CEPA: Who is excited?

Professor A. D. V. de S. INDRARATNA

I read with some consternation the note written by one M. G. Siriwardane (referred to as MGS hereinafter) in reply to my article on the ‘CEPA: Why This Hurry?’ My first reaction was to ignore it, as I found it written with certain amount of personal venom and malice.

Later, I thought otherwise, lest the reading public may be misled. First and foremost, I should like to mention that I was neither excited nor frightened about CEPA.

Having read mostly one sided arguments in favour of CEPA, I thought, as one who has studied, and taught International Economics to a few generations of students since the sixties, I should put out my thoughts on it in the larger public and national interest.

I was also prompted and encouraged to do so, by having read in the media that the President has said that he would not sign it unless he is convinced that it is in the country’s interest.

Inaccurate accusation

MGS accuses me of factual inaccuracies, but he distorts trade statistics to support his contentions. Few examples are only given here. Firstly he contests my statement that there was no counter factual analysis that the increase in trade was due to the FTA.

Yes, I still hold on to it, because I still remain to be convinced by any analysis that whatever trade that is supposed to have taken place would not have occurred had there been no FTA.

One has to note that India began liberalizing its trade regime with respect to consumer goods late in the 1990s on the one hand, and on the other, our import regime itself acted as a bias against our exports due to increased levies and duties over the same period.

Moreover, a proper counter-factual analysis must take into consideration relative prices between the two countries that would have prevailed with and without the FTA and compare its opportunities in multilateral free trade for Sri Lanka. This has not been done.

MGS further points out that, in 2007 under the FTA, exports from Sri Lanka to India were “at about US$ 450-500 million and Indian exports to Sri Lanka at US$ 600 -700 million, which is fairly balanced”.

Surely, these cannot be considered exact data (with such wide ranges); they are rather guesstimates! In any case, how can one say that with such a difference of US$ 150-200 million (that is more than 1/3 of the Sri Lankan exports to India) exports and imports are fairly balanced?

Export diversifications

I also find it difficult to accept the above figure of US$ 450-500 because total exports to India that year was only US$ 515 million.

Furthermore, if it had been US $ 450-500 in 2007, how does one account for the fall of Sri Lankan Exports under the FTA in 2008 and 2009 much below even 450, because total exports to India in these two years were US$ 418 million and 322 million respectively.

MGS accepts that greater diversification of exports would benefit Sri Lanka and quotes the number of products exported having increased from the year 2000 to 2005. I was referring there to only the tariff lines with zero or near zero tariffs under FTA.

I did not have the exact number of these at hand at the time of writing. I was going by the statement reported to have been made by the DG of Commerce whose statements I respect and regard as authoritative.

I have always argued that when there is a trade agreement between a small country like Sri Lanka and a giant like India or China there should be special and differential treatment to bring them on to a level playing field.

MGS does not seem to have disagreed with this, and comes out with a list of concessions conceded by India which, in his view, place Sri Lanka on a level playing field.

However, MGS has only to read the article by International Chamber of Commerce Chairman Tissa Jayaweera in the Daily News of June 15, to find out the large number of non -tariff barriers which Sri Lankan goods to India face, which certainly do not place Sri Lanka on a level playing field with India.

Extension of agreements

I am still of the view that the problems surrounding the FTA must be settled before we extend the FTA as CEPA or before bringing in services in to it.

The purpose of MGS’s note, according to his own words, is not to say “that the ISLFTA has been perfect and CEPA is the best format for the way forward but to show how facts have been distorted” in my article.

He would have made a better contribution if he had indicated the faults or inadequacies of the ISLFTA and shown how they could be avoided in the CEPA.

I am quite aware of the evolution of not only FTA but also SAARC and SAFTA. Although MGS may not know, I have participated in numerous seminars and conferences, discussions and written numerous articles on these from the time they were thought of.

This does not mean, however, that I, now a retired university professor, have any right to ask “the Sri Lankan commerce officials to rectify the anomalies of SAFTA before embarking on SATIS”, as MGS has suggested.

I have done what I could and should do by expressing my views on an issue of vital national interest.

I am not saying that CEPA should be rejected, although very strangely, MGS, while agreeing with me that “there is certainly no hurry for CEPA”; goes further that “in fact it can be rejected altogether”. Notwithstanding this, he asks the question “why the professor has got so excited about CEPA”.

There is nothing for me to get excited about either ISLFTA or CEPA. It is obviously MGS who has got excited about my views, and why should he? All that I am saying in a nutshell is that both pros and cons of CEPA should be thoroughly studied and made known to the people and a decision taken once there is certainty it is of net benefit to our country.

The most insidious part of MGS’s note which in fact exposes its main purpose is his attempt to compare my view point on CEPA with the Report on Corruption, authored by four of us, which had been published several years before the elections, and which is almost history now. This report has absolutely nothing to do with the present debate.

We have said over and over again that contents of that report had nothing to do with the Government and its purpose had been to highlight the seriousness of corruption in the country and that General Fonseka had misused its contents to mistakenly support his election propaganda.

We did not want to get in to a debate with those who criticized it at the time because of the backdrop of the presidential election.

The report has been amply vindicated by the acknowledgement of the existence of corruption in some government departments and ministries by the Government, several ministers themselves and the President’s own assertion to wipe out corruption as a topmost priority in the Government agenda.

Reference to that report here by MGS is nothing but a venomous attempt to malign me and tarnish my image with a view hopefully to curry favour with the Government. The President, an astute politician he is, is not likely to be carried away by such malicious propaganda.