By: Staff Writer
August 05, Colombo (LNW): India and Sri Lanka are progressing towards finalizing the Economic and Technology Cooperation Agreement (ETCA) after a five-year hiatus in negotiations.
The Indian Commerce Department has sought input from industry sectors on key areas such as product-specific rules for tariff concessions.
Initial inputs were submitted last year, but further views are needed as negotiations advance, particularly on rules of origin.
The decision to resume ETCA talks came after Sri Lankan President Ranil Wickremesinghe’s visit to India in July last year. Negotiations restarted in Colombo on October 30, 2023. Sri Lanka hopes the agreement will help mitigate its economic crisis, worsened by the COVID-19 pandemic.
ETCA aims to expand on the bilateral Free Trade Agreement (FTA) signed in 2000, which increased Sri Lankan exports to India in key commodities.
The agreement includes chapters on trade in goods and services, technical barriers, sanitary measures, rules of origin, customs procedures, trade remedies, economic and technological cooperation, and dispute settlement. It seeks to eliminate non-tariff barriers and improve trade facilitation.
India anticipates that ETCA will provide greater market access for automobiles, auto parts, pharmaceuticals, certain textiles, chemicals, and various services.
Industry research indicates Sri Lanka could become a significant part of the Indian supply chain, with Indian manufacturers potentially establishing factories there to export products to countries with existing or planned FTAs with Sri Lanka.
India is negotiating for customs duty concessions on goods such as cars, commercial vehicles, and machinery and seeks easier visa norms for professionals.
The 14th round of talks recently concluded in Colombo, covering rules of origin, goods, services, and technical barriers to trade.
Sri Lanka is requesting the removal of a quota on apparel exports to India and duty concessions on tea and certain agricultural commodities. The next round of negotiations will take place after Sri Lanka’s elections.
Both countries have already implemented an FTA in goods and are working to expand it to include more goods and services.
The India-Sri Lanka Free Trade Agreement (ISFTA), effective since March 2000, has improved economic relations by reducing tariffs on various goods.
Both countries have been negotiating to expand ISFTA into a Comprehensive Economic Partnership Agreement (CEPA) to include services, investment, and other economic cooperation areas.
Under the current FTA, India allows limited imports of garments and tea from Sri Lanka at reduced tariffs.
Sri Lanka seeks the removal of the garment import quota, citing India’s duty-free garment imports from Bangladesh under the South Asia Free Trade Agreement (SAFTA) for Least Developed Countries (LDCs).
Sri Lanka has restricted imports of automobiles and electrical goods. Since ISFTA’s implementation, trade between the two countries has grown significantly.
India’s exports to Sri Lanka increased from USD 499.3 million in FY 2000 to USD 4.17 billion in FY 2023-24, while imports grew from USD 44.3 million to USD 1.4 billion over the same period.
