Our Country has to new approach!

 Sri Lanka has to take a new approach to trade forever, fostering regional trade, an analyst has said, after the island nation was hit by a 44 percent tariff on goods exported to the US. “Sri Lanka has to take a new approach to trade, focusing on regional trade partnerships and openness to trade,” Economist and director at Arutha Research Rehana T. told EconomyNext.

“It should have diversified its export and destinations a long time ago, it cannot be done overnight.” There were many free trade agreements Sri Lanka had not implemented properly, and many trade negotiations which had stalled, Rehana T. said. Sri Lanka must now look to diversifying both its export basket as well as its export destinations through the world.

“We can look for different market for the products we already produce or we can produce new products for new markets or products, both of which are easier said than done.” “Pivoting to different markets is difficult. As 25% of Sri Lanka’s exports go to the US you can expect quite a significant reduction in export revenues this year, assuming the new tariff structure prevails.” Focusing on regional trade agreements is important. “India is a close regional ally and has immense potential Sri Lankan exports. “South Asia and South East Asia in general should be a focus for Sri Lanka in the future.”

However, Sri Lanka a highly complex and protectionist tariff structure which hinders. “As a result, exports as a percentage of GDP has stagnated, and trade has been declining in Sri Lanka.” The country has a complicated tariff structure with many para tariffs. It also has high tariffs on many imported products which impact competitiveness. Successive governments, egged on by protectionist big businessmen and a farming lobby, have discouraged imports claiming to protect domestic industries.

“In attempting to protect domestic industrialists and industry, government affects Sri Lankan consumers and export competitiveness.” Sri Lanka’s lack of preparedness to mitigate the effects of the tariffs could hurt the country’s recovering economy. “There will be a significant impact on business as demand falls in the US.” The US is Sri Lanka’s largest apparel export market. Following the US administration’s “Liberation day” tariff announcement, Sri Lanka could lose out to neighbouring Bangladesh, Vietnam, Indonesia and India. Apparel export players Bangladesh (37%), Indonesia (28%) and India (33%) were slapped with lower tariff rates than Sri Lanka by itself.

Quoted from EconomyNext