Talks between China and Sri Lanka about a free-trade agreement have hit major hurdles, mainly because Beijing will not agree to Colombo’s demand for a review of the deal after 10 years, Sri Lanka’s top negotiator said.
China has invested billions of dollars building ports, roads and power stations in the Indian Ocean island nation just off the southern toe of India as part of its Belt and Road Initiative, to increase its trade and other connections across Asia and beyond, but concerns have grown that such investments would drive the nation of 21 million people deeper into debt and undermine its sovereignty, prompting greater scrutiny of deals with China.
China’s exports to Sri Lanka dwarf the trade that goes in the other direction, leaving Colombo with a big deficit with Beijing.
Sri Lankan head trade negotiator K.J. Weerasinghe said this week that Colombo was insisting on a right to review the free-trade agreement after 10 years, but China was not ready to agree to that.
Ministerial-level discussions about an agreement have not been held since March last year.
Lower-level discussions between officials have made little progress, Weerasinghe said.
“The talks have come to a standstill. China wants to remove the review clause,” Weerasinghe said.
Beijing was opposed to such an option because it wanted longer-term stability, he said.
The Chinese Ministry of Commerce did not respond to a request for comment.
The review clause that Sri Lanka wants would allow it to change some of the deal terms if they were hurting the nation’s local businesses.
Weerasinghe said another point of contention was that Beijing wanted zero tariffs on 90 percent of goods the two nations sell to each other as soon as an agreement is signed, while Colombo would rather it started with zero tariffs on only half of the products concerned and be expanded gradually over 20 years.
China has been pushing for free-trade agreements with nations in the region and last year sealed an agreement with the Maldives that drew criticism from opposition political groups in the tropical islands’ nation.
They said it had been rushed through parliament with less than an hour of debate.
Sri Lanka has previously said it wanted more time to negotiate the free-trade deal with China as it is concerned about the economic impact of a rushed deal on its economy.
Sri Lanka imported US$4.2 billion of Chinese goods in 2016, mostly raw materials for garments, machines and electronics, metals, transport equipment and chemicals.
Its exports to the world’s second-largest economy were just US$211 million the same year, which included textiles, tea and vegetables, footwear and rubber.
Last year’s figures for trade with China have still not been released by the Sri Lankan authorities.
The trade deficit with China accounted for nearly half of the nation’s total deficit in 2016.
Sri Lanka’s foreign debt rose nearly 17 percent to 4.72 trillion rupees (US$30 billion) last year, a fifth of that coming from loans from China to finance the massive construction program.
Colombo is separately negotiating a trade deal with India, but that is also moving slowly because Sri Lankan businesses fear they would face competition from a flood of cheap goods made by Indian firms.
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