while China’s exports to Sri Lanka are much higher at approximately $ 2.5 billion.
Dr. Kohona said this trade deficit underlines the “tremendous” export potential to China, particularly because the Chinese economy has been affected far less by the Covid-19 pandemic and hence purchasing powers of their citizens are high.
“Every crisis creates new opportunities and even Covid-19 will create such opportunities, and local exporters should find ways to take benefit from this.”
Dr. Kohona also said that Lankan exporters need to become savvier and much more sophisticated in selling in the Chinese market.
“Nobody can come and sell anything unless you have a local partner. You need to cultivate relationships, you need to have language skills, and you need to be able to do the hard slog to get there,” he advised.
He added that Chinese buyers will look for high-end products with high-end packaging and for exporters to focus on those.