Following the success of FTA, the Governments of India and Sri Lanka felt that more action was required to unleash the full potential of our bilateral economic relations. Accordingly, during the visit of Prime Minister of Sri Lanka to India in June 2002, the two governments decided to set up a Joint Study Group to explore possibilities of starting negotiations for a CEPA, modelled on the India-Singapore CECA.
Based on the report of the JSG in October 2003, the two countries began negotiations on a CEPA in early 2005. Thirteen rounds of negotiations have been completed, the last round having been held in Colombo on July 8, 2008.
Following the last technical level meeting, the Commerce Secretaries of the two countries met on July 9, 2008 to finalise the remaining issues and announce that CEPA negotiations have been completed, and the text has been agreed.
CEPA is expected to build on the momentum generated by the FTA. It will address some of the issues that have come up in the implementation and operation of the FTA as well. It will also take the two economies beyond trade in goods and impart renewed impetus and synergy to bilateral economic interaction.
CEPA has been negotiated on the same premise and principles that had guided the negotiation and implementation of the FTA. These were:
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a) Moving in asymmetric manner with India willing to do more than is expected of Sri Lanka;
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b) moving at a pace at which Sri Lanka was comfortable with in terms of opening new areas; and
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c) addressing Sri Lankan concerns that seemed to hinder Sri Lanka’s export potential and taking proactive measures to facilitate Sri Lankan exports to India. |
If we look at the salient features of CEPA, we will see that it has been negotiated in a manner that meets these objectives.
Salient features:
i. Sri Lanka will open only 32 new tariff lines. In contrast, India will open 114 items despite having a smaller initial negative list under FTA. Sri Lanka’s negative list would be four times that of India after the signing of the CEPA.
ii. India has also expanded the concessions under the garments quota of 8 million pieces granted under the FTA and is willing to extend concessions in the textile sector beyond the FTA level.
iii. In the area of services, India has agreed to larger and deeper openings than Sri Lanka. Here the principle that progress will be gradual and at a pace Sri Lanka is comfortable with has been particularly stressed.
iv. India will open far more sectors upfront (about 80 sub-sectors) and grant deeper concessions in each of these areas. In return, Sri Lanka has been allowed to have a more gradual approach, open only selected areas (about 20 sub-sectors), and to restrict openings in these sectors to levels it is comfortable with.
v. Therefore, openings on various modes of supply, including Mode 4 that pertains to movement of natural persons is much more limited in Sri Lanka’s schedule of commitments than India’s. India will allow unlimited number of visas to executives, managers and specialists to work in India. Sri Lanka has not reciprocated and allowed restricted concessions in this regard. India has granted more than 2000 employment visas to Sri Lankans in the last three years alone.
vi. At Sri Lanka’s insistence, India has also agreed to safeguards measures so that these concessions can be revised or withdrawn if they happen to cause serious impairment to local industry.
vii. The services sectors opened by India include some of the areas where Sri Lanka has proven expertise and acknowledged advantages. These include: architectural and engineering services, tourism and travel related services, computer and IT and related services, transport, and maritime services.
viii. In the area of investments, too, the Indian schedule of commitments is much larger and wider than that of Sri Lanka.
ix. CEPA also envisages economic cooperation in a wide range of areas with a view to create capacities and develop human resource potential in Sri Lanka to better leverage the new openings envisaged in CEPA. Accordingly, India has agreed to cooperation in areas selected entirely by Sri Lanka: Agriculture, fisheries and forestry; Energy; Manufacturing; Services; Transport and infrastructure; Science and technology; Tourism; Environment; Human resource development; SMEs; and Meteorology and natural disaster preparedness.
x. CEPA also aims at creating a more facilitating environment for Sri Lankan exports and seeks to remove some of the perceived impediments to exports from Sri Lanka:
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CEPA provides for identification and removal of all non-tariff barriers, a major complaint of Sri Lanka during the years of operation of FTA.
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CEPA provides for close cooperation between the Customs Authorities of both countries to deal with delays and difficulties associated with Customs administration. It provides for transparency of laws, rules and regulations through prompt publication, adoption of risk management techniques to allow expeditious clearance to low risk consignments, adoption of paperless trading methods, adoption of advance ruling system etc. A Customs Working Group has also been set to meet atleast once a year and otherwise as required to resolve all outstanding problems.
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To deal with delays and inconvenience suffered by exporters due testing and certification processes for certain products in the other country, CEPA provides for a Mutual Recognition Agreement (MRA) as well as measures to deal with technical barriers to trade and adoption of common Sanitary and Phyto-sanitary standards. As a result, delays due to laboratory testing and certification processes will be avoided allowing Sri Lankan exports to enter India unhindered. Testing and certifications done in Sri Lanka would be recognized in India. The products that will benefit include: ayurvedic products, fish and fishery products, coffee, tea and spices, edible fruits and nuts, vegetable fats and oils, all kinds of animal and animal products, plant and products of plant origin, and other agricultural and related items.
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The FTA rules of origin criteria for some products are being relaxed at Sri Lanka’s request. India has agreed to ease rules of origin criteria for 346 products. This will enable Sri Lanka to export these items of priority interest to it and also to be more competitive in the Indian market. Some of the products including are agricultural and agro-processed items, machineries, electrical and other appliances, fishery products, apparel items, jewellery, non-ferrous metals, furniture and so on. All these items were identified by Sri Lankan government after consultations with stakeholders.
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In order to ensure that problems in bilateral trade receive priority attention and are resolved promptly, a Standing Committee at the level of Commerce Secretaries has been set up. It will meet every six months to address all outstanding issues and concerns and resolve them promptly. Annual meetings at the level of Commerce Ministers are also envisaged. Therefore, all concerns can be addressed at a very high level and on a regular basis.
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