New Delhi: As US reciprocal tariffs begin to jolt nations, Sri Lanka needs to initiate fresh trade negotiations with India and the government must consider appointing a Chief Negotiator to resolve the trust deficit, if any, according to a new report. Sri Lanka is at a critical juncture, with its prospects for 2026 clouded by external shocks.
Economic growth is forecast to slow to 3.3 per cent as the United States imposes a 20 per cent tariff on key Sri Lankan exports, according to an article in Eurasia Review. Keeping this in mind, Sri Lanka has requested India to expand its export quota under the Indo-Lanka Free Trade Agreement (ISFTA) which was signed 25 years ago.
Meanwhile, India has “continually advised Colombo to update the existing free trade agreement to address foreseeable issues”. “At this stage, the Economic and Technology Cooperation Agreement (ETCA) has become a key topic of discussion. However, progress on improving the India-Sri Lanka Free Trade Agreement (ISFTA) has stalled, despite numerous rounds of talks under various governments aimed at expanding trade and investment with India,” according to the report by A. Jathindra, a Sri Lankan-based independent political analyst. India remains interested in moving forward.
Santhos Jha, India’s High Commissioner to Sri Lanka has said that India is not pushing ETCA but is “waiting for Sri Lanka to wake up and realise it is indeed beneficial.” According to Deputy Minister of Foreign Affairs, Arun Hemachandra, “If we can secure favourable terms, we are open to the agreement. If not, we will not sign it. We are committed to safeguarding the nation’s economic sovereignty.”
“When there is one stronger nation and one weaker nation, we ought to understand that there is a propensity for the stronger nation to dominate the weaker nation. Therefore, we must proceed with caution,” he noted. According to the report, the challenge, therefore, is how Colombo can strategically manage relationships with stronger nations to serve its own interests.
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