WORLD TRADE  
ORGANIZATION  WT/TPR/M/237 
2 December 2010 
 (10-6480) 
Trade Policy Review Body 
4 and 5 November 2010  
 
 
 
TRADE POLICY REVIEW 
 
SRI LANKA 
 
Record of the Meeting  
 
Chairperson:  H.E. Mr. Bozkurt Aran (Turkey) 
 
  Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3 
II. OPENING STATEMENT BY THE REPRESENTATIVE OF SRI LANKA 5 
III. STATEMENT BY THE DISCUSSANT 8 
IV. STATEMENTS BY MEMBERS 12 V. REPLIES BY THE REPRESENTATIVE OF SRI LANKA AND ADDITIONAL 
 COMMENTS  28 
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 34 
 
Note:   Advance written questions by WTO Memb ers and the replies provided by Sri Lanka are 
reproduced in document WT/TPR/M/237/Add.1 and will be available online at:  
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm.    WT/TPR/M/237 
 Page 3 
 
 
  I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The third Trade Policy Review of Sri La nka was held on 4 and 5 November 2010.  
The Chairperson H.E. Mr. Bozkurt Aran (Turkey)  welcomed the delegation of Sri Lanka, headed 
by Mr. Tilak Collure, Secretary in the Minist ry of Industry and Commerce and the discussant,  
H.E. Ms. Karen Tan (Singapore).   
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures for the meeting.  The report by Sri Lanka was contained in document WT/TPR/G/237 
and that of the WTO Secretariat in WT/TPR/S/237. 
3. Questions by the following delegations had been  submitted in writing at least two weeks in 
advance and had been transmitted to  the delegation of Sri Lanka:  India, China, Pakistan, Australia, 
the United States, Canada, Chinese Taipei, Japan, Ne w Zealand, Brazil, Turkey, the European Union, 
and Thailand. 
4. The following delegations submitted written qu estions after the two-week deadline:  
Argentina, and additional questions fro m Canada, India and Chinese Taipei.   
5. The Chairperson noted that Sri Lanka had just emerged from an internal armed conflict that 
ended in May 2009 after lasting three decades.  De spite this, Sri Lanka had achieved sustained GDP 
growth of some 6% per year in real terms duri ng 2004-09, with growth of 7% expected in both 2010 
and 2011.  As a result of fast growth, GDP per capita had doubled between 2004 and 2009 to reach 
US$2,053.  Although the global financial crisis had a relatively limited impact on Sri Lanka's 
economic growth, it did affect Sri Lanka's external tr ade, particularly due to a drop in demand from its 
major trading partners, the EU and the United Stat es, which absorbed some 60% of the country's 
exports.  This situation was worsened by Sri Lanka's dependence on a na rrow export basket, with 
clothing and tea accounting for 60% of total exports. 
6. The reports by both Secretariat and the Govern ment of Sri Lanka highlighted Sri Lanka's 
open approach to trade and investment and its desire  to achieve a greater integration into the world 
economy through increased trade and by attracting fore ign direct investment.  An example of this 
approach in its trade policy was Sri Lanka's reliance on the use of price-based measures rather than on 
non-tariff measures, of which it made a limited used.  As a result of this, Sri Lanka's trade reform 
efforts since the last Review had resulted in enha nced transparency, but reliance on border protection 
remained important, particularly through the use of charges on imports other than tariffs.  Also, 
although incentive programmes had been streamlined they continued to be somewhat complex.   
7. Sri Lanka might use the opportunity granted by  the end of the conflict and by high growth 
economic rates to reinforce the already initiated pr ocess of economic, trade a nd institutional reform.  
The overall reduction in tariffs announced in June 20 10 and the elimination of the surcharge applied 
on most imports were good steps in this directi on.  The Government also envisaged unifying and 
further reforming its incentives regime and introduci ng comprehensive competition policy legislation.  
8. Sri Lanka was an active participant in the Doha Development Age nda, having launched, 
together with other countries, proposals on various areas of negotiations.  Sri Lanka was also a keen 
participant in two regional trade agreements:  th e South Asian Free Trade Area (SAFTA) Agreement 
and the Asia-Pacific Trade Agreement (APTA);  as we ll as in two bilateral agreements:  the Indo-Sri 
Lanka Free Trade Agreement (ISFTA), and the Paki stan-Sri Lanka Free Trade Agreement (PSFTA).  
Participation in these agreements had resulted in in creased trade with countries in Asia, particularly 
with India and China. WT/TPR/M/237 
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  9. In short, Sri Lanka had undertaken the path of reform in the aftermath of the internal conflict 
and was intent on achieving a wider integration into the regional and global economies.  He noted that 
we could all benefit from hearing more from Sri Lanka  about how it intended to deepen this process, 
as well as how it intended to deal w ith the challenges that remained.  WT/TPR/M/237 
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  II. OPENING STATEMENT BY THE RE PRESENTATIVE OF SRI LANKA 
10. Since the last Trade Policy Revi ew was conducted, significant development has taken place in 
Sri Lanka – the dawn of peace after three decades of conflict, which hinde red our full development 
potential.  In fact I wish to characterise this as our  most constructive TPR exercise, with a clear vision 
being articulated after achieving the most important land mark of peace. The government has drawn 
up plans under the "Mahinda Chintana - Vision for th e Future" to implement an ambitious roadmap of 
development across the island to accelerate economic  growth, with trade as a major vehicle for 
ensuring long-term socioeconomic development. End of the conflict combined with greater political 
stability in the country has given us new hopes.  
11. With GDP of US$42 billion, Sri Lanka is a sm all, vulnerable and open economy significantly 
dependent on foreign trade. Impor t plus export trade together with  private remittances account for 
nearly 70% of GDP. Over the last three and a half decades, our economy has transformed from the 
status of a primary products exporting economy to  a manufacturing products exporting economy.  To 
be less dependent on agricultural exports is a welc ome development. Another significant feature of 
the Sri Lankan economy is the continuous increase of the relative importance of the services sector; 
with a share of about 60% of the GDP, surpassing the manufacturing sector.   
12. This distinctive transformation is largely attri buted to our continued effort of pursuing the 
export-oriented liberalisation strategy initiate d in 1977 with more focus on industrialization 
objectives.  We wish to build further on open ma rket trade policies to generate, rapid economic 
growth, export expansion,  jobs creation and efficiency in resource allocation. Open market trade 
policies are important ingredients of our national development plans. However, we place a greater 
emphasis on ensuring that open trade policies are main streamed to our development strategies in such 
a way that the results of trade opening will yield be nefits to all, helping to bring about a more 
equitable society. This dimension of trade devel opment policies has received increased attention in 
our recent development policy formulations as there is  evidence globally that (in fact that has been 
our experience too) "social conflict grows when inequalities are perceived to be rising excessively" 
and when benefits of trade are disproportionately di stributed across different levels of income groups.  
13. The gender dimension has also always been an important consideration in shaping our trade 
policies for empowerment of women, especially for improvements in the livelihood of rural women.  I 
am pleased to inform that Sri Lanka has made signifi cant strides in this area.  For example, according 
to the Global Gender Gap Report 2010, Sri Lanka is ranked in the 16th position, way above some of 
the developed countries. This report states that "Sri Lanka (16) is distinctive for being the only South 
Asian country in the top 20 for the fourth consecu tive year.  Sri Lanka's performance remains steady 
as it maintains the same rank as 2009".  We also place serious emphasis on protection of the environment, as we are convinced that it is of paramount importance for sustainable economic development.  
14. As for the performance of the Sri Lankan economy, both the Secretariat Report and the 
Government Report, have presented a detailed acco unt of steady economic growth that has taken 
place during the recent years, despite the unprecedente d natural disaster caused by the tsunami at the 
beginning of the period under review and the intensif ication of the internal conflict towards the latter 
stages of the period.      In this regard, I simply  wish to highlight the fact that the Sri Lankan economy 
has remained resilient throughout this period an d is now, well on the way to realising the peace 
dividend, as we are witnessing a positive macro economic outlook. Several economic fundamentals 
are emerging favourably; inflation has moderated, interest rates have come down, international 
reserves have reached an all time high, the investme nt climate has improved, as a result of which, the 
growth prospects are quite promising and robust. WT/TPR/M/237 
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  15. The IMF, which released the fifth tranche of the Stand-By Arrangement with Sri Lanka in 
2010, has highlighted the need for ensuring strict fiscal discipline, thus reinforcing our commitment towards achieving the budget deficit target of 5%  by 2012, through tax reform and investment 
promotion. 
16. Besides, during the last five years, we saw  our GDP per capita income almost double, from 
US$1,051  in 2004 to US$2,053 in 2009.  At the beginning of the current year, the IMF graduated Sri 
Lanka to "Middle Income Emerging Market" status , thus enabling the country to project itself 
strongly in the international financial and capital ma rkets. We have set targets to double the GNP per 
capita to reach US$4,000 by 2016.  We have posted a strong economic growth of 7.8% during the first 
half of 2010. Annual GDP growth for the curre nt year is expected to average above 7%. 
17. We want to take these positive trends further w ith clear strategies for export diversification 
and enhancement of international competitiveness of our enterprises.  But despite this positive trend 
on the domestic front, the external environment that we are confronted with is of serious concern to us.  We note that certain trade policies of some developed market economies are not evolving in Sri 
Lanka's favour. Trade policies of developed countries must create conducive conditions  to enhance 
market access for small and vulnerable economies lik e Sri Lanka. However, contrary to this, the 
discriminatory trade policies of certain develope d countries have resulted in eroding Sri Lanka's 
competitiveness in the global economy.  For example, the U.S. has a number of preference programmes which facilitate preferential and duty fr ee access for exports from nearly 131 countries, 
some of which are at higher income levels than Sr i Lanka.  The negative impact of such arrangements 
on similarly situated vulnerable economies like Sri Lanka, which depend heavily on one or two 
product categories must be assessed and taken into consideration. 
18. More recently, the EU has withdrawn its GSP+ benefits with respect to Sri Lanka, causing 
some disruption to our exports to the EU market. We  believe similarly situated countries in term of 
financial, trade and development ne eds should be treated equally. It would appear that these schemes 
are being utilized to achieve foreign policy objectives which are not consistent with WTO 
requirements.  
19. Moreover, the emerging trend is that a plethor a of FTAs and regional trade agreements are 
being negotiated which will have discriminatory impact on our exports. The bulk of our export trade 
is on MFN basis and the afore-said discriminatory trading environment is increasingly becoming a concern to us.  
20. We therefore, attach utmost importance to  efficient functioning and preserving of the 
centrality and primacy of the multilateral trading system and the meaningful delivery of the 
development content of the Doha Round of Trade Negotiations. Sri Lanka is actively involved in 
these negotiations with the objective of concl uding the Round with creation of development 
opportunities for SVEs. We strongly believe that our economic development efforts and the Doha 
Round Results could go hand in hand. 
21. Sri Lanka hopes that the Round will deliver on im proved market access for products of export 
interest to the developing countries, particularly thro ugh the elimination high tariffs and tariff peaks.   
As a small economy with a limited export base and de pendent mainly on two or three markets, Sri 
Lanka's trade is particularly affected  by disproportionately high barriers. 
22. While anticipating the benefits of improve d market access for its exports, as a small, 
vulnerable economy and a net-food importing developing country, Sri Lanka also places great 
importance on the need for flexibiliti es in agriculture, particularly to safeguard the interests of the 
more disadvantaged segments of its rural commun ity, through measures targeted at safeguarding food  WT/TPR/M/237 
 Page 7 
 
