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By Sandun Jayawardana

The shockwave created by the imposition of a 44 per cent “reciprocal tariff” by the United States on imports from Sri Lanka reverberated across the House as MPs from both sides grappled with how to avert a potentially catastrophic impact the tariffs could have on an economy still recovering from bankruptcy.  

The issue overshadowed most other business of the House. Opposition MPs attacked the government for what they said was a failure to anticipate the situation and the lack of a proper plan to resolve the crisis. They also pointed out that the tariffs on imports from Sri Lanka were far higher than those imposed on other countries in the region, insisting that this showed how badly Sri Lanka had mishandled the situation. The government however, dismissed the accusations, noting that the US administration of President Donald Trump had levied sweeping tariffs across many countries and territories globally, adding that no country could have anticipated tariffs on such a vast scale.

Raising a question under Standing Order 27(2) on Tuesday (8), New Democratic Front (NDF) MP Ravi Karunanayake brought up the issue of the impact of the 44 per cent tariffs on Sri Lankan exports to the US. He noted that Sri Lanka’s exports sector, particularly the textile and apparel industry has long relied on access to the US market as a key driver of economic growth.

Mr. Karunanayake reminded that he had raised issue in the House on March 18 this year regarding the potential risks posed by the US’s “deglobalisation policies” and the tariff increases on Sri Lankan exports. Despite these concerns being highlighted well in advance, the US imposed the 44 per cent reciprocal tariff on Sri Lanka on April 2, he added. “This decision is a severe blow to our export sector affecting thousands of businesses, workers and overall investor confidence in Sri Lanka’s economic recovery. It is imperative that the government provides clarity on its preparedness, response and future course of action in addressing this critical issue,” Mr. Karunanayake emphasised. He stressed the government needed to treat the matter as a national crisis.

Matters the NDF MP asked the government to inform the House, included, what proactive measures it took after he raised concern in March, the long-term and short-term counter-strategies the government intends to adopt to protect the country’s export sector, whether a formal request had been made to the Trump administration to consider a special dispensation or exemption for Sri Lankan exports given the country is still emerging from bankruptcy, and market diversification measures being taken to reduce Sri Lanka’s dependency on the US market.

The government has been both proactive and reactive as necessary in the face of the US tariffs, Deputy Minister of Economic Development Anil Jayantha Fernando said in reply. “All the possible risks and consequences have been assessed and taken into consideration accordingly,” he insisted, adding that there was continuous dialogue with the White House and the US Trade Representative’s Office regarding the issue.

Deputy Minister Fernando pointed out that President Anura Kumara Dissanayake has already appointed a special committee consisting of industry experts and government officials including two deputy ministers to look into the situation and propose possible actions to be taken. Several meetings were conducted locally and with US authorities virtually, he said. The government was speaking to US authorities about possible options to reduce the country’s trade deficit with the US. President Dissanayake meanwhile, has already written to President Trump highlighting possible ways of mitigating the tariffs and actions that Sri Lanka can take, with a request for collaboration being made to reduce the tariffs. The White House has acknowledged the letter, the deputy minister revealed.

The entire world knew that the reciprocal tariffs from the US were coming, Opposition Leader Sajith Premadasa told the House on Wednesday (9). He noted that tariffs were a central part of the “Make America Great Again” campaign of Donald Trump when he ran for President. “I’m not sure if the government thought that Donald Trump would forget about his election manifesto like the Janatha Vimukthi Peramuna did after winning the election,” he quipped. Mr Premadasa added the government had been telling Parliament not to worry about potential tariffs as it was sending a delegation and will be holding discussions to manage the situation, yet it had asked for time to respond to a question he raised earlier in the day about details of this delegation and who it had met, the opposition leader pointed out. “The truth is; no delegation has been sent so far. Moreover, we are even prevented from presenting ideas on suitable strategies that a delegation can adopt.”

Other countries began having discussions with US authorities over potential tariffs several months ago, but the government waited until the US announced the decision to appoint a committee to decide on the matter, Sri Lanka Podujana Peramuna MP Namal Rajapaksa stated. He said countries such as India and Singapore had been preparing for months. Mr. Rajapaksa noted that the government had 158 MPs in the House and it was time for it to show its strength in protecting the country’s economy whatever tariffs the US imposes on Sri Lanka. He pointed out that investors have the option of moving to other countries where the US tariffs are comparatively lower. “Investors can shift to another location. It is the jobs that will be lost. The impact will be on the country’s job market and revenue.”

Sri Lanka exports just over USD 3 billion worth of goods to the US and imports US goods totaling about USD 400 million, with the trade deficit coming to 87.8 per cent. The 44 per cent tariffs on Sri Lanka has been decided on by dividing the country’s trade deficit with the US, Trade Minister Wasantha Samarasinghe claimed. Even if Sri Lanka were to lower certain tariffs, it will not be able to bridge this trade deficit. “We have already commenced discussions towards reducing tariffs,” he said, adding that while these discussions are ongoing, the government was also trying its best to provide relief. He said the Value Added Tax (Amendment) Bill that was being debated in the House that day is aimed at lessening the burdens on the industrial sector. As an example, he said the Bill will exempt VAT being levied on food and transport expenses for employees in industries.

Parliament this week also passed the Proceeds of Crime Bill. The new Act aims to provide for the recovery of proceeds of crime, provide for the investigation, restraint, forfeiture, and disposal of proceeds of crime, to provide for the protection, preservation, management of restrained proceeds of crime, to establish the Proceeds of Crime Management Authority, and to provide for inter-agency cooperation and international collaboration relating to the recovery of proceeds of crime.