Mixed Feelings On ETCA
by Hasitha Ayeshmantha
With Prime Minister Ranil Wickremesinghe and President Maithripala Sirisena putting a full stop to the Comprehensive Economic Partnership Agreement (CEPA) with India, the spotlight is now focused on the much-debated Indo-Sri Lanka Economic and Technology Co-operation Agreement (ETCA). With more and more discussions brimming on the matter, the new government seems persistent with pursuing the agreement.
Meanwhile, during the recent meeting between the Sri Lankan delegation and the Indian government, the outlay of the new framework of the Economic and Technology Cooperation Agreement, that takes the current India-Sri Lanka Free Trade Agreement (ISLFTA) to the next level, was discussed by both parties.
“Our proposed framework envisages exclusion of professional labour liberalisation by Sri Lanka other than in two subsectors, viz., ship builders and IT professionals, the statement said.
For better market access to the Indian market, the Sri Lankan delegation highlighted a number of issues that local exporters face in the Indian market which the Indian side will address in parallel to the negotiations on the Framework Agreement and the final ETCA. The signing of Mutual Recognition Agreements (MRAs) on standards was also discussed. Moreover, the Indian side will organise workshops in Sri Lanka for Sri Lankan exporters/officials to increase awareness of Indian standards, regulations, certificate of origin, and other measures, during January/February 2016. The two sides are striving to work towards signing the ETCA by mid-2016.
India is currently Sri Lanka’s largest as well as the most balanced trading partner. Overall bilateral trade between the two countries exceeded $ 4.5 billion in 2014. India is the largest source of imports to Sri Lanka and the third largest destination for Sri Lankan exports. It is among the first five largest investors in Sri Lanka and bulk of the Sri Lankan FDI overseas is located in India.
Talks of CEPA came in the limelight soon after the new government was re-elected at the August general election. Many stakeholders of the Sri Lankan economic sector as well as members of the private sector expressed mixed feelings on the topic of economic partnership between Sri Lanka and India.
However, many raised concerns over the matter claiming that entering into an economic partnership with a larger and much more diverse economy will affect Sri Lanka rather than attracting benefits. They warned the Sri Lankan government saying that forming an exclusive economic partnership agreement with India will be ‘unconventional’ as the two economies are not compatible with each other. They stressed that an emerging economy such as Sri Lanka cannot afford to compromise the economy through such an agreement. They asserted that the government should not step into the matter without a proper study.
High risk factor
The Government Medical Officers’ Association (GMOA) has been an organization which has strongly protested the government entering in to a partnership with India. Raising concerns over the matter, Secretary of the GMOA Dr. Nalinda Herath said that the performance of the services sector will be undermined if the government initiates such an agreement.
“Though the name CEPA has been changed to ETCA, we still cannot accept allowing unemployed Indian professionals to enter the Sri Lankan labour market. As we previously said, we extend our fullest support to the Government to improve the quality and skills of Sri Lankan professionals up to international standards. But, instead of uplifting local labourers, the government is going to hire Indians. As the ones who opposed the ETCA, we have had to face defamation from some people. Since we oppose it, the GMOA’s and all state professionals’ reputation is being defamed by some people. The public should be concerned over this due to the impending dangers it would cause,” Dr. Herath explained.
CCC on board
Meanwhile, the Ceylon Chamber of Commerce (CCC) has hailed the proposed Economic and Technology Cooperation Agreement with India, but has urged Systematic Consultations with the Private Sector.
The Ceylon Chamber of Commerce stated that they have consistently supported the expansion of Sri Lanka’s trade interests through signing mutually beneficial and well-designed trade agreements, and this has been clearly articulated in our ‘10 Principles’ on the economy.
The Chamber believes that such agreements are an important tool in deepening trade and investment opportunities for our businesses, within a rules-based framework. However, the Ceylon Chamber welcomes the Prime Minister’s statement in Parliament earlier last week explaining the Government of Sri Lanka’s (GoSL) stance on the proposed Economic and Technology Cooperation Agreement (ETCA) with India.