 
  security, livelihood security, and rural development.  These flexibilities are particularly important to 
achieve a satisfactory and effective level of sustainable domestic agriculture. 
23. Although market opening under the multilateral fra mework of the WTO remains as a priority, 
participation in the regional integration process is an  important component of our trade policy in order 
to create employment and accelerate economic growth . We are actively engaged in a number of such 
regional trade liberalisation initiatives that includ es Asia-Pacific Trade Agreement (APTA), the South 
Asian Free Trade Area (SAFTA), Indo-Sri Lanka  Free Trade Agreement (ISFTA) and Pakistan- Sri 
Lanka Free Trade Agreement (PSFTA).  In addition, Sr i Lanka is also a member of the Global System 
of Trade Preferences.  Though the APTA, or the Ba ngkok Agreement as it was originally known, is 
the oldest preferential trade agreement in Asian region, it did not generate significant amounts of 
preferential trade, during its early years. However, in recent years it has shown significant expansion 
of preferential trade. This is exp ected to expand further at the end of the current round of negotiations. 
Similarly, we anticipate preferential trade under SA FTA to expand, due to the recent decision to 
reduce the size of the negative lists. We are also conf ident that the bilateral agreements with India and 
Pakistan would also contribute towards promoti ng bilateral trade among the other countries in the 
region as well. 
24. In conclusion, let me reiterate that Sri Lanka  is fully committed to a rules-based, fair and 
equitable multilateral trading system.  We keenly  await a successful outcome to the Doha Round 
which would eliminate anomalies faced by countri es such as Sri Lanka, particularly in the more 
developed country markets. WT/TPR/M/237 
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  III. STATEMENT BY THE DISCUSSANT (H.E. MS. KAREN TAN (SINGAPORE)) 
25. It has been seven years since Sri Lanka's last Trade Policy Review and, since then, there have 
been significant developments in Sri Lanka's poli tical climate, economic environment, and trade 
regime.  This third Trade Policy Review of Sri La nka is thus timely, and gives us a good opportunity 
to discuss these developments.  It takes place agains t a backdrop of a return to peace and stability to 
this island nation after 30 years of conflict.  We ar e also in the midst of its implementation of a ten-
year development framework, covering 2006-2016.   Sri Lanka's efforts towards achieving its 
economic goals, as part of this work plan, are comme ndable and have already seen  some success.  It is 
with the same positive mindset and direction that Sri Lanka has developed and implemented its trade 
policies, which we are here to discuss today.   
26. To set the stage for our discussions, I will focus on two main areas.  First, the performance of 
Sri Lanka's economy during the peri od under review, that is, from 2004 to 2009.  Second, the trade 
measures and practices currently in place in Sri Lanka.  Hopefully, a snapshot of these two broad 
topics can provide the backdrop for our discussions a nd draw out the key issues, which we can base 
meaningful and focused engagement on.   
Sri Lanka's Economic Performance from 2004 to 2009 
27. Although the past five years under review have  been difficult ones for Sri Lanka, its economy 
has remained resilient.  Besides in ternal strife and the global economic crisis, Sri Lanka also suffered 
a major natural disaster, the tsunami, in 2004.  Ye t, even in these challenging circumstances, Sri 
Lanka managed to experience strong economic growth  averaging at 6% per year in the period under 
review. And I am happy to see that growth is expected  to be above 7% this year. In 2009, despite the 
world recession and a blow to the agriculture sector  due to poor climatic conditions, Sri Lanka still 
managed GDP growth, albeit at a lower rate of 3.5% .   Domestic demand and consumption have been 
on the increase and Sri Lanka's unemployment rate is declining.  All these factors contributed to the 
expansion of GDP per capita, from just over US$1,0 00 in 2004 to more than US$2,000 in 2009, one 
of the highest figures in South Asia.  
28. While Sri Lanka saw growth in all its sectors - the agricultural, industrial, and services sectors 
- it was the latter two that contributed most to  GDP expansion.  From  2004 to 2008, Sri Lanka's 
industrial and services sectors maintained average gr owth rates of more than 6% per year.  The 
country's most dynamic industrial and services se ctors are food processing, textiles and apparel, food 
and beverages, port construction, telecommunications, and insurance and banking.  It is the services 
sector that has the most potential in Sri Lanka's fu ture, already accounting for almost 58% of its GDP 
and contributing to 42% of employment. 
29. While domestic production and c onsumption have been on the rise, external trade was 
somewhat sluggish from 2004 to 2009.  The contri bution of merchandise trade to GDP fell by more 
than 10% during this period.  While Sri Lanka's exports increased from US$5 billion to US$8 billion 
in this time, this was a slow climb and there is  room for improvement.  A key challenge Sri Lanka 
faces is that its trade remains c oncentrated on selected markets and on a few products.  Its top traders 
are the EU, the U.S., and India, with more than 60% of exports going to the firs t two destinations.  Sri 
Lanka's exports are mainly apparel, tea, rubber, gems and jewellery; and im ports are oil, textiles, 
food, and machinery.  The bulk of its exports, howev er, are concentrated on garments and tea.  While 
these have held up well as niche products for Sri Lanka  in the past, this dependency on a limited range 
of products and a few major markets exposes Sri La nka to risk of instability, not only for export 
earnings, but also for the overall economy.  Going fo rward, it would be important for Sri Lanka to 
diversify its exports and markets.  There is also potential for Sri Lanka to attract higher value-add 
investments and to develop such industries.  In this regard, I am pleased to note that export  WT/TPR/M/237 
 Page 9 
 
