Negotiations on the proposed Economic and Technological Cooperation Agreement (ETCA) between Sri Lanka and India have reportedly stalled, as the Sri Lankan government is yet to appoint a chief negotiator to resume discussions.
Over the years, 14 rounds of talks have been held under successive governments to expand trade and investment ties with India. However, progress has slowed amid changing global trade dynamics and domestic concerns.
Following the imposition of reciprocal trade tariffs by former US President Donald Trump, Sri Lankan leaders emphasized the need to diversify export markets by enhancing trade cooperation with other countries. Sri Lanka also requested India to expand the quota for garment exports under the Indo-Lanka Free Trade Agreement (FTA) to 50 million units. India, however, has been reluctant to grant such concessions outside the framework of ETCA.
A key sticking point in the negotiations has been India’s insistence on stricter “rules of origin.” These rules determine whether a product qualifies for preferential tariff treatment under the FTA, ensuring that benefits are extended only to goods genuinely produced in the member countries. India is particularly concerned about preventing third countries from using Sri Lanka as a platform to access the Indian market through minimal value addition.
Indian authorities have repeatedly urged Sri Lanka to appoint a chief negotiator to move the talks forward.
The Indo-Lanka Free Trade Agreement, signed in 1998 and in force since March 2000, has already provided significant tariff concessions. India has eliminated duties on 4,150 tariff lines for Sri Lankan exports, while Sri Lanka has reduced tariffs on 3,932 Indian products. In addition, since June 2007, India has granted Sri Lanka a quota of 15 million kilograms of tea with a 50% tariff margin of preference and no port access restrictions.
Sri Lankan officials have also stressed the need to review and modernize the existing FTA to better align with current economic realities.