The CCC states that this statement can help allay misperceptions around the proposed ETCA. The Chamber now urges the authorities involved in the ETCA process to build on this by adopting a systematic consultative and information sharing process with the private sector.
Any bilateral or regional agreement that Sri Lanka forges must be supportive of the country’s holistic economic interests (rather than cater to individual business interests) must recognise size asymmetry of the economy; and must take a phased approach to liberalisation where domestic regulatory systems need updating (for instance, on movement of natural persons in professional services).
Assessing and Addressing Concerns
The CCC also highlights that when moving forward through this agreement, the government will have to address several concerns raised by the country’s private sector.
In this regard, the Chamber states that undoubtedly, there are valid concerns of an uneven playing field faced by Sri Lankan business in India. In order to build confidence, the Indian government should move quickly to clear some contentious issues facing Sri Lankan businesses that trade with India. Solving non-tariff barriers (NTBs)/Non-Tariff Measures (NTMs) should be given priority. The Chamber understands that the Framework agreement includes a chapter on ‘Early Harvest’ of barriers to trade in goods (including quota issues and NTBs). India must support this. The ETCA negotiation process can accelerate a Mutual Recognition Agreement for standards, and also establish an efficient and effective dispute resolution mechanism to resolve issues faced by business on both sides on a regular basis. This can build further confidence in the bilateral agreement.
Meanwhile, opposition to the ETCA – and indeed further overall liberalization of trade in goods and services – citing ‘national interest concerns’ must be carefully examined alongside the potential gains to consumers and firms in Sri Lanka. The latter too is ultimately a matter of national interest. In this regard, the Chamber urges the government to not entertain protectionism that may come under the guise of national interest concerns. They also point out that it is important that the government looks beyond the narrow commercial interests of the few and instead focus on the broader economic imperatives of exports, investments, and job creation to set a course for the future prosperity of the economy.
No cause for scare
Addressing several concerns raised over the proposed agreement, United National Party Parliamentarian, S. M. Marikkar stated that the public need not get alarmed over the issue. He stated that there still isn’t an agreement called the ETCA agreement, but that there is just an agreement to make certain reforms to the already existing trade agreement and make a new one.
The parliamentarian went on to point out that fears are being created over an agreement which has not even been made. Marikkar further elaborated that even if the agreement is initiated, it will open up various avenues for the Sri Lankan market as well.
He added that these employment opportunities must be provided only after creating new avenues in the IT, and industrial sectors and therefore, for this to materialise, the country’s human resources and training procedures must be improved.He further noted that India is providing training in the industrial sector, IT sector and commercial sector so that these human resources can be used in these industries.
“We must go beyond the regional mindset and come to terms with a global mindset”, said the UNP Parliamentarian.He went on to explain that it maybe India, China, Soviet Russia or America, trade agreements must be signed with any country. The Parliamentarian also pointed out that this will be the first step in reaching out physically to the global community and that along this road the government will further strengthen their foreign policy.
Cart before the horse
Commenting on the proposed ETCA agreement, Economist Dr. Sirimal Abeyratne said that the government has put the cart before the horse.
“We have many fundamental issues at home, while not addressing these fundamental issues, we have embarked upon a ETCA”, he said.
Stressing on his remark, Dr. Abeyratne said that the fundamental issues such as maintaining a healthy business environment, proper government finance, external finance issues and lack of reforms.
“It is evident that we have signed an agreement and through that we have made ourselves more vulnerable, merely because of the problems at home. Therefore we have not improved from the situation, but had further worsened the situation here”, he said.
Furthermore, the Economist added that Sri Lanka’s capacity is much ahead of that of India’s and except for several factors such as the automobile manufacturing industry, Sri Lanka has more resources and more productive services framework than that of India. He outlines that if Sri Lanka applies to the situation and utilizes the resources, the country would not have to depend on the fortunes of India.
Finalising his remarks, Dr. Abeyratne said that “In that case, Sri Lanka should have an ETCA with the entire world, as it would be much more productive”.