 
  diversification has been identified as one of th e three areas for Aid for Trade assistance and look 
forward to hearing the government's plans to fu rther develop new products to the export mix.  
30. The area, however, in which Sri Lanka has perhaps faced the most vulnerabilities and 
challenges, is in its fiscal policy.  Expansionary  fiscal policies and domestic borrowing have resulted 
in Sri Lanka having to suffer large budget deficits, high debt, and declining government revenue.  In 
2009, Sri Lanka's budget deficit reached almost 10% of GDP; its already declining government 
revenue fell further to about 14% of GDP; and debt  stood at more than 86% of GDP.  Added to these 
were a structural current accounts deficit, capital outflow due to th e economic crisis, and a loss in 
foreign exchange reserves.  These setbacks were not deterrents for Sri Lanka, however, but instead, 
were motivators for Sri Lanka to adopt recovery m easures.  Recognising the need for structural tax 
reforms to raise revenue, Sri Lanka  established a Tax Commission to review its tax policies.  Sri 
Lanka also signed a Stand-by Arrangement with th e IMF for US$2.6 billion.  Under the arrangement, 
Sri Lanka committed to several targets, including eliminating losses in two state utilities (the Ceylon 
Electricity Board and the Ceylon Petroleum Corporation)  and reducing its budget deficit to 5% of 
GDP by 2011.  In this regard, I would be inter ested to hear from the Sri Lankan delegation whether 
the policies undertaken to meet thes e commitments are progressing well.  
31. The adoption of such measures and the recent end of its civil strife mark the start of a new 
future for Sri Lanka.  There are now new growth opportunities and increasing investor-confidence.  In 
2009, the Sri Lankan stock market gained over 100% , one of the best performing markets in the 
world.  Official foreign reserves have also improved, amounting to more than US$5 billion by 
November last year.  Annual inward remittanc es of over US$3billion from Sri Lankans working 
abroad have also contributed to stimulating th e economy.  Sri Lanka now needs to work towards 
implementing progressive policies for a stronger, sustainable and more dynamic economy to enhance 
living standards and spread more widely the gains of economic growth.  These could include 
structural tax reform, restructuring state-owned en terprises, investing in education and R&D, boosting 
inward tourism, expanding their export base, and re forming the labor market.  Sri Lanka's ten-year 
development framework is a step towards this, as it addresses targets across the economy, with the 
ultimate goal of raising the GDP growth rate to more  than 8% per year.  Most heartening is that Sri 
Lanka's work plan identifies international trade as  a key instrument to achieving its development 
goals, and strives for trade policies to reflect this.   
Sri Lanka's Trade Policies and Practices 
32. Sri Lanka's trade policies and practices are gene rally open and outward-oriented.  Sri Lanka 
has an investor-friendly atmosphere, low tariffs , no tariff quotas, robust business incentives, and 
transparent procedures and regulations.  Notwithsta nding, there are several areas which Sri Lanka can 
improve on for an enhanced trade and investment regime.  
33. With regard to trade, for instance, while tran sparency has improved since the last review and 
protective tariffs are being progressively dismantled,  the requirements for excise duties, port levies, 
non-automatic licenses, border charges on exports, and cumbersome registration procedures for 
importers remain.  A significant change from the l ast review is Sri Lanka's implementation of the 
Customs Valuation Agreement, which is supposed to provide traders with a stable trading platform.  
This objective, however, can be nullified, as Sri Lankan authorities are given the right to deviate from the principles of the agreement.  This causes uncerta inty to traders.  Similarly, Sri Lanka's tariff 
structure has been improved on and simplified sin ce the last review, but there has also been an 
increase in the average applied tariff rate from 9. 8% in 2003 to 11.5% in 2010.  Also, the applied 
tariffs of some of Sri Lanka's lines exceed their bo und rates.  All these are cause for concern and need 
to be addressed quickly.  Hopefully, some of thes e have been mitigated by Sri Lanka's announcement, 
in June this year, of the elimination of import surcharges and an overall reduction of tariffs, resulting WT/TPR/M/237 
Page 10  
 
