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CEPA talks during Ranil-Modi summit
The proposed Comprehensive Economic Partnership Agreement (CEPA) between Sri Lanka and India — stalled over the years due to protests from Sri Lankan industrialists — is likely to figure in the talks between Indian Prime Minister Narendra Modi and Prime Minister Ranil Wickremesinghe during his three-day official visit to India from tomorrow, officials said.
Deputy Foreign Minister Harsha de Silva told the Sunday Times the Prime Minister’s visit would be significant as it was aimed at promoting trade, investment and goodwill between the two countries.
He said CEPA issues were likely to be among other important issues during the bilateral talks between the two leaders.
“We must push for such agreements with countries like India. However, we must not blindly enter into such agreements. We must study in detail our own experiences and that of other similar countries to negotiate the best deal for us. Any bilateral or multilateral trade agreement that benefits Sri Lanka must be pursued,” he said.
A senior official of the Department of Commerce told Sunday Times that Sri Lankan and Indian authorities were now bracing themselves for a possible resumption of negotiations for CEPA after seven years.
Indian Premier Modi invited Sri Lanka to bring CEPA back to the negotiating table when he visited the Sri Lanka in March.
The CEPA was about to be signed in 2008 by former President Mahinda Rajapaksa but the move was thwarted by protests from businessmen who expressed concern that Indian workers would invade the island and take away jobs from Sri Lankans.
A draft CEPA was prepared seven years ago and it needs to be updated to meet present needs before any fresh negotiations, the official said, adding that negotiating a final deal could take years.
The plan was to device a basic agreement and negotiate areas of trade, services, investment and labour mobility and include them as schedules to the CEPA draft document, he explained. The official noted that Finance Ministry officials were working on this basic agreement with India and officials of the Ministry of Commerce were participating only in official level discussions.
A senior Finance Ministry official disclosed that if the government went ahead with CEPA, India was expected to reduce its negative lists by another 114 items while Sri Lanka reduced only 32 items. Under the Indo-Sri Lanka Free Trade Agreement, Sri Lanka was allowed to have a larger negative list (1,180 tariff lines) than India (429 tariff lines), he added.
In the services sector, India has agreed to provide more access than Sri Lanka. India will open far more sectors upfront (about 80 sub-sectors) and grant many concessions in each of these areas. In return, Sri Lanka would have have to open only selected areas (about 20 sub-sectors), and to restrict openings in these sectors considering its impact on the country’s service sector, he pointed out.
Negative lists and tariff lines which are one and the same refer to items that will come under the normal tax regime and not considered for special treatment under CEPA, and are commonly known as exemptions. Sub sectors are a reference to units under a main sector like smaller industries or institutions under garments.
A member of Sri Lanka’s technical negotiating team said they had insisted that India needed to consider Sri Lanka’s small size, and the Indian negotiators agreed to deal with this asymmetry by granting “special and differential treatment” to Sri Lanka.
India has categorically said its principal objective was not to seek preferential market access to Sri Lanka, but to develop an arrangement creating a win-win situation for both sides. India has also reiterated any upgraded framework would be based on differentiated obligations, and not reciprocity.
Several leading businessmen including exporters and manufacturers claimed that CEPA would be unalterable leaving Sri Lanka at India’s mercy while trading with India was a bureaucratic nightmare.
However the anti-CEPA business community was reluctant to make statements openly as they feared that such comments would be perceived as support base for opposition politicians like Wimal Weerawansa, an ardent Mahinda Rajapaksa supporter and CEPA critic.