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| Sunday, 2 January 2005 |
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Sri Lanka should exploit 25 member EU market by Elmo Leonard The now expanded European Union comprising 25 member nations as a single market affords a favourable climate for Third World nations like Sri Lanka to exploit in the enhancement of trade. This was spelled out by Trade Advisor to the Delegation of the European Commission to Sri Lanka, Roshan Lyman, recently. There were 10 newcomers into the European Union in May 2004 and the now population of the 25 nation trade bloc is 455. The chambers of commerce in Sri Lanka could play a major role in carrying out programmes that create and strengthen cooperation between the 10 accession countries, utilising the available EU funding programmes such as Asia Invest, Small Project Facility and the like, Lyman said at a seminar on the enlargement of the EU - its awareness and opportunities. The new entrants to the EU are Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. The EU now accounts for 18 percent of world trade; a combined GDP of Euro 9,576 billion or 28 percent of total world GDP Lyman said. The increased EU Single Market bears the same rules as when it comprised 15 members and a single set of administrative procedures. With a Common Customs Tariff in all 25 member states the overall MFN Tariff will decrease from the original average of 9 percent in the 10 new-member states to the existing EU average of 3.6 percent, Lyman explained. The expanded single market will bear a Common Commercial Policy and all EU bilateral agreements will be extended to all 25-member states, while all FTA's concluded by the EU will involve the 25 member states. Speaking on the implications of the expanded EU membership, Lyman said that the EU GSP scheme, EBA and other autonomous trade preferences granted by the EU will cover 25 member states. Further, the enlargement of the EU has removed the origin between the existing 14 EU members and the 10 new acceding countries. This will erase some impediments to incorporating third country products as inputs in trade within the EU 25 and afford one voice for the 25 member states in the WTO. The challenges ahead for Sri Lanka to enhance trade with the EU 25 comprise raising trade awareness in both Sri Lanka and the Accessing Countries. Strengthening commercial arrangements. Strengthening infrastructure such as trade links, air-route links. Realising the advantages of harmonised measures: SPS, common external tariffs. Continuous need for technical assistance to Sri Lanka to comply with technical standards relating to SPS and TBT. This is a priority already identified for assistance by the EC Delegation in Sri Lanka. Lyman explained, that the most direct impact of enlargement is the replacement of the acceding countries' external tariff with the Common External Tariff (CET) of the EU which will materially alter the terms of access to the acceding countries markets. The replacement of 10 tariff regimes with one, and the general bias towards tariff reduction and simplification inherent in the change should make access by Sri Lankan exporters to these markets relatively easier. The trading patterns were already stabilised in the 1990s so enlargement does not signify major disruption of trade with third countries. In terms of MFN rates, the average MFN tariff for industrial products were higher in the acceding countries (ACs), except in the three Baltic States, which had a lower average than the EU average of 3.6 percent the speaker continued. While clothing is a significant industry sector within many of the ACs apparel exports only accounted for 3.5 percent of total AC exports to the EU. For the vast majority of industrial products, tariffs in ACs were higher than in the EU 15. In particular, the largest economies, Poland and Hungary, applied much higher tariffs. Enlargement should, therefore, have trade creating effects in industrial products. The position was reversed for applied agricultural tariffs, with 7 of the 10 acceding countries having a lower average rate then EU-15. However, Lyman explained, that the biggest agricultural economies such as Poland (34.6 percent) Hungary (30.9 percent) and Cyprus (31.1 percent) had rates that were higher than the average tariff for EU imports of farm goods (10.5 percent). In terms of Sri Lanka's access to the ACs, the EU GSP will tilt the advantage towards Sri Lanka, since Sri Lanka does not benefit from such a preferential scheme in the current trade with ACs. Lyman emphasised that Sri Lanka will have to compete for these markets with all other users of EU GSP. Sri Lanka will also have additional benefits as it was granted the labour incentives in February 2004. Lyman also highlighted that the impact of trade diversion seems to be limited. For industrial products, this would have already occurred, while for agricultural products, through the ACs will enjoy improved market access, there is little overlap with Sri Lankan agriculture exports, such as, tea, spices etc. As far as services it is possible that diversion takes place. Textiles and clothing could be one area where displacements could occur. However, textile industries in the ACs enjoyed quota and duty free access to the EU-15 market even before EU enlargement. |
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