  in a welcome increase in the amount of duty-free lin es from 10% of product lines in 2003 to 44% of 
lines today. 
34. In terms of investment, Sri Lanka has cultiv ated a friendly environment for businesses to 
operate in, with transparent rules and incentiv e programmes managed by Sri Lanka's Board of 
Investment, Inland Revenue Author ity, and Ministry of Finance.  Businesses enjoy a stable 
investment regime and benefit from tax incentives.   Sri Lanka has been grappling with unwieldy 
incentive programmes and has been working to stre amline this.  However, it still suffers from a 
complex system of tax incentives, which could resu lt in the duplication of beneficiaries and create 
undesired opaqueness.  Sri Lanka needs to ensure th at investment schemes are managed well so as not 
to distort the allocation of resources and to ensu re that business competitiveness is maintained.  
35. To attract new investments, Intellectual Property, or IP, enforcement is critical.  While 
comprehensive IP legislation was introduced in 2003 and tougher legal provisions to fight piracy have 
been introduced in recent years, more can be done with  respect to enforcement. In this regard, Aid for 
Trade activities which have hither to been focused on stabilising the macroeconomic environment, 
could also be channelled to training in IP and IP enforcement.  
36. Of Sri Lanka's sectoral policies, the most progressive are perhaps those pertaining to the 
services sector.  Sri Lanka's pursuit of liberalisation policies in the telecommunications sector, for instance, has allowed this sector to flourish at a nnual growth rates of over 20% in the period under 
review.  Sri Lanka's legal framework for its financia l sector, too, has been strengthened since its last 
review, with laws that are transparent and well- managed.  Sri Lanka's banking sector is becoming 
increasingly diversified, having accoun ted for about 68% of its total fi nancial sector assets in 2009.  
The Secretariat's Report points out, however, that while Sri Lanka's liberalisation measures in these 
sectors have led to market expansion; increased co mpetition; and growing foreign participation, state-
owned banks and telecommunications  operators continue to domina te, and Sri Lanka's reliance on 
these needs to be minimised further.   
37. It is in the manufacturing and agricultural sectors that improved policies are especially 
needed.  Manufacturing is still concentrated in th e apparel and food sub-sectors, and over 80% of 
industries are located in the Western and North Western provinces.  Besides expanding the scope of the manufacturing industry beyond these sub-sec tors, and looking into including value-add 
production, horizontal measures are also needed to  more efficiently allocate resources, improve 
infrastructure, and increase access to product and labour markets. 
38. For the agricultural sector, which employs ove r 70% of the population, some challenges 
remain.  Production stagnation, structural constrai nts, and the protective support policies in place are 
some of these challenges.  The Secretariat's Repor t also lists protective schemes, which have resulted 
in negative effects.  Sri Lanka's ten-year development framework addresses some of the challenges by 
aiming to improve competitiveness through modern technology, shifting to commercial agriculture, 
and promoting diversification into higher value-a dded products.  Pursuing ot her more open measures 
would also be helpful to the sector.  For example,  reducing protective support to give opportunity for 
private investment in commercial agriculture, and lowering tariffs for more affordable consumer 
prices and reduced price risks to farmers.  In pursuing objectives of increased production and 
improved competitiveness, it is hoped that the govern ment will look beyond protectionist measures 
for solutions in this area.   
39. I hope my comments this morning will be usef ul as a backdrop to our discussions.  I note 
from some delegations' submissions, that they have  questions on issues such as non-tariff charges 
imposed on imports, protective agricultural support, and other incentives programmes, issues which I 
have briefly touched upon as well.  These questions show the importa nce of Sri Lanka as an economic  WT/TPR/M/237 
 Page 11 
 
 
  and trading partner to the various delegations here and we hope that the concerns and interests raised 
at this review will contribute to Sri Lank a's trade policy considerations at home.   
40. As one of the founding Members of the WTO, Sri Lanka is no doubt looked to by other 
members to play an active and constructive role in WTO and DDA discussions, and to pursue open 
trade policies that are aligned with the WTO's commitments and goals.  It is heartening to see that 
some of Sri Lanka's policies have already taken th at positive direction.  We look forward to this 
continuing in Sri Lanka's development plan ahead and hope to see the results of Sri Lanka's open and 
progressive trade policy at the WTO.  WT/TPR/M/237 
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  IV. STATEMENTS BY MEMBERS 
INDIA 
 
