Entrepreneurs oppose FTA with China

* DSI boss ridicules proposed FTA with Singapore
* India accused of using product specifications to restrict imports
* Cabinet minister complains of not being consulted in policy formulation. 

The People’s Commission to formulate a National Policy on International Trade and Treaties headed by Professor W.D.Lakshman and Palitha Fernando PC, commenced receiving oral submissions at the OPA last Thursday. The other members of the People’s Commission are Messers. P. D. Fernando, R. P. L. Weerasinghe, Dr Bandula Weerasekera, Dr Anula Wijesundera and Lakshman Perera. The People’s Commission to formulate a National Policy on International Trade and Treaties was instituted by the ‘Professionals’ National Front’ which is a consortium of a dozen professionals’ associations including among others, the Government Medical Officers’ Association (GMOA), the Electrical Engineers’ Association, the Customs Officers’ Union and the National University Teachers’ Association. Among those who made oral submissions on the first day, was Minister Daya Gamage.

A successful entrepreneur himself, Gamage said that local entrepreneurs have not been looked after by any government. He said that the government was going to alienate a large tract of land to a Singapore based company for sugar cane and these are things that can be handled by local entrepreneurs. If there is no money to invest, the local banks should help local entrepreneurs. The banks can borrow from overseas even though the government can’t. They should borrow from overseas and lend to local entrepreneurs. While large scale projects may need foreign investment, there are things that the local entrepreneurs can do and they should be given all the help necessary to do it. He said that when ETCA is signed with India, India can take over the leadership of certain sectors of the economy. When Munchee tries to export to India there are many barriers. But if Indian products are brought to Sri Lanka, local enterprises may have to close. So he said we have to see how this can be prevented. He said that he regretted that when certain decisions are made, even they, the ministers of the government, were not consulted.

Elle Gunawansa Thero making a statement before the People’s Commission stated that when entering into foreign treaties, economic considerations should not be the only critera applied and the long term impact on the people, on society, the environment, and on biodiversity also have to be taken into account. The lease of the Hambantota port and an additional 15,000 acres may bring in money to tide over the country’s immediate financial problems and generate employment, but the long term social and environmental impact of this had to be studied. The Ven monk also stressed that the archaeological value of the land that was being alienated also had to be considered.  He said that the Central Bank Governor had said that this agreement should be signed soon because the finances of the country were in a bad shape. If that happens, none of these things will be taken into consideration. He also warned against bringing in industries that have been rejected by other countries and he pointed out that high pollution industries have already caused problems in China.

The Managing Director of DSI Industries, Kulatunga Rajapaksa, stated that Sri Lanka has only a limited number of items that can be exported such as tea, rubber products, spices, and garments. Under the FTA with India, limitations were imposed on these and we were asked to export other things. The India-Sri Lanka FTA has a huge list of duty exempt goods but the items on this list are aircraft engines, and ships and so on which are not produced here. Those people who negotiated the FTA should have known that if India imposed restrictions on certain goods, we too should impose restrictions on certain goods imported from India. The India-Sri Lanka FTA has been in operation for 15 years but without any tangible benefit to Sri Lanka. India has imposed various product specifications on Sri Lanka, but we don’t have any product specifications for Indian goods which is why Maruti cars are imported into Sri lanka on a large scale even though they are not exported to any other country.

If we need to export tea to India, there are various product specifications to be met. If sausages are exported, the goods have to be examined at a place in Delhi, and the container sent will have to be in the harbour for four or five days. Rajapaksa spoke of the way trade barriers are imposed not through tariffs or restrictions but through product specifications. Speaking of the proposed FTA with Singapore, he pointed out that even without such an FTA, no duty is charged for exports to Singapore except for certain prohibited goods. When we can’t export anything to Singapore even in such circumstances, we are now going to sign an agreement to get goods duty free from Singapore to SL. Singapore does not produce anything. Though nothing originates in Singapore, all goods exported have to have a certificate of origin as per the WTO rules. But they say they can export re-engineered goods to Sri Lanka. There is a difference between repairing, reconditioning and re-engineering.

Under the category of re-engineered goods, they can export old phones and computers to SL. So they get to export their junk into SL free of duty. Another danger is the e-commerce highway where goods are delivered to one’s doorstep by post without any payment of duty. A lot of trade takes place in Singapore in that manner. Speaking of the proposed Sri Lanka-China FTA, Rajapaksa said that this is more dangerous than anything else because one of the conditions is that 90% of our HS codes should be freed from import duties. Even now there are a lot of Chinese goods in Sri Lanka. We have only three import duty bands 5%, 15% and 28%.  In other countries the import duties could go up to 50%, 60% or 70%. Despite this a lot of exports come from China where there is a massive production base and what we get are mostly rejects and overruns and even those are under-invoiced reducing the amount of duty paid.

Under-invoicing undermines the whole system. Even if the duty paid is 100%, the practice of under-invoicing means that the duty structure will not have its intended effect. When duty free imports from China come into the country under an FTA, Sri Lankan industries will suffer. There is a condition in the proposed FTA with China saying that no cess can be imposed. Even the import of carrots has a Rs. 100 cess. If even a cess cannot be imposed, no industry will be left in this country. Rajapaksa drew attention to the fact that an FTA with Indonesia was also on the cards. He stated that before any FTA is signed, we have to see what the benefits are for our country and if there are no benefits that can reasonably be expected, its better not to sign such agreements. Most significantly, he pointed out that most Sri Lankan industries that produce goods for local consumption, also export their products whether it be biscuits, rubber products or cables and the question arises whether one is to develop such industries or import those goods from abroad.

Rajapaksa pointed out that some people say that local industrialists oppose these FTAs because we want to sell our goods at a high price in the local market or because we produce substandard goods. But he rejected such allegations saying "If that was true, how can we be exporting our goods to other countries?"

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