FTAs: Good, bad and ugly

This newspaper, in an article titled ‘FDI lowest in 10 years’ which appeared in its columns on Saturday, quoting an economist said that free trade zones (FTZs) and not free trade agreements (FTAs) were the road to boost exports.

Professor Prema-Chandra Athukorala, Professor of Economics, Australian National University, speaking at a function in Colombo on Thursday organized by Advocata Institute, a local think tank, said global studies had shown that vis-à-vis enhancing exports, only 10% of the concessions offered by FTAs have been utilized in this regard.
With Sri Lanka planning to broaden its current FTA with India to an Economic and Technology Cooperation Agreement (ETCA), due to space constraints, this editorial will only focus on FTAs.

Meanwhile, as per Athukorala’s lecture, the balance 90% offered as concessions under FTAs has proved to be only theoretical, with no practical value to enhance exports. He said that the stumbling block was the rules of origin (ROO) under FTAs.
In Sri Lanka’s case, the island currently has two FTAs, one with India as aforesaid and the other with Pakistan. Both these agreements are over a decade old.

Athukorala, citing an example of the ROO and its impediment to boost exports vis-à-vis the Sri Lanka context said that he spoke to a joss sticks manufacturer at Mawanella the other day. This manufacturer said that he cannot export joss sticks to India by trying to avail himself of the concessions to which exporters are reportedly entitled to under the Indo-Lanka Free Trade Agreement (ILFTA) because of India’s stringent ROO. As a key component in the manufacture of joss sticks is imported from India it disqualifies this manufacturer from exporting to India under the ILFTA duty concessionary umbrella because of this ROO law.

Read the entire article on Ceylon Today