41. Sri Lanka since its previous Review deserves our appreciation for many achievements 
including the ones on the economic and development fronts. The present review takers place in the 
post-conflict background. The nearly three-decade long armed conflict came to  an end in May 2009. 
During the course of the conflict, India supported th e right of the Government of Sri Lanka to act 
against terrorist forces. 
42. Let me now highlight what we consider are ma jor achievements of Sri Lanka since its last 
Review as noted in the Report:  in spite of the external challenges posed to the global economic and 
financial system and domestic constraints, the Sr i Lankan economy in 2009 economy grew by 3.5% in 
real terms, a commendable achievement;  high degr ee of openness to international trade, investor 
friendly atmosphere, and encouragem ent of foreign direct investmen t;  all sectors of national economy 
have contributed to the overall growth in GDP;  higher levels of export performance and increase of 
investments have also contributed towards the GP D growth;  another notable achievement was the 
sharp deceleration in inflation;  during the period under review, Sri Lanka has nearly doubled the per 
capital income. I consider this rare and quite a remarkable achievement.  
43. Let me turn to other aspects of Sri Lanka's  economic and trade and investment policies a 
review of which could further spur  growth and development. Some of these have been mentioned by 
our Discussant:  complete the pending structural re forms, including tax reform, the restructuring of 
state-owned enterprises;  investing in education and research and developm ent, and reforming the 
labour market;  system of tax incentives which co uld have possibility of distortive effect on the 
allocation of resources by artificially placing some firms and sectors in a more advantageous position 
than others;  reducing import protection, rationa lizing domestic support, and implementing a more 
consistent trade policy would allow a more ef ficient allocation of resources for increasing 
productivity. 
44. India and Sri Lanka are closely linked through geog raphy, history, religion, language, culture 
and trade. The relationship between the two countri es is more than 2,500 years old and both sides 
have built upon a legacy of intellectual, cultu ral, religious and linguistic intercourse.  
45. Buddhism went to Sri Lanka from India, and flourished much more there than in its country 
of origin. In recognition of our civilisational bonds, both countries will commemorate the 2600
th year 
of the attainment of Enlightenment of Lord Buddh a through joint activities in Sri Lanka.  More than 
100 flights a week fly between the two countries and the largest number of tourists in Sri Lanka are 
from India. 
46. India and Sri Lanka have a vibrant and growi ng economic and commercial partnership.  India 
is now Sri Lanka's largest trade pa rtner overall and Sri Lanka is one of India's largest trade partner in 
South Asia.  India is among the four largest investors in Sri Lankan economy.  Sri Lanka's 
investments in India, too, have shown remarkable gr owth in recent years.  In terms of development 
cooperation, too, India makes a significant contributi on, Sri Lanka being the largest recipient of aid, 
grants and concessional lines of credit in South Asia. 
47. President Rajapaksa visited India in June this year on his first State Visit after the election 
victory. India extended a Line of Credit of US$800 million for reconstruction of railway lines, agreed 
to assist in the rehabilitation of Palaly Airpor t, Kankesanthurai Harbour, Duraiappah Stadium and 
Cultural Centre in Jaffna. A joint venture for c onstruction of 500 MW coal based power plant at 
Sampur was agreed as also a feasibility study for th e interconnection of the electricity grids of both 
countries.  WT/TPR/M/237 
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  48. The legal framework for the India-Sri La nka economic commercial and investment 
relationship is provided by a Free Trade Agreem ent, a Double Taxation Avoidance Agreement, a 
Bilateral Investment Protection and Promotion Agreement.  The India-Sri Lanka Free Trade 
Agreement (FTA) was signed in 1998 and entered in to force in March 2000. This was India's first-
ever FTA.  The FTA has led to significant uptur n in overall bilateral trade.  The two countries 
recognize the need to build on the achievement s of the FTA through a more comprehensive 
framework of economic cooperation. 
49. Post ending of conflict in Sri Lanka, India h as put in place a robust programme of assistance 
to Sri Lanka to help Internally Displaced Persons (IDPs) to return to normal life. In June 2009, Prime 
Minister announced IRs 5 billion as a grant for relie f and rehabilitation in Sr i Lanka.  In June 2010, 
Prime Minister announced that in order to addr ess the challenge of housing for the IDPs, the 
Government of India would build 50,000 ho uses in Northern and Eastern Sri Lanka.   
50. Cultural cooperation is a very important aspect  of our bilateral relationship and seeks to 
enhance the level of cooperation in a wide, variet y of fields such as performing and visual arts, 
libraries, museums, etc. Another recent facet of e xpanding cultural ties, outside the Agreement on 
cultural cooperation has been of Ms. Jacqueline Ferna ndez, a Miss Sri Lanka, even before the release 
of her first Bollywood movie, she caught fancy of prominent Indian directors and has subsequently 
made her mark.  
51. I wish to take this opportunity to state that th ere is no limit to the growth of prosperous and 
mutually beneficial relations between India and Sri Lanka – not even the sky.  
CHINA 
52. China is glad to learn that during the review period the performance of Sri Lanka's economy 
was strong supported mainly by domestic demand. GDP  expanded by a solid 6% per year in real 
terms despite internal challenges and external shoc ks. As a result, Sri Lanka's GDP per capita doubled 
between 2004 and 2009 to reach US$2,053.  Effort s by the Sri Lankan Government to contain 
inflation have also achieved positive results. Howeve r, both imports and exports decreased sharply in 
the context of the global financial and economic cris is, particularly due to the drop of external 
demand. 
53. China commends Sri Lanka for having a fairly  open and transparent trade regime and 
participating actively in the Doha Development Ag enda. Since its last review, Sri Lanka has taken 
steps to enhance transparency. Info rmation regarding applied tariff le vels and all other import charges 
is easily available online.  Duty-free lines rose fro m 10% of the total in 2003 to 44.4% in 2010. And 
as the Secretariat Report has noted, Sri Lanka has re latively limited use of non-tariff measures. On the 
other hand, Sri Lanka has introduced new border char ges. We hope these are largely responses to the 
financial crisis therefore are only temporary in natu re. Our reading of the Secretariat report also seems 
to suggest that it is in the interest of Sri Lanka to ensure more effective use of price-based measures 
given that it has a relatively frequent recourse to such measures both internally and at the border. 
54. The friendly exchanges between China and Sr i Lanka have a history of more than 
1,600 years. The period beginning from 1952 opened a new chapter in trade relations between the two 
countries with the signing of an agreement relati ng to barter trade on rice and rubber. We Chinese 
never forget that in the 1950's Sri Lanka was th e only country where we could have access to rubber. 
At that time, we called rubber "gold for industr y". At present, trade and economic cooperation 
between China and Sri Lanka is much broader with the official interaction institutionalized through 
the Joint Committee on Trade and Economic Coopera tion. Moreover, China and Sri Lanka are both 
members of the Asia-Pacific Trade Agreement.  W ith these schemes in place, bilateral trade expands 
fast and smoothly. During the international financ ial crisis, bilateral trade of 2009 only decreased WT/TPR/M/237 
Page 14  
 
  2.6% to US$1.64 billion. Export of Sri Lanka even  registered an increase of 18%. During the first 
eight months of this year, trade between Chin a and Sri Lanka already exceeded US$1.23 billion, up 
by 46% over the same period of last year. Export of Sri Lanka increased by 51%. 
55. As of August 2010, direct investment of Chin a in Sri Lanka amounted to US$15.81 million; 
Chinese enterprises signed labor service contract s worth US$5.6 billion with the accomplished 
turnover of US$2.5 billion.  As the Secretariat Re port has shown, China has also provided Sri Lanka 
some development aid under the framework of south-south cooperation. 
56. We take note that Sri Lanka pays great atten tion to Aid for Trade and outlines key constraints 
to development in its Ten Year Horizon Deve lopment Framework 2006-2016 (TYHDF). Trade is 
identified as one of the macroeconomic means to achieve the Government's development strategy. 
The TYHDF seeks to promote exports by encouragi ng further rationalization of tariff and trade 
policies, facilitation of a fair trading environment and trade and investment arrangements with partner 
countries. The three priority areas for aid-for-trade assistance identified by Sri Lanka are trade policy 
analysis, negotiation and implementation; export diversifications; and competitiveness. We hope 
development partners will be able to help Sri Lanka achieve its development objectives taking the 
afore-mentioned needs into consideration. 
PAKISTAN 
57. Since its independence in 1948, Sri Lanka invested substantially in human resource 
development and the percentage of literacy in Sri La nka has remained the highest in South Asia.  One 
hallmark of Sri Lanka is gender e quality, which is evident from the fact that the people of Sri Lanka 
elected the world's first female Prime Minister in 1960. 
58. Although, Sri Lanka suffered a civil war fo r 26 years from 1982 to 2009, it remained a 
popular tourist destination.  In spite of prolonged civil war, Sri Lanka continued to have a relatively 
open trade policy which is understandable because Sri Lanka was one of the earliest contracting 
parties of GATT coming in its ambit on 29 July 1948.  The civil war ended in May 2009 and the 
country is passing through a phase of consolida tion and rehabilitation of internally displaced 
population. 
59. With the restoration of peace and following the presidential and parliamentary elections, Sri 
Lanka has a unique opportunity to ensure continuity in policies initiated in the recent times to put Sri 
Lanka on the path of higher sustainable growth a nd prosperity.  The Government of Sri Lanka has 
undertaken an ambitious programme of reforms in  areas including rationalization of tax structure 
improvement in state-owned enterprise performance a nd further strengthening of the financial sector.  
Although, the budget deficit in 2009 was 9.9% of GDP , due to higher than expected expenditure on 
post-conflict rehabilitation and human itarian expenditure, with the help of correct policies, it is 
expected that the deficit will reduce to 8%  during 2010 and 6% in the medium term. 
60. The reform agenda, especially reforms in its i nvestment policies are welcome.  We believe 
that, being a founding WTO Member, Sri Lanka is aware of its multilateral commitments and while 
implementing reforms in its trade policies, woul d keep in view its multilateral commitments and 
address the issues reflected in the Secretariat Report. 
61. Sri Lanka has three FTAs.  It is also active in the DDA negotiations and has tabled several 
proposals, reflecting its commitment to an early completion of the Round.  The Sri Lankan Trade Policy aims at moving towards greater integr ation in the world economy, increasing access to 
overseas markets, and attracting FDI, along with shif ting the role of the Government from control and 
regulation to facilitation of private sector development and trade.  WT/TPR/M/237 
 Page 15 
 
