ECONOMYNEXT – Sri Lanka and China have agreed to work toward an early conclusion of a comprehensive free trade agreement (FTA), a joint statement by the both countries said, amid a six year delay over Colombo’s disagreement on three clauses.
After six rounds of negotiations, the FTA discussions between the both countries came to a temporary halt in 2018, following concerns over an upper hand by China.
“The two sides agreed to work toward the early conclusion of a comprehensive free trade agreement in one package in line with the principles of equality, mutual benefit and win-win outcomes,” the joint statement followed by President Anura Kumara Disanayake’s visit said.
It said that both countries are satisfied with the progress of bilateral cooperation in economy and trade.
“Sri Lanka expressed appreciation to China for its effort to promote imports from Sri Lanka through various means.”
“China expressed its readiness to continue supporting Sri Lankan enterprises in the tea, gem and other industries in establishing ties with relevant Chinese associations of importers and exporters, facilitate Sri Lanka’s participation in expos such as the China International Import Expo, China Import and Export Fair, China-South Asia Exposition and e-commerce platforms, and further enhance cooperation between enterprises of the two countries on the basis of mutual benefit and win-win outcomes.”
GEOPOLITICAL PROXY COLD WAR
Sri Lanka is caught in a geopolitical proxy cold war between China and India with the backing of the United States, analysts say.
That cold war has led Sri Lanka to be extremely cautious in dealing with both Asian powers and even to forego some investment opportunities.
However, the 2022 economic crisis and sovereign debt default have compelled the island nation to look into all available avenues to ensure more foreign inflows to move away from the crisis.
The proposed FTA went into trouble when Sri Lanka had disagreement over timing of zero tariffs from the Chinese side, percentage of tariff line, and review time period.
Sri Lanka wanted a list of about 500 tariff lines to go to zero on the day the agreement comes into force, but there was no element of reciprocity from the Chinese side, FTA negotiators have told EconomyNext.
China during the negotiation wanted to liberalize 90 percent of the tariff lines and the value of the trade, though Sri Lanka’s position was to go for an 85 percent tariff line and not the value, the negotiators have said.
China also has opposed Sri Lanka’s proposal to have a review on the FTA in the 10th year instead of 20th year.
After the disagreements, China has shown some flexibility on the three key concerns, sources who are privy of the virtual discussions over the FTA have said.
During President Disanayake’s current visit, Sri Lanka has welcomed more business investment from China and expressed its willingness to provide a conducive investment and business environment.
” China will continue to encourage Chinese enterprises in investing in Sri Lanka to facilitate economic transformation and sustainable development in Sri Lanka,” the joint statement said.
“The two sides agreed to expand cooperation in such fields as logistics, green development, and digital economy to propel their high-quality and mutually beneficial practical cooperation.” (Colombo/January 16/2025)
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