TRADE POLICY REVIEW OF SRI LANKA
Statement by Deputy Permanent Representative Christopher Wilson
* As Delivered *
November 1, 2016
Thank you, Chair. The United States extends a warm welcome to the honorable Minister and all those visiting from Colombo. I would like to begin by expressing my government’s best wishes to the Government of Sri Lanka. Under President Sirisena, your government’s commitment to human rights, democracy, and the rule of law is noted and greatly appreciated. We also note your government’s commitment to the progressive adoption of sound trade and investment rules.
This review comes at a historic moment for Sri Lanka. With the end of a long civil war and a renewed commitment to democratic values, we see opportunity for prosperity to regain and consolidate its foothold in your nation. With enlightened governance, sound economic policies, and peace, we see a bright future for all Sri Lankans.
Sri Lanka’s high literacy rates, well established export industries, and commitment to economic reform provide strong potential for much higher growth rates and employment creation. In traditional exports like apparel and agricultural products, there is ample room for growth by moving up the value chain. A small but rapidly growing information technology sector oriented to entrepreneurship promises to complement these existing export giants. Also, with peace restored, tourism has boundless potential. Finally, Sri Lanka is well placed in its ambition to become a regional services hub.
Let me just briefly note that the United States and Sri Lanka have an expanding trade relationship totaling US$3.25 billion in two-way trade in 2015. The United States remains Sri Lanka’s largest single-country export market.
We would like to underscore our regard for Sri Lanka’s commitment to principles of openness to international trade and an investor friendly climate. In particular, we laud Sri Lanka’s goal to adopt world-class trade and investment standards – the first South Asian country to make such a commitment. In this context, we commend Sri Lanka for joining the ranks of WTO Members that have accepted the TFA Protocol, contributing to the rapid entry into force of that agreement. We note, however, the Secretariat’s observation of the slow pace of implementation of trade and investment reforms. Sri Lanka has made substantial use of import surcharges and other charges applied mainly on imports. We continue to hope that the government’s commitment to economic reform and its desire to establish Sri Lanka as a regional services hub will provide increasing opportunities for Sri Lanka to reduce the barriers to imports.
We hope, too, that Sri Lanka is bearing in mind the benefits to its trade that can result from binding a greater number of its tariff lines beyond the current 36.4%. Among other benefits, the binding of tariff lines makes trade more predictable for domestic industries that require inputs at the lowest cost.
The Secretariat Report further notes that other charges can considerably increase the cost of imports into Sri Lanka. Eliminating or significantly reducing such charges would also enhance predictability and affordability of inputs for competitive domestic consumption and production. We also hope that the government will take care to abide by WTO rules when modifying its tariffs. Here, I must mention our concern about some applied tariff lines that apparently exceed their bound rates.
Exporters of non-traditional goods exporting at least 80% of their production enjoy a number of tax concessions. We would like to know Sri Lanka’s rationale for such concessions not only in light of its WTO commitments but also in terms of the economic and trade distortions that these can create.
We are pleased to acknowledge an important policy development that has taken place since Sri Lanka’s last Review. Sri Lanka’s legislation implementing the WTO Customs Valuation Agreement (CVA) is a major step forward. According to the Secretariat, however, that legislation grants the authorities the flexibility to depart from CVA rules when deemed necessary, in the interest of the national economy or for any other reason, allowing for the use of minimum values. During the period under review, the Secretariat points out, Sri Lanka has applied such minimum import prices when calculating import taxes applied to used cars. We are disappointed that Sri Lanka’s implementation of this important agreement has taken this turn and would like to know what options Sri Lanka may be considering to mitigate this unfortunate legislative outcome.
The Secretariat Report notes that the Government of Sri Lanka remains determined to reduce further the list of sectors in which foreign investment is restricted. We also note that many restricted sectors may be open to specific projects, depending on a case by case review. We welcome this flexibility and other approaches to open the economy. Another positive step would be for the government of Sri Lanka to decide to participate in the Agreement on Government Procurement. Also, to promote a positive climate for business and economic growth, we encourage the efforts by Sri Lanka to address governance issues, including strengthening the rule of law and combating corruption.
We hope that this trade policy review will help us to understand more clearly the ways in which Sri Lanka is addressing the important issue of protection of intellectual property rights. We believe that more can be done in this area, particularly with respect to enforcement.
Finally, the United States will continue to work with Sri Lanka to strengthen and deepen our relationship. Recent political changes in Sri Lanka have dramatically increased the scope for bilateral cooperation and we are taking full advantage of that in our greatly expanded development assistance programs. We look forward to working with Sri Lanka as we implement our bilateral 5-year Joint Action Plan to Boost External Trade and Investment. We are confident that this Plan will serve as a road map to higher growth, employment generation, increased opportunities, and higher living standards for the people of Sri Lanka.
Again, thank you for all the efforts that have gone into preparing for this review, and best wishes to your delegation.