 
  62. Pakistan and Sri Lanka have deep economic, soci al and cultural ties rooted in history.  Trade 
between Pakistan and Sri Lanka is largely covered by  an FTA put in operation in 2005.  The bilateral 
trade between both the nations is steadily increasing as a result of the FTA under which, both Pakistan and Sri Lanka will eliminate tariff on almost 90% of  products.  Pakistan has already eliminated tariff 
in accordance with the bilateral co mmitments.  We are also endeavour ing to convert the bilateral FTA 
into a comprehensive economic partnership by incl uding trade in services, investment and economic 
cooperation in its ambit.  Pakistan has now become  the second largest trading partner for Sri Lanka in 
the South Asia region.  Sri Lanka has also played an important role in the regional activities under the 
auspices of SAARC. 
AUSTRALIA 
63. Sri Lanka can rightly be proud of  its economic record since its last Review, and its reasonably 
open and transparent trade regime.  Its GDP per capita growth in particular has been truly impressive.  Australia and Sri Lanka have importa nt trade interests and the trade relationship is e xpanding for the 
benefit of both sides.  Australia is a signifi cant supplier of food to Sri Lanka, including fresh 
vegetables, dairy products and wheat.  In 2009, bilateral merchandise trade was worth $303 million.  
Sri Lanka is Australia's 13
th most important source of internat ional students, with over 8,500 Sri 
Lankan students enrolled in Australia in 2009.  Aust ralia's principal imports from Sri Lanka are tea, 
clothing, textiles and rubber tyres.  The Austra lian company, Pacific Dunlop, has a substantial 
investment in Sri Lanka's rubber manufacturing industry. 
64. The end of nearly three decades of civil conf lict in 2009 and the expansion of energy and 
transport infrastructure which is now underway ha s provided an opportunity for foreign investors, 
including from Australia.  Progress on reconciliation and political reforms to create the conditions for 
enduring peace and stability will be important factors in building investor confidence. 
65. We note the Sri Lankan economy grew at an aver age rate of 6% during the period 2004-2009, 
notwithstanding the adverse effects of terrorism , the 2004 tsunami disaster and the recent global 
economic slowdown.  However, Government borrowi ng for investment and expenditure has been a 
major driver of this growth.  It will be important  for the Government to address fiscal reform and 
allow greater space for private entrepreneurs in the market place to boost competition and drive 
economic efficiency.  Proposed tax reforms and ch anges to the Board of Investment are a welcome 
step in this direction.  A renewed commitment to  corporatisation and priv atisation of state-owned 
enterprises would be an important further step. 
66. Australia appreciates Sri Lanka's long-term co mmitment to trade reform and its ambitious 
"Mahinda Chintana" Framework which identifies international trade as one of the significant 
macroeconomic instruments to achieve the country' s development goals.  We welcome recent changes 
to simplify Sri Lanka's tariff structure and would encourage further moves in this direction and 
provision of early notice of tariff changes to ensu re importers have an opportunity to make any 
necessary adjustments. 
67. More broadly, Australia welcomes the trade objectives within the Framework to focus on 
increasing integration of the Sri Lankan economy w ith global markets.  Can I just take this 
opportunity to lend our strong support to the refere nces in Mr Collure's opening statement about the 
primacy of the multilateral trading system, the im portance and centrality of MFN trade, and the 
necessity of concluding the Doha Round as soon as possi ble.  Australia looks forward to working with 
Sri Lanka to this end.  
68. We would welcome continued efforts by Sri Lanka  to ensure that regulations and guidelines 
are not more trade restrictive than necessary to ach ieve their underlying, specified objectives, or 
unduly burdensome.   WT/TPR/M/237 
Page 16  
 
  UNITED STATES 
69. I would like to begin my remarks by expressing my government's best wishes for a new era of 
peace and prosperity to be enjoyed by all Sri Lankans.  This review comes at a historic moment for Sri Lanka.  With the end of a long and bitter civil wa r, Sri Lanka is confronted with the opportunity to 
boost economic development and provide increase d economic opportunities for citizens across the 
island.  The end of this conflict opens new hope a nd opportunity for prosperity to regain its foothold 
in your nation and for your country to achieve its  economic development aspirations.  Sri Lanka can 
now direct its full attention to the constructive and productive acts of governing that will permit Sri 
Lanka to grow and to flourish. 
70. Indeed, Sri Lanka has a solid foundation for progress, having shown strong GDP growth of 
roughly 6% per annum from 2004 to 2009.  We are impressed by the strong performance of Sri 
Lanka's economy during this period, despite the internal  conflict, the effect of a tsunami, and external 
shocks such as higher oil and food prices and the gl obal financial crisis.  We are also pleased to see 
that Sri Lankan firms have been increasingly able to climb the value chain in producing higher value-
added products, taking advantage of  both a skilled labor force and investments in technology.    
71. The United States and Sri Lanka have an expa nding trade relationship totalling US$1.8 billion 
in two-way trade in 2009.  The United States remains Sri Lanka's largest single-country market.   Sri 
Lanka exported US$1.6 billion to the United States in  2009, led by exports of textile and apparel 
goods.  Additionally, the stock of U.S. foreign di rect investment in Sri Lanka was US$114 million in 
2008 (which represents the latest data available), a 42.5% increase from 2007. 
72. We would like to underscore our regard for Sri Lanka's stated principles of openness to 
international trade and an investor  friendly climate.  With this in mind, we note, however, the 
Secretariat's observation that Sri Lanka's trade refo rms have proceeded at a mixed pace since its last 
Review.  While transparency has apparently been enhanced, average tariff protection has increased.  
Also, Sri Lanka has made substantial use of impor t surcharges and other charges falling solely or 
mainly on imports.  We take due note of the Secretariat's statement that these measures have been 
taken mostly for revenue purposes.  We continue to  hope that high economic growth and the end of 
the armed conflict will provide increasing opportuniti es for Sri Lanka to lower the burden on imports 
as well as to step up economic, trade and institutional reform.   
73. We are pleased by the government's recent announcement of an overa ll reduction in tariffs, 
lowering many rates to zero.  We are further hearte ned to note that the government eliminated a 15% 
import surcharge applied on most imports.  These are positive developments and we look forward to 
hearing more about the government's plans to improve  consumers', producers', and investors' access to 
imports by lowering tariffs.   
74. We hope, too, that Sri Lanka is bearing in mind the benefits to its trade that can result from 
binding a greater number of its tariff lines beyond the current 36.4%.  The binding of tariff lines makes trade more predictable for y our domestic industries that require available inputs at the lowest 
cost to be able to compete in th e global marketplace.  As the Secretariat notes, the authorities, as part 
of your strategy to liberalize trade and tariffs a nd other charges on imports, may wish to consider 
enhancing the scope and level of Sr i Lanka's bindings.  Adding predictability to the trade regime, this 
would help to improve the business environment, which is one of the government's stated goals. 
75. The Secretariat Report further notes that other ch arges can considerably increase the cost of 
imports into Sri Lanka.  In some cases these charges more than double that total cost.  Eliminating or 
significantly reducing such charges would also enha nce predictability and affordability of inputs for 
competitive domestic consumption a nd production.  Sri Lanka has already taken steps to reduce the 
costs of imports by its most recent actions.  We enc ourage you to continue on this path, while keeping  WT/TPR/M/237 
 Page 17 
 
