The U.S’ so-called “reciprocal” tariff and China’s retaliatory tariff on the U.S. have started a trade war. It brings to an end a globalisation and the WTO rules supporting it.

It will now lead to an uncertain period of the major economic powers, either challenging each other and/or cooperating with them. In this breakdown of the present world order, the worst affected will be small countries like Sri Lanka with economies on the export of one or two commodities, with the US being a major market.

Even after negotiations the tariffs will not return to pre-April 2^nd levels. This will bring about a disruption in Sri Lanka’s exports, resulting in factory closures and large scale lay-offs, which may according to industry even be about 100,000. Similarly, the widening trade deficits will bring about a current account deficit. With the overall external trade being affected, the government will not be able to achieve the revenue estimated from duties and excise.

There is a strong possibility of political upheavals taking place due to the deteriorating economic situation, not only Sri Lanka but also in the neighbouring countries. Consideration may be given to the following measures in determining remedial action.

1. In June 2024 the Cabinet of Ministers approved the National Tariff Policy which was to be introduced in January 2025. With a simplified four band tariff regime (of 0%, 10%, 20% 30%) to be implemented from the 1^st of January 2025. Many of the para-tariffs were to be removed, and the tariff regime was to be based on the principles of transparency, consistency and predictability. The Cabinet also approved the Trade National Single Window to be fast-tracked for implementation in 2025, addressing the non-trade barrier. So far these have not been implemented.

2. Under the proposed GSP Plus with EU, Sri Lanka together with seven countries form a duty free zone. In order to qualify for GSP Plus, we have to become parties to the following 27 conventions.

1. International Covenant on Civil and Political Rights

2. International Covenant on Economic Social and Cultural Rights

3. International Convention on the Elimination of All Forms of Racial Discrimination

4. Convention on the Elimination of All Forms of Discrimination Against Women

5. Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or

Punishment

6. Convention on the Rights of the Child

7. Convention on the Prevention and Punishment of the Crime of Genocide

8. Minimum Age for Admission to Employment (N° 138)

9. Prohibition and Immediate Action for the Elimination of the Worst Forms of Child

Labour (N° 182)

10. Abolition of Forced Labour Convention (N° 105)

11. Forced Compulsory Labour Convention (N° 29)

12. Equal Remuneration of Men and Women Workers for Work of Equal Value

Convention (N° 100)

13. Discrimination in Respect of Employment and Occupation Convention (N° 111)

14. Freedom of Association and Protection of the Right to Organise Convention (N° 87)

15. Application of the Principles of the Right to Organise and to Bargain Collectively.

Convention (N° 98)

16. International Convention on the Suppression and Punishment of the Crime of

Apartheid

17. Montreal Protocol on Substances that deplete the Ozone Layer

18. Basel Convention on the Control of Transboundary Movements of Hazardous Wastes

and Their Disposal

19. Stockholm Convention on persistent Organic Pollutants

20. Convention on International Trade in Endangered Species

21. Convention on Biological Diversity22. Cartagena Protocol on Biosafety

23. Kyoto Protocol to the UN Framework Convention on Climate Change

24. UN Single Convention on Narcotic Drugs (1961)

25. UN Convention on Psychotropic Substances (1971)

26. UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances

(1988)

27. Mexico UN Convention Against Corruption

We are parties to many of these Conventions, if not all. Therefore, the Government must take immediate steps to negotiate with EU when they visit Sri Lanka in May.

3. The Government must also take all steps to conclude the ECTA negotiations with India, within 3 months so as to access the Indian markets.

4. Implement the Thailand-Sri Lanka Free Trade Agreement immediately.