Columns

The admonition “Export or Perish” has never been more relevant than in today’s global conditions that threaten access to our main market—the USA—though its relevance was always pertinent for our trade-dependent economy.

Uncertainty

In spite of last Monday’s unexpected announcement by US President Donald Trump reducing tariffs on Chinese imports from a whopping 145 percent to only 20 percent, and a “reset of US-China trade relations”, there is considerable uncertainty in global trade.

Sri Lanka’s exports to the US remain highly uncertain. Sri Lanka’s exports are facing severe threats like never before owing to the ongoing trade and tariff wars and our limited range of exports and few markets.

Opportunity

The current challenge to our exports is an opportunity to diversify our export commodities and seek new markets. Never has the admonition ‘Export or Perish’ been more relevant to Sri Lanka than it is today.

In the midst of a global tariff war when our exports to our main markets are facing a severe threat and imminent recessionary conditions are threatening our exports, expeditious actions must be taken to minimise the setbacks to our exports.

Challenge

We must find ways and means of coping with the severe economic storms and uncertainties in this bleak international economy by diversifying our exports and export markets, as the prospect of negotiating for lower import tariffs in the US is highly uncertain.

Way forward

We must enhance our competitiveness, diversify our exports, widen our export markets and increase our exportable surpluses in agricultural commodities in which we have a competitive edge. Developing new products, increasing our efficiency and increasing our competitiveness, finding new markets and removing obstacles to our export trade are the ways forward to an improvement in our exports.

US tariffs

The high import tariffs President Trump has imposed have suddenly disrupted global trade, and a global recession is expected this year. How we cope with the emerging global conditions will determine our economic stability and growth.

Exports

Our exports are expected to be severely reduced if the US tariffs for our exports remain high, as the US is our main export market. We have to find ways and means of enhancing our merchandise exports.

The manner in which we minimise and cope with the emerging global conditions will determine our economic stability and growth. The high US tariffs are expected to reduce our exports, strain our balance of trade, increase unemployment and reduce incomes. Furthermore, the recessionary conditions may reduce earnings from tourism and inward remittances. How do we cope with these serious economic setbacks?

Negotiations

Whether the government’s trade negotiations would bear fruit remains to be seen. The expectation is that there would be a lowering of tariffs owing to the adverse impacts of the tariffs on the US economy. What those changes would be and how beneficial they would be for our exports remain highly uncertain.

Our actions

The countervailing actions we could take to meet the impacts of the US trade policies are the protection of our other markets, diversification of our markets and export products, improving our competitiveness, and increasing our exportable quantities in our high-quality agricultural exports such as tea, pepper, cashew and spices. These are vitally important in the long-run growth of our exports.

European Union

In the current context of uncertainty in the US market, it is vital to protect and expand our exports to other regions and countries. The European Union countries are a huge market for our exports and are so due to the favoured treatment we have of the GSP plus status. There are, however, conditions that the government must comply with for the continuation of these concessions.

GSP Plus

The outcome of our discussions with the EU mission on our GSP+ status is of vital significance for our exports, as the EU is our second-largest export market. We are in danger of losing our GSP+ status as we have dragged our feet in meeting the EU’s condition of repealing the Prevention of Terrorism (Temporary Provisions) Act as amended (PTA) and the Online Safety Act, which bolster the repressive potential of the government.

Fulfilling the promise

The government has promised to repeal this legislation for the continuation of the EU’s trade concessions so vital for our economy. The delay in implementing this promise could endanger the continuity of the concessions at a time when exports to the US are threatened. The government must make a firm and credible commitment to repeal these draconian laws.

The government has the formidable challenges of unifying the country and eradicating corruption. In a most inhospitable international environment that is threatening to destabilise the country’s external finances, reducing unemployment and increasing incomes are imperative.

Formidable challenges

The economic challenges for the government have reached huge proportions owing to the trade wars and likely recessionary conditions. One of the main criticisms of the government during this election was that it had not done enough to solve the economic problems and did not have the capacity to solve economic problems. The opposition also contended that the economic improvements experienced in the first six months were due to the policies adopted by the previous government.

Summing up

The crisis we are facing today on exports is an opportunity to correct a fundamental flaw in our economy. Our dependence on a few exports and a few markets, the narrow number of exports and low volumes makes us vulnerable to the vagaries of international trade.

The solution to the fundamental weaknesses is to expand and diversify our export markets, diversify our export products, increase our export volumes in the products in which we have a decisive comparative advantage and remove the obstacles for our exports, such as complying with the conditions for the continuation of the GSP+ concession.

The export strategy has to be implemented by strong participation of the private sector. The government has to play the important role of facilitating exports by improving infrastructure, reducing the costs of production and encouraging foreign investment in export industries.