Sri Lanka should focus more on the European Union (EU) and other trading blocks and partners to boost trade and investments as there is no certainty about a deal (or no deal) on Brexit, said economists and trade experts at a forum on Brexit’s implications on the EU, UK and Sri Lanka, held last week.
Experts said the impact of Britain’s exit from Europe is greater as between the EU and Sri Lanka compared to the UK / Sri Lanka, because the EU accounts for a large share of Sri Lanka’s trade and investments.
While Sri Lanka’s share of trade with the UK is around 10 percent, it is around 28 percent with the EU, and while tourist arrivals account for about 18 percent from the UK, they are around 22 percent from the EU.
However, Sri Lanka will have work to do in meeting stringent EU legislative standards relating to labour, human rights, good governance and ethical practices, the panelists noted.
Executive Director of the Lakshman Kadirgamar Institute, Dr. Ganesh Wignaraja said Sri Lanka will have to take cognisanse of the negative impact that Brexit could have on trade, in either scenario.
“There is no certainty about Sri Lanka enjoying the GSP Plus preferential treatment under a hard, soft or disorderly Brexit. We need to monitor the situation well and negotiate a good deal to get over the negative implications under whatever situation,” Dr. Wignaraja said, cautioning that Sri Lanka will anyway lose GSP Plus concessions when it eventually graduates to ‘upper middle income’ status.
The panellists also warned that if the UK leaves, Sri Lanka will have to face a lot of issues and that alternative strategies need to be in place to maintain global trade.
“A lot will depend on how Sri Lanka will negotiate with the UK and the trading bloc. A better deal will have to be worked out diplomatically to continue trade with the UK and EU which account for the major share of Sri Lanka’s exports,” Dr. Wignaraja said.
The need for Sri Lanka to fully use the GSP Plus concessions was also stressed by the speakers as the timeline for Sri Lanka to enjoy the trade benefit, is narrowing.
Ceylon Chamber of Commerce Economist Jayani Ratnayake said, of the 200 Sri Lankan products listed in the UK Temporary Tariff Regime (TTR)- which accounts for around 95 percent of Sri Lanka’s exports to the UK, 57 products enjoy GSP Plus concessions and that will be for 12 months.
“Whether it will be a ‘deal’ or ‘no deal’ scenario, is unknown. If there is a no-deal Brexit and if TTR is enacted, Sri Lanka products that are listed in the schedule will enjoy GSP Plus concessions for 12 months. If it’s a deal scenario, GSP Plus concessions will continue to December 2020. Therefore, (either way) the GSP Plus is only a temporary relief measure,” Ratnayake said.
Thirty nine Sri Lankan products account for over 10 percent of the market share in the UK. These products include made up knotted nets of twine, cordage, rope or cable of nylon or other polyamides, coconut oil and its liquid fractions, cinnamon, cloves, solid or cushion tyres, sails for boats, men’s or boys trousers and breeches of artificial fibres, women’s or girls slips and petticoats of made fibres and banknotes.
The United Kingdom’s decision to exit the European Union and the subsequent developments since then has resulted in uncertainty for global trade and financial markets.
Brexit remains a major concern for the country given it is Sri Lanka’s second largest export destination with an export value of over USD 1 billion.
Immediate Past Chairman of the Sri Lanka Apparel Exporters Association, Felix Fernando said apparel exports to the UK dropped from around US$ 878 million in 2016 to around US$ 805 million last year. However, apparel exports to the EU has been around US4 1,066 to US$ 1,100 million.
“We need to get more exports to the EU. We have called on the government to go for free trade agreements with the EU and the UK as we cannot depend only on these markets for exports. China and India are major markets which need to be looked into,” he said.
Views were expressed on whether it was time for Sri Lanka to consider other blocs such as the Commonwealth, for trade.
“Sri Lanka first need to get the FTA with Singapore going and make good on it before going in for agreements with others. If we go with the same negative attitude we had with Singapore, no one will want to have trade deals with Sri Lanka,” Fernando said.