By Gomi Senadhira
Former Director General of Commerce
The recent article by the former Director General of Commerce Ms Sonali Wijeratne (Is there a national trade policy for Sri Lanka?) published in your newspaper illustrates the major problems about the trade negotiations and policy formulation in Sri Lanka. She has apparently written this article to provide "… some clarity, truth and also understanding" to the apparent confusion created by the conflict of opinion between the Professional National Front of Sri Lanka, which vehemently claim that Sri Lanka has no Trade Policy and my position that "Sri Lanka does indeed have a Trade Policy." Unfortunately, her attempt to provide "… some clarity, truth and also understanding as to why the present confusion has arisen" … has added further confusion to the discussion on this subject.
The Department of Commerce is Sri Lanka’s main agency dealing with trade policy and trade negotiations. The mission of the department is, as stated on its website;
Promote
"To develop and promote Sri Lanka’s foreign trade relations at bilateral, regional and multilateral levels by the effective implementation of government trade policy, with a view to raising the standards of living and realizing a higher quality of life through the increase of total production, income and employment levels, thereby actively contributing to the overall economic growth of Sri Lanka.
The DoC is responsible for foreign trade policy formulation, and all related coordination and implementation matters, with the objective of developing and promoting Sri Lanka's foreign trade relations at bilateral, regional and multilateral levels."
The department has a number of trained trade policy specialists. The department is also the focal point for technical assistance on trade policy related capacity building, which, in the recent years, included two large, EU funded, multi-year projects.
So, when the newly retired DG/Commerce says "… It is an irrefutable fact that there was no informed, credible nor coherent trade policy", or "… the need for a National Trade Policy for Sri Lanka is paramount." it is a matter of serious concern. Did the Department of Commerce, under her leadership, failed in its key mission, the effective implementation of government trade policy. Or, if there is "no informed, credible nor coherent trade policy" how was it implemented effectively? Did the DG advise the government about the need for a National Trade Policy? Or, are we talking about different trade policies?
Simplest
As the simplest of trade policy terms used in the trade negotiations are difficult "… for the laypersons and newcomers to penetrate" the WTO has published a Dictionary of Trade Policy Terms. The dictionary defines the term "Trade Policy" as; "the complete framework of laws, regulations and international agreements and negotiating stances adopted by governments to achieve legally binding market access for domestic firms." Every country has a trade policy that fits into this definition.
The trade policy of Sri Lanka is the complete framework of laws, regulations and international agreements and negotiating stances in place. It is not a detailed proposal or a set of decisions about how to do something in the future. Though, these laws, regulations, international agreements and the negotiating stances change constantly, at any given time, any country has a trade policy and Sri Lanka too has a trade policy. If someone says "Sri Lanka has no trade policy" then s/he has not understood the meaning of the term "trade policy."
Trade policies
The best place to find the trade policies of the WTO members is the WTO TPRM website, where comprehensive information available on the trade policies of the members. That includes Sri Lanka’s Trade Policy, which is simply a compilation of information on the trade related laws, regulations and international agreements and negotiating stances adopted by the government of Sri Lanka.
The WTO reviews cover all aspects of trade policies of the members, with particularly emphasis on the WTO compliance. Any trade policy analyst should understand that it is difficult, if not impossible, to review the WTO compliance of a country’s trade policy without comprehensive coverage of all trade policy related issues. It appears that the former DG/ Commerce has not understood the role and functions of the WTO Trade Policy Review Mechanism (TPRM), even after "participating and spearheading" one of such reviews.
The former DG also claims "Policy Prescription that attended the SLSFTA as well as other proposed FTAs were entirely based on Political Policy Prescription of the Cabinet Committee on Economic Management… Thus was the official Mandate given to the Ministry of International Trade & Development Strategy to negotiate Free Trade Agreements with India, China, Thailand and Singapore in parallel! Such are the flimsy, naïve and shallow assumptions based political policy prescriptions that cannot be taken by any rational human being as one constituting a Trade Policy!"
Bad decision
Former Director General of Commerce
The recent article by the former Director General of Commerce Ms Sonali Wijeratne (Is there a national trade policy for Sri Lanka?) published in your newspaper illustrates the major problems about the trade negotiations and policy formulation in Sri Lanka. She has apparently written this article to provide "… some clarity, truth and also understanding" to the apparent confusion created by the conflict of opinion between the Professional National Front of Sri Lanka, which vehemently claim that Sri Lanka has no Trade Policy and my position that "Sri Lanka does indeed have a Trade Policy." Unfortunately, her attempt to provide "… some clarity, truth and also understanding as to why the present confusion has arisen" … has added further confusion to the discussion on this subject.
