No country can live in isolation in today’s globalised world. Countries are linked by diplomatic ties, trade and people to people contact. It would not be incorrect to say that trade makes the world go around. Trade is especially important for an island nation like Sri Lanka.
Sri Lanka, variously know as Serendip, Ceylan and Ceylon in the ancient days, has been known as a vital trading post for centuries thanks to its prime location on the East-West sea route. Ancient explorers and seafarers have described how merchants came to Sri Lanka, attracted by its spices, gemstones and other riches.
But as trade developed around the world, a need was felt by most countries to protect their own industries and products. If the main crop of a given country was potato and if it allowed unfettered imports of potato, one can imagine the fate of the local potato industry. This is how the concept of taxes and duties was born. Accordingly, the Government of a country that produces its own butter is well within its rights to impose, say, a 25 percent duty rate on imported butter, which will instantly make the imported variety more expensive and the local one more affordable.
But the problem with duties is that they are often reciprocated against by other countries, thereby making exports less lucrative. For example, Country A imposes a 25 percent duty on Country B’s butter, but Country B will counter that with a 25 percent duty on Country A’s tea. Both countries lose as a result. Hence, the idea of Free Trade Agreements, whereby two or more countries agree to waive duties and taxes for each other’s specified products. There is also a list of essential goods which do not qualify for the tax exemptions, mostly to protect certain local industries.
Sri Lanka pioneered FTAs in this region by signing one with India more than 20 years ago. By now it has signed FTAs with several other countries. But FTAs can sometimes be disadvantageous to countries with smaller economies, especially if the other country is an economic and financial behemoth. This is exactly why many feared the FTA between Singapore and Sri Lanka signed under a veil of secrecy by the UNF Government around two years ago. Singapore’s US$ 362 billion economy is many times bigger than that of Sri Lanka.
There was a clamour by opposition politicians, economic experts, professional bodies and many others that the FTA with Singapore should be subjected to a wide debate before being signed as the country was in the dark about is contents. There was a suggestion in some quarters that the new Government should annul the FTA. However, these are Government-Government agreements that cannot be arbitrarily changed in that fashion. But each country is free to re-examine and take any relevant steps with the consent of the other.
In this context, the Attorney General has informed the Supreme Court that a committee appointed by the Government is currently reviewing and re-visiting the context of the Sri Lanka–Singapore Free Trade Agreement signed by the previous Government. Senior State Counsel Nirmalan Wigneswaran appearing for the Attorney General informed the Supreme Court that the agreement itself grants provisions to review and re-visit the agreement with the Singaporean counterpart. Seven Fundamental Rights petitions have been filed seeking an interim relief staying or suspending the implementation of the Sri Lanka–Singapore Free Trade Agreement signed on January 23, 2018.
In the light of allegations that the Sri Lanka-Singapore Free Trade Agreement (SLSFTA) was neither considered nor approved by the Cabinet of Ministers and also not disclosed to the public, it is vital that it should be reviewed with a view to amending or annulling any clauses that may pose a danger to our economy. This is the correct thing to do – as is a wider public discourse that follows a full disclosure of the FTA contents.
The same goes for the much-talked-about US$ 480 million Millennium Challenge Corporation (MCC) compact which critics say could have adverse repercussions for Sri Lanka. Again, the public has received very little information on the MCC and there are many misconceptions too floating around as a result. To address these concerns, the Government has appointed an MCC review committee chaired by Senior Economist Prof. Lalithasiri Gunaruwan. Moreover, the public can also submit their views by email to this committee. The Government has assured that attention will be paid to all these concerns in any decision taken with regard to the MCC.
We cannot entirely shun FTAs and agreements such as the MCC in a world that is linked intricately in the mesh of global trade. In any case, no agreement could be 100 percent negative or 100 percent positive. The challenge here is identifying the positives, while reducing or eliminating the negatives - give and take, yes, but on terms that are more favourable to us.
This whole scenario calls for a more transparent process with regard to all international transactions and agreements undertaken by any Government that is in power. For example, one sees many ads calling for global tenders, but the public are usually kept in the dark on who has actually won the tenders. Any prospective agreement with a foreign country must be widely debated in Parliament and outside, with the public given a chance to express their opinions as well. That will help clear up any misconceptions whilst allowing us to keep international friendships alive. It is a win-win situation for all.