‘Para tariffs impede trade liberalisation’ | Sunday Observer

‘Para tariffs impede trade liberalisation’

29 September, 2019

Protectionist measures supported by para tariffs put a spoke on trade enhancement and trade liberalisation moves critical for greater integration and expansion of markets, said panelists at the EU-Sri Lanka Trade Related Assistance Seminar on ‘International Trade Agreements: Policy Options for Sri Lanka’ conducted by the International Trade Centre and the Department of Commerce of Sri Lanka last week.

Panelists reiterated the need for Sri Lanka to stop taking cover under protectionist measures such as para tariffs, if the country is to achieve greater integration with global trading partners and open up the country for foreign direct investments crucial to develop a manufacturing for export sector in the country.

Professor in Economic, University of Colombo Sirimal Abeyratne said Sri Lanka has failed to benefit from large capital outflows from advanced countries to emerging markets since the beginning of the financial crisis in 2008.

“With an election cycle round the corner there will be bold policy measures. Para tariffs which are mostly used by South Asian countries impedes trade liberalisation and integration,” Prof. Abeyratne said.

Central Bank Governor Dr. Indrajit Coomaraswamy stressed the importance of export market diversification and capturing new markets with trade agreements.

For greater integration with regional and the global economy trade agreements are crucial.

“Sri Lanka is trying to renegotiate a bilateral partnership with India in services and technology transfer and a similar one with China and Singapore and a bilateral agreement with Pakistan.

“We are also trying to negotiate one with Thailand. If we are successful in completing negotiations with China we would be the only country in the world to have preferential access to India, China and the EU under the GSP Plus facility.

“I am not aware of any other country which has preferential access to these three large markets and if put side by side having in mind India and snap China’s slow growth with East Africa and ASEAN, the potential is enormous,” the governor said, adding that a lot needs to be done in addressing trade facilitation, investment promotion, factor marketing, and the high cost of electricity which are pressing issues.

However, he noted that the country has made a start but the process has been slow.

“If we could press on the potential is enormous,” he said.

On macroeconomic fundamentals, the Governor said it would be fair to state that the underlining macroeconomic fundamentals have been in a pretty good shape despite the 2018 fourth quarter shock and the heinous events of April this year.

“However, there is a gap but if you read the newspapers tomorrow you will know the independent evaluations that the underlining fundamentals are not so bad because inflation, a key indicator of domestic stability is at the bottom of the target of four to six percent and the current account deficit this year despite the slowdown in the tourism sector and other activities of April would be about 2.6 percent of GDP. It was 3.2 percent last year.

“We feel 2.6 percent can be financed without much difficulty. Gross reserves are at US$ 7.7 billion which has about four-and-a-half months import cover which is again pretty reasonable,” the governor said, adding that all in all macroeconomic fundamentals are sound despite the six to seven months shocks. He said the challenge is on the growth front which has been subdued. Growth is expected to be around three percent this year while the Central Bank feels the potential is about five percent.

“We need to get that up not through artificially pumping money which we tend to do by following inappropriate macroeconomic policies. We try to get the sugar high up by loosening monetary policy or expansion in fiscal policy. This time I hope we can get out of that.

”The way to get growth is a price strengthening growth framework with structural reforms,” the governor said On global trade he said according to the World Trade Organisation, global trade is expected to face strong headwinds this year and the next due to trade tensions and economic crisis.

Ambassador and Head of Delegation, Delegation of the European Union to Sri Lanka and the Maldives Tung-Lai Margue said under a no deal Brexit future trade agreements with UK will need to be properly looked into. Sri Lanka would have to negotiate future trade with UK.

He said Sri Lanka improved exports under the GSP Plus concessions reinstated in 2017. However, it would sooner than later lose the trade concessions once it becomes an upper middle income country.

-LF

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