The Department of Commerce is Sri Lanka’s main agency dealing with trade policy and trade negotiations. The mission of the department is, as stated on its website;
Promote
"To develop and promote Sri Lanka’s foreign trade relations at bilateral, regional and multilateral levels by the effective implementation of government trade policy, with a view to raising the standards of living and realizing a higher quality of life through the increase of total production, income and employment levels, thereby actively contributing to the overall economic growth of Sri Lanka.
The DoC is responsible for foreign trade policy formulation, and all related coordination and implementation matters, with the objective of developing and promoting Sri Lanka's foreign trade relations at bilateral, regional and multilateral levels."
The department has a number of trained trade policy specialists. The department is also the focal point for technical assistance on trade policy related capacity building, which, in the recent years, included two large, EU funded, multi-year projects.
So, when the newly retired DG/Commerce says "… It is an irrefutable fact that there was no informed, credible nor coherent trade policy", or "… the need for a National Trade Policy for Sri Lanka is paramount." it is a matter of serious concern. Did the Department of Commerce, under her leadership, failed in its key mission, the effective implementation of government trade policy. Or, if there is "no informed, credible nor coherent trade policy" how was it implemented effectively? Did the DG advise the government about the need for a National Trade Policy? Or, are we talking about different trade policies?
Simplest
As the simplest of trade policy terms used in the trade negotiations are difficult "… for the laypersons and newcomers to penetrate" the WTO has published a Dictionary of Trade Policy Terms. The dictionary defines the term "Trade Policy" as; "the complete framework of laws, regulations and international agreements and negotiating stances adopted by governments to achieve legally binding market access for domestic firms." Every country has a trade policy that fits into this definition.
The trade policy of Sri Lanka is the complete framework of laws, regulations and international agreements and negotiating stances in place. It is not a detailed proposal or a set of decisions about how to do something in the future. Though, these laws, regulations, international agreements and the negotiating stances change constantly, at any given time, any country has a trade policy and Sri Lanka too has a trade policy. If someone says "Sri Lanka has no trade policy" then s/he has not understood the meaning of the term "trade policy."
Trade policies
The best place to find the trade policies of the WTO members is the WTO TPRM website, where comprehensive information available on the trade policies of the members. That includes Sri Lanka’s Trade Policy, which is simply a compilation of information on the trade related laws, regulations and international agreements and negotiating stances adopted by the government of Sri Lanka.
The WTO reviews cover all aspects of trade policies of the members, with particularly emphasis on the WTO compliance. Any trade policy analyst should understand that it is difficult, if not impossible, to review the WTO compliance of a country’s trade policy without comprehensive coverage of all trade policy related issues. It appears that the former DG/ Commerce has not understood the role and functions of the WTO Trade Policy Review Mechanism (TPRM), even after "participating and spearheading" one of such reviews.
The former DG also claims "Policy Prescription that attended the SLSFTA as well as other proposed FTAs were entirely based on Political Policy Prescription of the Cabinet Committee on Economic Management… Thus was the official Mandate given to the Ministry of International Trade & Development Strategy to negotiate Free Trade Agreements with India, China, Thailand and Singapore in parallel! Such are the flimsy, naïve and shallow assumptions based political policy prescriptions that cannot be taken by any rational human being as one constituting a Trade Policy!"
Bad decision
The decisions by the Cabinet to negotiate FTAs with India, China, Thailand and Singapore in parallel, based on "flimsy, naïve and shallow assumptions", may have been a bad decision or one of the worst trade policy decisions, because of the type of the negotiators and advisors appointed to carry out that task. However, "flimsy, naïve and shallow assumptions" or the preparatory work was not a part of national trade policy. Only the decision to commence negotiations turn into a small part of the negotiating stances adopted by government to achieve legally binding market access and becomes a tiny part of the national trade policy. A FTA becomes an important part of trade policy only after it is concluded and signed. For example; few years ago Sri Lanka negotiated FTAs with Thailand and Iran due to "political decisions" to do so. Those were badly negotiated agreements and, fortunately, never became a part of our trade policy. But the FTA with Singapore, with all its problems, unfortunately, became a part of our trade policy.
Political decisions to launch FTA negotiations are not uncommon. The decision to negotiate U.S.- Singapore Free Trade Agreement was taken by two men, President Clinton and Prime Minister Goh, during a late-night round of golf! If you study what happened after those two decisions (the decision by the Cabinet and the decision by two men during a late-night round of golf) and the two agreements, it is possible to identify the problems with the SLSFTA. The problems are mainly with the agreement.
