Pak­istan and Sri Lanka re­assess FTA

Enterprise - - Bilateral -

Pak­istan and Sri Lanka have en­tered into re­newed ne­go­ti­a­tions to re­view the Free Trade Agree­ment (FTA) they signed in 2002, The agree­ment has been func­tional since 2005 but has not ac­com­plished the ex­pected in­crease in trade be­tween the two na­tions. As such, Pak­istan’s Min­istry of Fi­nance and Eco­nomic Af­fairs and Sri Lanka’s Min­istry of Com­merce and In­dus­try have re­cently ex­changed their del­e­ga­tions to re­vise the Com­pre­hen­sive Eco­nomic Part­ner­ship Agree­ment (CEPA).

Un­der the FTA, Pak­istan is the sec­ond largest trad­ing part­ner of Sri Lanka in the South Asian re­gion. The FTA plan al­lows the coun­tries duty-free mar­ket ac­cess for their re­spec­tive ex­ports. Ini­tially Sri Lanka en­joyed tar­iff con­ces­sions on nearly 206 ex­ports, whereas Pak­istan re­ceived con­ces­sions on 102 prod­ucts. While the agree­ment proved to be more ben­e­fi­cial to Sri Lanka, in 2010 both coun­tries agreed to ap­ply duty-free mar­ket ac­cess to thou­sands of ex­ports.

De­spite a num­ber of con­ces­sions of­fered un­der the FTA plan, the agree­ment has fallen short of ex­pec­ta­tions. Although an in­crease in trade rev­enue of nearly $342 mil­lion in 2010 from $100 mil­lion in 2004 was seen, it is still well be­low the $2 bil­lion mark ex­pected to be achieved by 2012.

At the 10th ses­sion of the Joint Eco­nomic Com­mis­sion (JEC), both coun­tries held talks on is­sues fo­cus­ing mainly on im­prov­ing bi­lat­eral trade re­la­tions and re­view­ing the now ob­so­lete Free Trade Agree­ment.

A num­ber of other agree­ments were also signed be­tween the two coun­tries and var­i­ous is­sues came up for dis­cus­sion.

The high­lights in­clude: • A meet­ing for Com­pre­hen­sive Eco­nomic

Part­ner­ship Agree­ment (CEPA) to be held in Colombo Sri Lanka in Au­gust 2011 to fur­ther dis­cuss bi­lat­eral trade re­la­tions. Pro­mote fre­quent ex­changes of JEC trade del­e­ga­tions to both coun­tries at least once a year. Re­assess and re­lax the ex­ist­ing visa poli­cies to pro­mote in­di­vid­ual trade par­tic­i­pa­tion by busi­ness­men in both coun­tries. Ex­change valu­able ser­vices be­tween the coun­tries to help set up ba­sic in­fra­struc­ture. Pak­istan of­fered to pro­vide the nec­es­sary ser­vices and ex­per­tise of its Heavy Me­chan­i­cal Com­plex to set up su­gar and ce­ment grind­ing and pack­ing plants in Sri Lanka. Fur­ther­more, the State Bank of Pak­istan also promised Sri a credit of nearly $200 mil­lion to Sri Lanka. Sri Lanka has also shown in­ter­est in shar­ing with Pak­istan the re­quired skills needed to pro­duce var­i­ous hand­i­crafts, brass­ware, ceram­ics, leather and wood­work. In re­turn Sri Lanka has of­fered to train schools of nurses in var­i­ous med­i­cal fields like car­di­ol­ogy, psy­chi­a­try, neu­rol­ogy etc. Both na­tions also agreed to form a Joint Com­mit­tee for co­op­er­a­tion to in­crease the scope of science and tech­nol­ogy in the re­gion. The two coun­tries also hope to re­view the ex­port items on each other ‘No Com­mis­sion List’ in a bid to re­duce the im­port tar­iff on them. The items on a ‘No Com­mis­sion List’ when ex­ported from a coun­try do not en­joy any tar­iff con­ces­sions. Talks over the fate of auto parts ex­port to Pak­istan by Sri Lanka, which was previously de­nied, were also held. Both coun­tries hope to of­fer priv­i­leged mar­ket ac­cess to a range of ex­port items un­der var­i­ous con­ces­sions. Cur­rently, Pak­istan’s ex­ports to Sri Lanka in­clude wo­ven cot­ton fab­rics, ce­ment,

• bas­mati rice, pota­toes, cumin, phar­ma­ceu­ti­cals, tubes and pipes. Whereas the im­ports from Sri Lanka in­clude rub­ber, co­conut and be­tel leaves.

The re­vised pro­vi­sions of the Com­pre­hen­sive Eco­nomic Part­ner­ship Agree­ment (CEPA) are be­lieved to be much broader in con­text than the for­mer. CEPA is ex­pected to re­move prod­ucts like bro­ken rice, onions, maize, ce­ramic sinks and ethyl al­co­hol from Sri Lanka’s ‘No Com­mis­sion List’. Sim­i­larly, Sri Lanka wants its be­tel leaf ex­ports to be re­moved from Pak­istan’s ‘No Com­mis­sion List’ and gain more tar­iff con­ces­sions.

Sri Lanka as the first coun­try to sign an FTA with Pak­istan also has sim­i­lar agree­ments with In­dia and shares trade rev­enue of nearly $2.5 bil­lion. Pak­istan plans on gain­ing ac­cess to In­dian mar­kets through en­hanc­ing trade links with Sri Lanka. Cur­rently, In­dia is Pak­istan’s largest com­peti­tor in many of its key ex­ports to Sri Lanka in­clud­ing cot­ton fab­rics, denim, knit­ted fab­rics, ce­ment, tubes and pipes. The mag­ni­tude of In­dian ex­ports to Sri Lanka is sig­nif­i­cantly higher than Pak­istan, which fuelled the need to re­view the trade agree­ment

Pres­i­dent Mahinda Ra­japaksa with

Pres­i­dent Asif Ali Zar­dari

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