Despite repeated requests from India, Sri Lanka has yet to appoint a chief negotiator to resume talks on the Economic and Technology Cooperation Agreement (ETCA), which has been stalled after 14 rounds of discussions under successive governments aimed at expanding trade and investment with India, an informed source said.
In response to U.S. trade tariffs, Sri Lankan leaders have emphasized the need to strengthen trade ties with other countries to diversify export markets. Following reciprocal tariffs imposed by the U.S., Sri Lanka requested India to increase the quota for apparel exports under the Indo-Lanka Free Trade Agreement (FTA) from eight million units to 50 million units. However, India indicated that any such expansion should be considered only within the framework of ETCA. Both sides now see the FTA as needing revision, given the significant changes in bilateral and global trade landscapes since its inception.
Resuming ETCA talks is expected to be more complex, as India is insisting on strict adherence to “rules of origin.” These rules determine whether a product qualifies for preferential tariff treatment under an FTA and prevent third countries from exploiting the agreement by routing products through Sri Lanka with minimal value addition. “This is to make sure that no third country benefits from the facility to be given to Sri Lanka,” the source said.
Indian authorities have formally requested Sri Lanka to appoint a chief negotiator for ETCA discussions. The FTA between the two countries was signed in 1998 and came into force in March 2000.
Under the current FTA, 4,150 Indian tariff lines are zero duty for Sri Lankan exports, while 3,932 tariff lines are zero duty for Indian exports to Sri Lanka. India has also provided quotas and preferential treatment on select products: 15 million tonnes of tea with 50% margin of preference and no port restrictions since 2007, 25% tariff reductions on 528 textile items, and 50% margin of preference on eight million garment pieces across 233 tariff lines.
The Sri Lankan government has emphasized the need to revisit and update the FTA to reflect the current trade environment.
