India May Remove Non-Tariff Barriers For Sri Lanka

India is likely to announce the waiver of non-tariff barriers for Sri Lanka when external affairs minister I K Gujral visits the island to chair a meeting of the third joint commission next week.

The meeting of the commission and bilateral talks with Colombo will take place between January 20 and 22 when Gujral is expected to announce the waiver of quantitative restrictions and other non-tariff barriers for Sri Lanka under the South Asian Preferential Trading Arrangement (Sapta).

The waiver is an important breakthrough in bilateral relations with Sri Lanka and is a part of the governments avowed policy of boosting ties with its neighbours, ministry sources said.

 

This is the first time that India opening trade with any country, apart from the trade concessions granted to the four least developed countries Bangladesh, Bhutan, Nepal and Maldives about six weeks ago.

Colombo has been seeking the waiver of quantitative restrictions on a wide variety of items for a long time, especially in agricultural products, cloves, cinnamon, rubber, confectioneries and oars.

It argued that its export bill to India, a mere Rs 100 crore last year, is so small that any open trading arrangement will not upset lobbies within India. But some sections in the government are hostile to the idea of ending support for these powerful domestic lobbies.

These ministries have resorted to all kinds of delaying tactics with Colombo. So much so that the last time the number of tariff lines were reduced under Sapta, Sri Lanka called the move meaningless. It then demanded that India abolish all quantitative curbs. But New Delhi also has a genuine problem: As a member country of the WTO, any moves to conduct free trade had to be done globally, not bilaterally. Further, any item freed for Sri Lanka if done under Sapta would have to apply to all other Saarc countries including Pakistan.

As part of the goodwill package towards Bangladesh last month, all QRs had been abolished under the head of least developed country, a category the WTO permits.

Since Sri Lanka is not an LDC, it is believed that Indian decision will be taken under Sapta and later communicated to the WTO. Pakistan-specific trade is unlikely to be affected because Colombos wish-list of 180 items does not overlap with that of Islamabad.

Ministry sources said the sub-committee on trade & finance (the other two sub-committees are on education & culture and science & technology) will be the most important part of the joint commission.

A bilateral investment protection pact is also likely, while the second $15 million credit tranche (of the $30 million announced in 1995, the first tranche was given last year) will be disbursed during the visit.