When President Clinton and Prime Minister Goh agreed to negotiate a FTA, it was believed that an agreement with Singapore, a small, very open, market-oriented economy, should be "easy" to negotiate and could be concluded in two months. But it took two years. That was because, in trade negotiations, most of the real and complex issues crop up only after the negotiations start. Though, doing homework on the feasibility of a FTA (please don’t call this trade policy) prior to the commencement of any such negotiations is important, that amounts to very small part of the work involved. Real work begins only when the negotiation starts and the level of ambition is set.
The problems with the SLSFTA are with our negotiators (including the DG/Commerce) and what they did or didn’t do during the negotiations and even after the conclusion of the negotiations. So, don’t blame the politicians or the "Political Policy Prescription".
Shocking
The comments by the former DG Commerce on the proposed FTA with Thailand are even more shocking. She says, "In the case of the proposed FTA with Thailand, the study to ascertain benefits for Sri Lanka by entering into such Agreement laughably enough commenced after the negotiations began! The high level political decision making to enter into negotiations had already been made by key Cabinet Ministers… It is a puzzle to figure out what professional officials could negotiate sans a National Trade Policy….!"
Didn’t she know that between 2001 and 2011, Sri Lanka negotiated two FTAs with Thailand, one bilateral and one regional, and the Department of Commerce had done sufficient studies on a FTA with Thailand, "including the market access requirements/capacities of stakeholders vis-à-vis the competiveness, strengths and weaknesses of the goods and services supply base of Sri Lanka to Thailand and vice versa". One such cost-benefit analysis was carried out just before what would have been last meeting to finalize the BIMSTEC FTA. Then the conclusion was – don’t do it, as the agreement was heavily favourable to Thailand. This was followed up with the stakeholder consultations, where they were briefed about the possible adverse implication. At that time, the department, not only recommended against signing of the BIMSTEC- FTA, but also lobbied, discreetly but strongly, against it.
But when the department was informed that as the BIMSTEC - FTA was mandated by the Heads of states, the department was obliged to continue with the negotiation, damage control measures were initiated by reducing the level of ambition to minimize the adverse implications of the agreement. Sri Lanka’s stance was supported by all the members, other than Thailand. All the relevant information was available in the department. All that was required was to update those studies, after the high level political decision was made to relaunch FTA negotiations with Thailand, and the brief the government and the stakeholders appropriately. Any professional trade official would have done that without any difficulty.
Easy prey
Same applies to proposed Bangladesh FTA. Though the former DG says "In the case of proposed Sri Lanka/Bangladesh FTA, too, political imperative over trade policy continued to hold sway…, Sri Lanka would be an easy prey in negotiations!" any professional trade negotiator should be able to negotiate mutually favourable agreement with that country as Sri Lanka has two F/PTAs with that country and is in the process of negotiating a third FTA (BIMSTEC). The Department of Commerce has enough information, to prepare for the negotiations. But as I said earlier, the real work begins only when the negotiation starts and the level of ambition is set. But Sri Lanka is in a position to negotiate a balanced agreement with that country without becoming "… an easy prey."
If the negotiations are not moving well with any of the FTAs, the negotiators should brief the "Political Masters" appropriately. Take for example, IOR-ARC FTA, BIMSTEC FTA, Iran FTA, Thailand FTA (which was negotiated earlier) where the department informed the decision makers that these agreements are not favourable to Sri Lanka. For example, take the Sri Lanka – Iran FTA. The agreement was negotiated and finalized before the high profile visit of Iranian President Dr. Mahmoud Ahmadinejad to Sri Lanka and was one of the agreements to be signed during the visit. However, the department advised the government against signing the agreement. It didn’t "discreetly, but voluntarily" withdraw from its responsibility of advising the "Political Masters", even when, the department was the lead negotiator for Sri Lanka for that agreement. After all, that is the role and the responsibility of the department. If the Department of Commerce, as the key government agency on trade policy had failed to carry out its mission don’t blame the "Political Masters". It is department’s and its Director General’s responsibility to advise the government. Did the department fail in its key mission? Did the department wasted all the funds received from the donors (including the ongoing EU/ITC project) to develop the capacity building in the area of trade policy?
If so, look inward. It is not very difficult to identify the problems. Then try to understand what trade policy means and the difference between the terms "trade policy" and "trade strategy". For example, do we have an Asian trade strategy? Do we have a strategy (for Post-Brexit) trade with the UK? Then more urgently and most critically we need short, medium, and long term strategies to meet the challenges stemming from the unprecedented disruption to the global economy and world trade by the COVID-19 pandemic. Some countries have already notified to the WTO the trade policy measures they have initiated to face this crisis. We could learn from those notifications and develop our own policy options.
Source: www.island.lk (01 April 2020)
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