The Hindu : Business : Sri Lanka wants extension of textile quota regime

Online edition of India's National Newspaper
Thursday, Sep 30, 2004

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Business

Sri Lanka wants extension of textile quota regime

By Our Special Correspondent

CHENNAI, SEPT. 29. Sri Lanka has approached the U.S. and the European Union (EU) with a suggestion to extend the textile quota regime under the Multi Fibre Arrangement (MFA) by two years to enable the island nation to deal with the threat of unemployment of thousands of workers in its garment industry developed to exploit textile quotas, according to the Sri Lanka Minister for Trade, Commerce and Consumer Affairs, Jeyaraj Fernandopulle.

"This raises the issue of violation of human rights of the workers (viz, access to livelihood),'' he said, in an interaction with journalists of The Hindu here today. A large number of garment units were in interior villages of Sri Lanka, each employing up to 500 workers. Their prospects were bleak particularly because of competition from China, he said.

Asked what steps Sri Lanka would be able to take in two years that it could not take during the ten-year scheduled phase-out of the MFA, Mr. Fernandopulle said, "We will try to get into a free trade agreement (FTA) with the U.S.'' He pointed out that 80 per cent of Sri Lanka's exports of textiles were destined for the U.S. market. The U.S. and the EU were the country's biggest export markets. However, there was as yet no positive response from either the U.S. or the EU to the request for extension of the MFA (which has to end on December 31, 2005, in terms of the 1994 Agreement on Textiles and Clothing of GATT/WTO).

The minister, who is in the city to take part in the meeting of the India-Sri Lanka Joint Business Council on October 1, said "overall" the FTA in operation between the two countries for the past four years had proved a "fair" arrangement. It had led to growth of exports of his country. Investors, including some Indian companies, were using Sri Lanka as a manufacturing base to access the Indian market with the FTA tariff concession, and also the lower value addition norm of 25 per cent (against the minimum of 35 per cent otherwise) in the case of products that use raw material originating in either country.

However, there were complaints about difficulties being faced by Sri Lankan exporters as a result of discriminatory sales tax on imports in India, especially Tamil Nadu, difficult Indian customs procedures, restriction of imports to specific ports and "corruption". Sri Lanka had utilised only one per cent of its permissible level of export of textiles to India under the FTA.

The FTA was also misused by certain exporters in Sri Lanka who used the country as a base to export imported copper without value addition and at the cost of the domestic user industry (handicrafts). Duty-free imports allowed for units under the Board of Investments (BoI) promotional scheme for re-export were diverted to the Indian market. The matter had been discussed bilaterally. Export of metal scrap had been banned now by Sri Lanka.

Sri Lanka was preparing a law to enable levy of punitive duty on dumped imports, he said.

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