China-Lanka tariff plan needs extreme caution: Local industry
While professionals and businesses have been focusing attention on the alleged, ill-effects of the proposed trade and services pact with India, unknowingly the pendulum has swung quickly in favour of China with a trade agreement close to be finalised.
The Business Times reliably learns that China wants to fast-track the deal, before India, with a visit by Prime Minister Ranil Wickremesinghe to Beijing in May being part of that initiative.
While the fifth round of negotiations with China on finalising the proposed Free Trade Agreement (FTA) concluded last month, certain agreements reached at the Cabinet Committee on Economic Management (CCEM) meeting on the FTA has irked local manufacturers.
An agreement reached under Sri Lanka’s Tariff Liberalisation Programme (TLP) to cover 90 per cent of both tariff lines and trade value with 10 per cent negative list and reach liberalisation of 90 per cent within a 20 year-period would be highly unfavourable for the country as China has a huge trade bargaining position with economies of scale in producing cheaper goods, several leading industrialists warned.
If tariffs are to be removed on 90 per cent of tariff lines and trade volume, covering substantially all trade, then no one would be able to stop cheaper Chinese-made products flooding the market, hurting not only local industry but also resulting in job losses, they stressed.
It is reliably learnt that the CCEM recently directed the Ministry of Commerce to submit a proposal on these concessions to the Cabinet of Ministers for its approvaly.
The CCEM has also agreed to the proposal of phasing out and removal of CESS over a 5 year-period from the fifth year the FTA comes into force, a letter sent to the Secretary to the Ministry of Development Strategies and Economic Management by the Prime Minister’s office, revealed.
The Department of Commerce has been directed to undertake a comprehensive sector-wise analysis to identify affected industries, their exports, employment, turnover and volume of production.
An economic expert, who declined to be named, told the Business Times that Sri Lanka should be cautious of its tariff liberalisation with China and not identify sectors in the economy to be opened out, which would adversely affect vulnerable industries.
He noted that it is essential to enact legislations on anti-dumping and protective measures to safeguard local industries against unfair trading practices and a surge in cheaper Chinese imports.
Sri Lanka has already tabled the tariff reduction modality at the 5th round of China-Sri Lanka FTA negotiations concluded on January 19.
Initially 3380 items have been proposed for the inclusion in the negative list of China aimed at protecting its domestic industries. Several vegetable products, animal and vegetable fats and oils, prepared food, chemicals, wood products; pulp and paper, and textile categories are protected by China. In almost all of the agreements, China has placed pulp and paper in its negative list.
Sri Lanka has a comparative advantage in 566 products, out of which China does not import 24 products from the other countries in the world, Of the 542 potential exports to China; Sri Lanka already exports 243 products.
The other 299 products with trade potential to China are currently not exported by Sri Lanka to China but are imported by China from the rest of the world.