Financial Times

Focus strategy best for Sri Lanka
By Dilshani Samaraweera
Sri Lanka must focus on priority areas to maximise benefits from world trade talks, says a visiting trade expert from Geneva. “Sri Lanka, being a small vulnerable economy, must focus where you have interests and in areas where you have potential interests,” says Michel Kostecki, a consultant from the International Trade Centre – the technical cooperation agency of the UN trade body UNCTAD and the World Trade Organisation (WTO).

Kostecki was in Colombo to train government officials and private sector representatives on WTO negotiations, as part of the European Union’s trade assistance package for Sri Lanka.

He said identifying and focussing energies on selected areas that are of strategic importance to Sri Lanka, at WTO talks, will reduce wastage and mistakes while increasing chances of benefiting from international trade.

The sixth round of world trade talks was held in Hong Kong, in December 2005, with 149 WTO member countries, including Sri Lanka, participating. The outcome of the Hong Kong Ministerial was severely criticised by leading international civil and human rights groups for sidelining trade issues that are important for poor countries. However, this imbalance in decision-making inside the WTO, says Kostecki, is a ground reality that smaller, poorer countries are stuck with because of their smaller trade base and lower purchasing power.
“Most developing countries, especially small developing countries and LDCs (Least Developed Countries), are less active in the WTO because there is a correlation between the size of commerce of a country and its importance in the WTO,” he said.

Big in small places
The way around this problem is for small economies to identify areas in international trade where they are big operators. Small countries can then leverage comparative size at trade talks. This means focussing on selected goods and services and trade topics of relevance, instead of generalising.
Kostecki says Sri Lanka, should identify and focus energies on specific trade issues and goods and services that are of priority to the island.

“As an example, in certain markets, tariffs are low for bulk tea but the tariffs increase when you try to export packaged tea. So you can focus on having these tariffs reduced, because you are more important in the tea area and are more likely to be heard when talking about tea exports, than some other subject,” explained the ITC Consultant. For this strategy to work however, all available resources and expertise must be harnessed to feed information to trade negotiators so that they can identify domestic interests while bargaining at trade talks. But at this point business sector interest in trade negotiations is noticeably low.

“I think what is needed is to increase industry awareness about the WTO because business participation is essential for any trade negotiation,” says Kostecki.

Countries that are expanding international trade have already worked this out and have integrated market intelligence and domestic business input into whatever they table at world trade talks.

“In Geneva we have a saying. At the WTO it is not countries negotiating; it is the industries talking,” says Kostecki.

Communication the key
However, while business input is vital to direct trade negotiations, governments are advised to facilitate feedback from all stakeholders because of the wide social impacts of trade decisions.

Kostecki explains that countries use three types of systems to formulate trade policy. In a bureaucratic system there is little or no consultation between the government and stakeholders and in a business dominated system, businesses have a bigger say in trade decisions.

“However, it is the third type of system – the transparent system – that manages to avoid street protests,” says the ITC consultant.
A transparent system allows for public debate and feedback from all stakeholders on trade policy and trade decisions.

As a result, says Kostecki, there is greater understanding about why certain decisions are made and better public support for them.

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