|Monday, 12 May 2003|
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More trade for a better future
Trade not aid' is the new axiom of the 21st century. The implication is that developing countries will be better off trading with their developed counterparts, as opposed to simply living on aid. It is a sound argument - aid can drag these countries to a state of false security, whereas trade can re-invigorate their agriculture and industry while building up foreign reserves in the long term.
In a world increasingly becoming globalised, it pays to have the right alliances. No country, not even the most ideologically isolationist, can remain outside the network of nations. Commercial links with other countries are vital to survive in an age of free trade. Specific trade alliances, formally free trade agreements, with other countries are even better, for they contain provisions that mutually benefit both parties.
Judging by recent events, Sri Lanka seems to be moving in the right direction with regard to global trade. Sri Lanka first signed a Free Trade Agreement (FTA) with India, which is now being implemented. It is also working within the South Asian Association for Regional Cooperation (SAARC) to form a South Asian Free Trade Area.
Now Sri Lanka has been mentioned as a potential candidate for a Free Trade Agreement with the United States, following Singapore's ascension to Free Trade status with the US last week. This is the outcome of significant progress made within the US-Sri Lanka Trade and Investment Framework Agreement signed during Prime Minister Ranil Wickremesinghe's visit to Washington to meet President George W.Bush in July last year.
As Sri Lanka's Ambassador to the United States Devinda Subasinghe correctly points out, this will be "very significant" for local industry with 41 per cent of Lanka's exports (mainly apparel and garments) worth US$2 billion destined to the US market.
While negotiations on a final FTA may take some time, it is not too early to praise the powers that be in Washington and Colombo who had mooted this timely proposal. The agreement will open up a vast market for Sri Lankan products in the US, one of the world's biggest consumer markets and enable Sri Lankans to buy quality US goods. It is a two-way process, but Sri Lanka stands to gain more benefits.
Such a deal will assume added significance in the light of World Trade Organisation proposals for a quota-free trading environment after 2005. The US, through its quota system, is one of the biggest buyers of Lankan garments and fears have been expressed that our apparel industry would face a disastrous post-2005 era. Hopefully, an FTA with the US will enable Sri Lanka to continue the lucrative garments trade at very nearly the same level.
It is clear that the US trade authorities have assessed Sri Lanka's progress in economic reforms in considering Sri Lanka as a potential FTA partner. The country has achieved a remarkable economic metamorphosis from a biting recession to moderate growth. More growth can be expected if peace dawns. The US and countries around the world will be watching these developments with interest as peace could be the major catalyst for a total economic transformation in Sri Lanka.
In the meantime, local exporters must work on improving the quality of their goods and adding more value to them to win new markets. Quality, not cheapness, will be the prime criterion in a barrier-free trading scenario in the near future. Only the best will survive. The rest will perish.
Produced by Lake House