The unprecedented shift in US foreign policy following the election of Donald Trump as the President has contributed to further volatility on the political economy with particular implications for Sri Lanka Vis-a-Vis the US potential retraction from the African Growth And Opportunity Act (AGOA).
In a context where GSP plus is compromised, the potential loss of rival economic benefits such as provisions of AGOA would create considerable dent in Sri Lankan export market, Eran Wickramaratne, State Minister for Finance and Mass Media told at the third edition of Islamic Finance Forum of South Asia, held in Colombo on Tuesday.
“Sri Lankan apparel companies have begun operating in Ethiopia and Kenya to gain the duty free access to the US market under the provisions of (AGOA). However, scholars and politicians have repeatedly noted that they may retract from the agreement,” he said.
The Minister said further that in 2015, Iran agreed a long-term deal on its nuclear programme with the group of world powers. Under the accord, Iran agreed to limit its sensitive nuclear activities and allow in international inspectors in return for the lifting of economic sanctions.
However, President Trump’s administration announced that US will leave the deal indicating that Washington will begin to reinstate sanctions.
In addition to sanctions imposed by US on Iran in August, 2018, Minister said the remaining sanctions will be imposed in November this year. Accordingly, port operators, ship builders, petroleum related transactions and transactions of foreign financial institutions with central bank of Iran will be mainly affected.
“As a result of this, Sri Lanka’s tea exports and the import of crude oil are both affected in recent months. Most likely, Sri Lanka will have to purchase refined oil products rather than crude oil as we go forward. This could mean a considerably higher cost for the country,” Wickramaratne said.
Currently, Iran is the third largest crude oil producer within the OPEC, with a production of four million barrels per day.
“Brexit is particularly significant for Sri Lanka Vis-a- Vis the Generalized System of Preferences (GSP). We are speculating that overall exports to the EU may increase by nearly US $ 500 million as a result of getting GSP Plus. However, Brexit would remove access to the British market under various provisions, causing a significant market loss as UK is the second highest export destination to Sri Lanka,” he said.
Furthermore, Sri Lanka intends to be globally integrated and build regional connections, the Minister said adding that Sri Lanka has “dialogue partner” status in ASEAN, as a member of the ASEAN Regional Forum and the country will be using its trade agreements with Singapore and potential trade agreement with Thailand to bring it closer to obtaining observer status in ASEAN by 2025, with the goal of an FTA, as well as linking to the Regional Comprehensive Economic Partnership agreement (RCEP).
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