Sri Lanka and China have agreed to establish a working group to resume discussions on a long-delayed Free Trade Agreement (FTA), according to Foreign Minister Vijitha Herath.
This decision follows President Anura Kumara Dissanayake’s recent state visit to China, during which both nations reaffirmed their commitment to advancing the bilateral trade agreement.
The FTA discussions, stalled since 2018 due to disagreements over key clauses, are now back on track, with both sides pledging to finalize a comprehensive deal. A joint statement emphasized the principles of equality, mutual benefit, and win-win outcomes.
Sri Lanka expressed gratitude for China’s efforts to promote Sri Lankan exports, while China reiterated its support for Sri Lanka’s tea, gem, and other industries.
Efforts include connecting Sri Lankan enterprises with Chinese importers and facilitating their participation in expos such as the China International Import Expo and other trade platforms.
Negotiations had previously faltered over Sri Lanka’s concerns regarding tariff liberalization timelines, tariff line percentages, and review periods. Sri Lanka sought immediate zero tariffs for 500 items and a 10-year review clause, while China proposed broader liberalization, favoring 90% of tariff lines and a 20-year review.
However, recent virtual negotiations suggest China is now more flexible on these issues.
The geopolitical backdrop adds complexity to the FTA discussions. Analysts highlight Sri Lanka’s delicate position in a proxy cold war involving China, India, and the U.S.
This rivalry has often made Sri Lanka cautious in engaging with major powers. However, the 2022 economic crisis and sovereign debt default have forced the country to seek diversified foreign investments and trade partnerships to stabilize its economy.
During President Dissanayake’s visit, Sri Lanka welcomed increased Chinese investments and committed to fostering a favorable business environment.
The joint statement outlined plans to expand cooperation in logistics, green development, and the digital economy, aiming for sustainable development and economic transformation in Sri Lanka.
China’s renewed interest in the FTA and willingness to address past disagreements reflect its broader strategic goals in the region.
For Sri Lanka, a comprehensive FTA could provide critical economic relief by boosting exports and attracting investments. Both countries appear eager to move forward, signaling a potential breakthrough in their economic partnership.
As the working group begins its deliberations, the focus will be on addressing outstanding issues and achieving a balanced agreement that benefits both nations.
