European Union concerned over Sri Lanka import controls; says trade not one way street

ECONOMYNEXT – The European Union, a key buyer of Sri Lanka exports that has also offered GSP+ benefits to the island has raised concerns over import controls slammed in the wake of monetary instability in March and April 2020.

The EU delegation said the EU had bought more than a billion Euros worth of goods (220 billion rupees) from Sri Lanka than it bought 2018 and 2019 creating a so-called trade surplus in favour of Sri Lanka.

“Trade, however, is not a one-way street,” the EU delegation said in a statement.

“The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment.

“Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impactSri Lankan exports by constraining the import of raw material and machinery.

“We recall that a prolonged import ban is not in line with World Trade Organisation regulations.”

Analysts have called for Sri Lanka’s Latin America style central bank set up in 1951 by a Federal Reserve money doctor to be reformed to restore monetary instability and have free trade without foreign exchange troubles.

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The controls in 2020 are the worst since 1970s when Sri Lanka went in for a closed economy with severe import and exchange controls as the Bretton Woods system of soft-pegs collapsed, with the central bank buying large volumes of Treasury bills.

The full statement is reproduced below:

Joint Statement
The Delegation of the European Union (EU) and the Embassies of France, Germany, Italy, Netherlands and Romania issue the following statement.
19 November 2020, COLOMBO – As COVID-19 continues to bring a number of challenges, we, theColombo-based Heads of Missions representing the European Union and its Member States, held a series of high-level meetings, including with Foreign Minister Gunawardena. On this occasion, we underlined the EU’s long-standing support for Sri Lanka as a reliable partner, including through over 1 billion EUR of grants over the last 25 years, notwithstanding the Member States’ bilateral assistance.

In addition to our significant development cooperation, we recall that the EU is a crucial economic partner for Sri Lanka. Thanks to the EU’s special Generalised System of Preferences (GSP+), Sri Lanka enjoys competitive, predominantly duty- and quota-free access to the EU market, based on the continued implementation of 27 international conventions on human rights, labour, environment, climate change and good governance.

Not least due to these unilateral trade preferences, the EU is the second biggest export market for Sri Lanka worldwide, with a positive trade balance of more than 1 billion EUR (about 220 billion LKR) in 2018 and 2019.

Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment. Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impactSri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with World Trade Organisation regulations.

Sri Lanka’s withdrawal of support for the United Nations Human Rights Council Resolution 30/1 remains a source of concern. The Government has stated its continuing commitment, including to the EU, to fostering reconciliation,justice and peaceful coexistence among Sri Lanka’s diverse communities. The EU stands ready to support the Government’s efforts in this area. The rule of law and a vibrant civil society are essential in this regard.

We are looking forward to continuing our deep engagement with Sri Lanka, in line with our shared international commitments and obligations.

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