India, Friend Or Foe?

The vexatious question of the proposed Comprehensive Economic Partnership Agreement (CEPA) with India which seeks to broaden the scope of the Indo-Lanka Free Trade Agreement (ILFTA) to encompass services and investments as well, appears to be in limbo due apparently to politics preceding economics.
The present ILFTA is confined to the trade in goods only.
The non implementation of CEPA appears to be due to several reasons.
One late development possibly could be due to the non implementation of the 13th amendment, a sore point as far as Delhi is concerned, which would give greater autonomy to the minority Tamils who is the majority population in those areas on a cumulative basis.
Then there are also other issues that impede the progress of the ILFTA to be transformed into a fully fledged CEPA, like fears from certain section of the business and professional communities here that their local market and jobs would be swamped by Indian products and by Indians respectively.
An Indian diplomat speaking on the grounds of anonymity told this reporter that they are aware of these fears and trepidations from the Sri Lanka side. He further said that India understands that such an agreement cannot be run on the basis of equity considering the economies of scale which are largely in India’s favour,  when taking in to account both of its geographic size as well as that of its population, vis-à-vis that of Sri Lanka’s.
His contention however was that in a situation where Sri Lanka’s exports to its major market, ie the EU is contracting due to the sovereign debt crises besetting several of those economies in that region, Sri Lanka needs to look for new markets, and what better market than India, with Sri Lanka being the biggest trading partner of this island’s giant neighbour in the SAARC region despite the absence of a CEPA.
This diplomat said that even though India’s economy is expected to grow at a slower rate this year, some 6%, with it too being a victim of the euro zone crisis just like Sri Lanka, this 6% however would still be equivalent in size to the island’s economy, considering the fact that India is a US$ one trillion economy.
His argument was that if there were fears of Sri Lanka being swamped by Indian labour, professional or otherwise, to place caps as to how many Indians could work here, thereby ensuring the safety of local employees and of their jobs.
The diplomat also inferred that agreements such as CEPA are non binding, literally speaking that it could be torn aside and relegated into the dustbin if Sri Lanka felt that there was no gain for it by such an agreement.
Some of the allegedly vociferous opponents of CEPA, such as Ceylon Biscuits are exporting their products to India under the ILFTA (see the business pages of this newspaper’s last week’s issue).
So it may be well worth for the Government of Sri Lanka (GoSL) to have a second look at CEPA (it was to have had been signed in 2008 when the SAARC summit was held in Colombo, but President Mahinda Rajapaksa succumbed to pressure exerted against it by certain sections of the business community and that proposed agreement has been in limbo since) in these perilous times.

“China syndrome”

This Indian diplomat also emphasized the importance that India places on the security of its national borders.
He further said that Sri Lanka needs to be cognizant of such concerns of India’s.
The diplomat obliquely made reference to India’s military interference in Sri Lanka during the J.R. Jayewardene-Rajiv Gandhi tenure as a step towards safeguarding the borders of India.
Of late GoSL has been flirting with China for the funding and execution of infrastructure development projects, which more often than not are implemented by obtaining commercial loans from China in a non transparent manner.
India’s borders are surrounded by hostile forces. On its North-West is Pakistan against which it has fought four bloody wars and on its North-East, there are two other hostile countries, Bangladesh and China. India has also fought a gory war against China in 1962.
And on the south is Sri Lanka where the Chinese appear to be gaining a foothold in the island through its numerous commercial loan packages.
Sri Lanka’s close relationship with China, previously military, ie when the war against the LTTE was on and now economic, is looked upon with suspicion by India. This diplomat was however careful not to name names.
Where the “point of no return” vis-à-vis Sri Lanka’s relations with China with such a relationship being considered as being inimical to India’s interests are however not clear.
Whether in such circumstances, due to GoSL’s “closeness” to China, would result in its giant neigbour taking military action against its tiny island neighbour or whether retribution would take a different form, a different complexion is also not clear.
However in the post cold war era, actions by one country against the other do not necessarily take the form of a military complexion.
A classic example in this connection is the current economic sanctions imposed by the West against Iran because of its nuclear programme, where its people’s are now feeling the pinch with increasing joblessness in this Farsi speaking nation.
Not only Iran, Sri Lanka too is suffering because of those sanctions, with its tea exports to Iran, one of its biggest consumers, also being hit as a result.
So sanctions and not military actions appear to be the name of the game in this 21st century when a “small” country does not appear to toe the line as dictated to it by bigger and powerful countries.
India, besides so many other things, is also the third biggest economic power in Asia. It’s a country which is very much in cahoots with the powerful Western bloc led by the USA in the post cold war era, an era in which we now live in, though this diplomat, probably because of his Indian pride, tried to downplay.
The West, both from a military and economic perspective, also does not see “eye to eye” with China. Its voice, in this part of the world is increasingly becoming India both for economic and political reasons.
One wonders whether India’s vote against Sri Lanka at the March Human Rights (HR) sessions in Geneva, where it fell in line with the West, was because of the China factor, when reading between the lines of what this Indian diplomat told me the other day?
One also wonders how India would once more vote when the HR Council meets again in September to take up the Sri Lanka issue?
No elections in sight for the Northern Provincial Council, a thaw seemingly not visible in regard to Indo-Lanka relations, and the island moving closer to the Chinese sphere of influence do not appear to be the best way for Sri Lanka to go at least from an economic perspective in these difficult times by antagonising the governments of its main export markets, which are also its main tourism markets as well.
Sri Lanka lost the GSP + duty free concession on the HR issue in its exports to EU, which, led by garments, its biggest export commodity, is currently in the contracting mode, probably a foretaste of worse things to come?
In foreign relations as in politics, there are no permanent friends of foes, only permanent interest.
And in these troublous times, from Sri Lanka’s perspective, probably led by matters of economic interest, may be the stance that it should  take.