Sri Lanka’s prospects with RCEP in India’s absence
While it is unclear if the government is considering joining the China-led Regional Cooperation Economic Partnership, Colombo seems open to the idea
- Sri Lanka’s growing emphasis on tapping the emerging Asian market would make the China-led Regional Cooperation Economic Partnership (RCEP) agreement seem an ideal forum to build trade ties in the region.
- But given the island nation’s current economic challenges and India’s decision to opt out of the grouping, the road is far from easy for Sri Lanka, according to economists.
- Few would dispute Sri Lanka’s distinct advantage, thanks to its strategic location in the Indian Ocean, along one of the busiest shipping routes in the world.
- We must develop the [southern] Hambantota and Colombo Ports together with the Airports to be a centre in the international commercial processes.
- While it is unclear if the Sri Lankan government is considering seeking RCEP membership, Colombo seems open to the idea.
- In the current situation amid a global pandemic, no country can stick to an isolationist policy.
- Countries have to work together, putting aside their political differences.
- Sri Lanka is pro-trade and we will explore all multilateral arrangements, including the RCEP to explore what they can offer.
- To start with, Sri Lanka’s current trade policy “remains unclear”. Following the coronavirus outbreak early this year, the government slapped significant import restrictions to conserve its draining foreign reserves.
- Moreover, the government’s position on Free Trade Agreements (FTA) has not been consistent.
- For instance, the proposed Economic and Technology Cooperation Agreement (ETCA) with India is “in limbo”, while Colombo has expressed interest to revive FTA negotiations with China.
- The Sri Lanka-India ETCA agreement been in place already, and had India also been part of RCEP, it would have made life a lot easier for Sri Lanka.
- Further, while the U.S. and the EU are Sri Lanka’s two largest export markets, India and China are the two biggest sources of imports, and Asian countries have largely engaged as sources of imports, development financing and FDIs, she added, pointing to Sri Lanka’s challenges in navigating a complex trade terrain.
Lessons for Sri Lanka
- Colombo is seeking to diversify its export basket and markets by looking to expand trade with, among others, countries in the Asia-Pacific region.
- RCEP would make it more difficult for Sri Lanka to compete with the likes of Vietnam, Cambodia and Laos, not to mention the wealthier ASEAN countries, in the lucrative markets of China — unless a bilateral agreement is finalised quickly — Japan, South Korea as well as Australia and New Zealand.
- Further, if India was to eventually become a member of RCEP, there could be a boost to Sino-Indian economic relations within a rules- based framework that could potentially reduce bilateral tensions.
- Sharing a broader reading of the development, the immediate aftermath of the pandemic, marked by the disruption to global supply chains, led to a critique of globalisation and a case was made for greater autarky.