Sri Lanka Trade Pacts – Some Prefer China over India

The Comprehensive Economic Partnership Agreement (CEPA) expected to be signed between India and Sri Lanka next month which sparked off recent protests in Colombo is seen as a retrogressive deal by some quarters from the island nation. According to sources, it seems that China is favoured by some over India, and are also uncomfortable about India eclipsing close to 20,000 highly skilled Chinese essential workers presently in Sri Lanka. However, it is not clear why some in Sri Lanka prefer China over India despite heavily lopsided Sino-Lankan trade in favour of China.

Ahead of Sri Lankan President Mahinda Rajapaksa's visit to India next month, hundreds of protesters took to the streets against the proposed trade pact, claiming it would hugely benefit the neighbouring country by forcing the domestic industry into appalling risks. The CEPA which was supposed to be signed two years ago is likely to come to fruition during Rajapaksa's visit to New Delhi on June 8.

Many highly educated, including doctors and engineers who were part of the recent protest along with businessmen fear that the island could be dominated by cheaper and skilled Indian services at the expense of the domestic industry. But this argument is unfounded as India’s educated unemployed were largely jobless because their reluctance to work for less or in remote places. Moreover, Sri Lanka being a country less than half the currency value of India would not have to panic about the products or services from India going cheap rather can ensure superior quality which could help the country build its economy on a firmer footing.

The Indo-Sri Lanka Free Trade Agreement (ISFTA) signed in 1998 and which is effective since March 1, 2000 has been able to boost trade between both nations significantly with near equal opportunity for the Sri Lankans. The ISFTA that is confined to the trading of only goods pushed country’s exports by manifold from $55.7mn in 2000 to $516.4mn in 2007.

On the contrary, in 2002, the traded volume between China and Sri Lanka totalled about $350mn, of which China's exports accounted for $340mn providing room for Sri Lankan exports at about a meagre $10mn. Although Sino-Lankan trade witnessed tremendous growth over the years with bilateral trade crossing $2bn in 2009, imports from China remained predominately greater than the efflux.

By Jose Roy