CEPA talks with Sri Lanka hit roadblock

Ongoing negotiations for concluding a Comprehensive Economic Partnership Agreement (CEPA) with Sri Lanka have hit a hurdle over issues related to services as well as pruning of a 'negative list' of products that will see no tariff cuts.

In 1998, the two countries had signed a Free Trade Agreement for merchandise goods. This agreement is now being upgraded to a CEPA covering services and investment also.

Sources close to the development said the Sri Lankan offer on market access to its services sector was not good enough.

"Indian negotiators are of the view that the Sri Lankan offer on services is much lesser than its offer in trade talks going on at the World trade Organisation. Offers in bilateral trade negotiations are usually more liberlal than multilateral negotiations" the source said.

Sources added that services came up for discussion in the latest rounds of negotiations (as many 11 rounds have been held so far).

It is now felt that CEPA negotiations would need another two more for finalising the details, the last of which could focus specifically on services related issues. At the moment, the CEPA is likely to be signed duing the first half of 2008.

Appreciating the fact that the island nation does not have a well developed regulatory regime for its services, Indian negotiatiors have been assuring Sri Lanka that its services sector will not be swamped by Indians.

"Why would Indian doctors, teachers and lawyers leave India and rush off to Sri Lanka, when there is enough opportunity in the country. If at all Indian professionals go to Sri Lanka, they will add value to the local companies," the source said.

In addition, both the sides are also trying to achieve agreement on a pruned negative list of items (which are products, in which tariffs will not be reduced).

As per the current Free Trade Agreement between both countries, signed in 1998, Sri Lanka earmarked more than 1,180 products in the negative list while India's list contains over 420 products.

"The stakeholders in the respective countries, have been opposing the move to cut the number of items in the negative list for the CEPA," the source said.

On the investment front as well, negotiations are at an advanced stage. "The surge in exports from Sri Lanka, during 2003-04 was due to the fact that Indian companies invested in Sri Lanka, especially in the Vanaspati sector.

But later, due to political instability and fear of lesser returns, the the rate of growth of investments slowed down. Currentl, negotaitors are trying to identify areas in which investment could be made," the source said.

COURTING THE LION

Issues related to services as well as pruning of a 'negative list' of products that will see no tariff cuts stall the talks

Negotiators feel that the Sri Lankan offer on services is much lesser than its offer in trade talks going on at the WTO

Indian negotiatiors have been assuring Sri Lanka that its services sector will not be swamped by Indians