 
  firmly in mind the benefits that can help Sri Lanka  achieve its goal of greater integration into the 
world economy. 
76. We also hope that the government will take car e to abide by WTO rules when modifying its 
tariffs.  Here, I must mention our concern about some 103 applied tariff lines that exceeded their bound rates in June 2010.  We will be interested to know what the gove rnment is doing to rectify this 
situation.  
77. Exporters of non-traditional goods exporting at least 80% of their production also enjoy a 
number of tax concessions, including a preferential in come tax rate on profits from these exports, and 
a full tax holiday for between three and seven year s for new investments.  These concessions are also 
extended to service providers that export at least 70% of turnover.  We would like to know Sri 
Lanka's rationale for such concessions  not only in light of its WTO commitments but also in terms of 
the economic and trade distortions that these can create. 
78. We are pleased to acknowledge an important policy development that has taken place since 
Sri Lanka's last Review.  Sri Lanka's legisl ation implementing the WTO Customs Valuation 
Agreement (CVA) is a major step forward.  Accordin g to the Secretariat, however, that legislation 
grants the authorities the flexibility to depart from CVA rules when deemed ne cessary, in the interest 
of the national economy or for any other reason, a llowing for the use of minimum values.  During the 
period under review, the Secretariat points out, Sri Lanka applied such minimum import prices to used 
cars.  We are disappointed that Sri Lanka's implemen tation of this important agreement has taken this 
turn and would like to know what options Sri Lanka  may be considering to mitigate this unfortunate 
legislative outcome.   
79. The Secretariat Report notes that the Government  of Sri Lanka remains determined to reduce 
further the list of sectors in which foreign invest ment is restricted.  We welcome this and other 
approaches to open the economy, and we offer the following comments in this regard. The services 
sectors, we believe, hold promise for fulfilling Sri Lanka's competitive objectives.  Inasmuch as these sectors, which account for 58% of GDP and 42% of employment, remain the main driver of economic 
growth, additional WTO services commitments would also foster economic development thereby 
improving the livelihoods of Sri Lanka's citizens.  A nother positive step would be for the government 
of Sri Lanka to decide to participate in the Ag reement on Government Proc urement.  We encourage 
the government of Sri Lanka to consider the benefits  of making this commitment.  Also, to promote a 
positive climate for business and economic growth, we encourage the efforts by Sri Lanka to address 
governance issues, including strengthening the rule of law and combating corruption.  The United 
States stands ready to assist in addressing these cr itical development issues, and believe that our 
mutual interest lies in creating confidence among all investors that Sri Lanka is a friendly place to do business. 
80. We hope that this trade policy review will help  us to understand more clearly the ways in 
which Sri Lanka is addressing the protection and en forcement of intellectual property rights.  We 
believe that more can be done.  We understand that, in the appare l sector, right holders have some 
successes in combating trademark counterfeiting through the courts.  We would expect that trademark 
enforcement will become an ever more important  example for Sri Lankan firms as they develop 
strong brands and unique designs. 
81. Finally, the United States will continue to work  with Sri Lanka to strengthen and deepen our 
relationship.  We believe that developing countri es such as Sri Lanka have much to gain from a 
balanced and ambitious result in the Doha negotiatio ns that include meaningful new market access for 
all.  A result that includes new market access in  services, industrial goods and agriculture could 
further enhance opportunities for Sri Lanka to broade n its export base, its export markets and hence WT/TPR/M/237 
Page 18  
 
  Sri Lanka's opportunity to compete in world market s.  The United States looks forward to working 
with Sri Lanka toward bringing the round to a successful conclusion.  
CANADA 
82. Sri Lanka is at a critical juncture as it faces  new challenges following the end of 30 years of 
internal conflict.  The Canadian government wishes to acknowledge the hardship that his conflict had 
imposed on the Sri Lankan people and its conseque nces on their lives.  The end of the prolonged 
internal conflict provides greater optimism for economic prosperity and long-term sustainable 
development.  The approval of the IMF-SBA facilit y in July 2009, the near doubling of per capita 
income despite the adverse effe cts of the recent global economic slowdown, and enhanced foreign 
investment inflows also contribute to  a positive outlook for the future. 
83. Canada understands the challe nge faced by Sri Lanka in achieving sustainable economic 
development in a country where trade remains conc entrated in a few products and markets, where 
there are constraints to technological innovation, a limited private sector investment and few small 
and medium enterprises involved in trade. 
84. The Canadian government appla uds Sri Lanka's efforts toward s regional economic integration 
in part through the negotiation of regional trade agreements and participa tion in regional trade 
initiatives, and encourages Sri Lanka to continue this trend.  However, the Canadian government also 
notes that no major trade liberalization or privati zation measures have been introduced since the last 
Review.  Although the structure of the economy has not changed significantly since 2004, frequent changes in tariffs and ad hoc duty waivers have sometimes resulted in distortions in agricultural 
commodity markets and domestic production.  Growth needs sound economic management and 
political stability.  Towards this end, the Sri Lankan government should re duce import protection, 
rationalize domestic support and implement a more  consistent and transparent trade policy. 
85. Canada supports Sri Lanka's proposed amendment to the current CPC bill, aimed at 
improving regulation and pricing policy in the ener gy sector, and hails the new act for electricity, 
together, these will create a more investor friendly environment as energy is currently very costly in 
Sri Lanka. 
86. While Canada agrees that import restrictions are sometimes necessary to protect human, 
animal and plant health or safety, the Canadian gove rnment invites Sri Lanka to review the scientific 
research and analysis available regarding bovine s pongiform encephalopathy and reconsider some of 
the policies and regulations implemented with re gards to their BSE ban.  Sri Lanka, as a WTO 
Member, should take into account international guidelines, such as those laid out by the OIE 
regarding BSE, when developing  and reviewing its measures. 
87. We believe that Sri Lanka has taken a step in the right direction by significantly liberalizing 
its investment regime, signing investment protec tion agreements and becoming a party to the New 
York convention on recognition and enforcement of foreign arbitral awards .  Although domestic and 
foreign investment has been encouraged in trans port services and infrastructure, the state retains a 
strong presence in these sectors.  Canada encourages  furthering efforts to advance regulatory reform, 
so as to strengthen competition, increase private sector  participation and establis h a level playing field 
for new entrants. 
88. Canada would also like to take this opportunity  to encourage Sri Lanka to participate in the 
WTO plurilateral agreement on government procurement as well as offer our assistance to the Government of Sri Lanka in brin ging forward measures to counter anti-dumping, countervailing and 
safeguard measures currently under consideration.  WT/TPR/M/237 
 Page 19 
 
 
  89. In conclusion, Canada recognizes the commitment made by Sri Lanka to establish an 
environment conducive to private sector business de velopment through rationalization of trade and 
tariff policies, adoption of prudent monetary policy measures, promotion of a fair trading environment 
and implementation of policies that encourage inv estment.  Canada encourages Sri Lanka, as a WTO 
founding Member, to continue its im plementation of outward oriented  economic strategies within a 
WTO consistent legal framework. 
SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU 
90. Sri Lanka's overall economic grow th and performance since the last Review is particularly 
impressive given the various challenges and difficult ies it has had to contend with over the past six 
years.  An average annual GDP growth of 6%, for example, is quite an achievement when you 
consider the repeated effects of terrorism within the country for much of the period, added to the 
tsunami disaster in 2004, and then, more recently, th e financial crisis and global economic slowdown.  
My delegation would like to congratulate the government and the people of Sri Lanka on the 
determination they have shown in the last few years,  and the various actions th at have been taken.  I 
believe that these have successfully conveyed to th e rest of the world that Sri Lanka means to 
continue with outward-ori ented economic strategies. 
91. With respect to the trade policy Review that  we are engaged in now, my delegation has 
already submitted several written questions in advan ce on a number of different aspects.  Like other 
delegations, we are asking for more clarity and cer tainty in Sri Lanka's implementation of specific 
areas of trade policy, in terms of both domestic regulations and administrative regime, as well as its 
compliance with the multilateral trading agreements. 
JAPAN 
92. I would like to begin our comments with Sri Lanka's macroeconomic environment. Despite 
the recent global economic and financial crisis, ts unami and other difficult problems, Sri Lanka's 
economy has managed to grow steadily, at about 6% annual real GDP growth rate, with decreasing 
unemployment rate and growing overall labour productiv ity. At the same time, the high inflation rate 
and increasing budget deficit could be obstacles for the future development of Sri Lanka's economy. 
Japan expects Sri Lanka to address these issues a nd continue its strong ec onomic development.  
93. Let me briefly touch u pon on our development assistance to Sri Lanka  because this has 
same relevance to the current discussions. Japan is providing support for projects related to Sri 
Lanka's mid- and long-term development plan, as we ll as projects for rehabilitation from its internal 
conflict which ended in May 2009. Among othe rs, Japan is supporting the development and 
improvement of infrastructure for more vigorous ec onomic activities, including electricity supply, and 
the construction of road networks, bridges and ports. We also support the projects designed to 
promote tourism and other industries with a view to enhancing Sri Lanka's foreign exchange earning 
capacity. We are doing all this through an approp riate combination of grants, loans, technical 
assistance and other measures. Japan wishes to expr ess its hope that our assistance will contribute to 
Sri Lanka's rehabilitation from internal conflict, especia lly in its northern and eastern parts, as well as 
to its further economic development.  
94. As for trade and investment policies, I would like to make three comments.  Firstly, Japan 
appreciates the reduction of tariffs and other duti es on automobiles and certain electronic products and 
the removal of import surcharge announced in June  2010. However, according to the Secretariat 
Report, the overall average applied MFN tariff rate s have increased from the time of the previous 
review, and there is a possibility of discretionary issuances of orders modifying tariff rates without 
sufficient notification period. This would adversely affect predictability for the importers. Therefore, 
we would like to request Sri Lanka to ach ieve overall improvement  on tariff rates.  WT/TPR/M/237 
Page 20  
 
  95. Secondly, there are many complicated taxes and other charges. Although Japan understands 
the necessity to meet the financial requirements for the governmental activities, we wish to request Sri 
Lanka to work towards simplification of the tax system and improvement of tax rates. 
96. Thirdly, Japan understands that Sri Lanka is  now in the process of reviewing its foreign 
investment policy. Given that foreign direct inve stment is a key element to bring about further 
economic development, we hope that this review will lead to clearly focused investment incentive 
schemes and the creation of one-stop service mechan ism through the enhancement of the function and 
purview of the Board of Investment. We believe th at this will make Sri Lanka more attractive to 
foreign investors. Further regulatory reform and liber alization, including privatization, in the area of 
services, would also contribute in this regard. 
NEW ZEALAND 
97. New Zealand and Sri Lanka share a longstanding, close relationship.  We place an especially 
high value on our trading relationshi p and accordingly take a close inter est in Sri Lanka's trade policy.  
This is an important review and we appreciat e the opportunity to provide some comment.   
98. At the outset, New Zealand acknowledges th e progress Sri Lanka has already made in 
meeting the objectives of the WTO. We also note the active role Sri Lanka is playing in WTO 
negotiating groups.  
99. The Secretariat's Report refers to Sri Lanka's general efforts to create a transparent trade 
policy that is easily understandable.  This is commenda ble.  It is encouraging that Sri Lanka's recent 
trade announcement on 1 June 2010 combines a m ove towards simplification with an overall 
reduction in import charges. The most positive aspect of this announcement was the elimination of the 
import surcharge. 
100. New Zealand has been for many years an importa nt supplier of high quality dairy products to 
Sri Lanka.  New Zealand's largest dairy company h as had a presence in Sri Lanka since 1983.  It has 
invested strongly in Sri Lanka, and a significant prop ortion of its total milk production in Sri Lanka is 
sourced from over 2000 local farmers.  New Zeala nd looks forward to continuing to be both an 
important supplier of high quality dairy products to Sri Lanka, and a major investor in Sri Lanka's 
dairy industry.   
101. New Zealand understands Sri Lanka's concer ns about its status as a net food importing 
country.  We do however share the WTO's view th at reduced import protection would help improve 
the low productivity in its agricultural sector. 
102. In the context of the announcement on 1 June seeking to simplify Sri Lanka's import regime, 
we would appreciate Sri Lanka's clarification on the regulatory framework for food and animal 
products, especially in terms of the creation of national standards and the formulation of import 
testing requirements.  A lack of certainty in th is area is presently causing some confusion for our 
exporters and thus affecting their exports to Sr i Lanka.  In particular, we would appreciate an 
explanation of the institutional roles and responsibili ties of the Sri Lanka Standards Institute (SLSI), 
Food Control Administration Unit (FCAU), and Fo od Advisory Committee (FAC). We look forward 
to working with Sri Lanka, both bilaterally and multilaterally, to reduce distortions in its trading 
environment and advance our trad e and economic relationship.  
BRAZIL 
103. Brazil congratulates Sri Lanka for its strong economic performance during the period under 
review. As mentioned in the Report by the Secretar iat, despite the enormous challenges represented  WT/TPR/M/237 
 Page 21 
 
 
  by the internal strife, the effects of a tsunami, and external shocks such as th e global financial crisis, 
Sri Lanka's GDP expanded by 6% per year in real  terms during the period 2004-2009. Moreover, the 
GDP per capita doubled to reach US$2,053. These da ta constitute indicati ons of growth by any 
standard. 
104. It is with great satisfaction that we note the end of the internal armed conflict in May 2009. 
This circumstance provides a much needed opportun ity to step up economic, trade and institutional 
reforms that will enable the consolidation of the process of national reconcili ation. Brazil also notes 
the prudent macroeconomic policies adopted by th e Sri Lankan Government that resulted in the 
curbing of inflation. Indeed, after a peak in June  2008, inflation fell to below 5% by end 2009 and was 
kept at single-digit levels in the first half of 2010. Those are encour aging steps in the generation of a 
stable economic environment, a crucial enabli ng condition for the reconstruction process and the 
acceleration of development.  We would like, ther efore, to recognize and commend Sri Lanka for its 
efforts to implement sound policies so as to guarant ee fiscal, monetary and financial discipline.   
105. We recommend the Sri Lankan Government to  persevere in its efforts to improve 
transparency with the creation of an enabling business environment; lower the burden on imports, 
reducing tariffs and other charges; and enhan ce the scope and level of Sri Lanka's bindings. 
106. Bilateral trade flows have tripled during the period under review but there is still room for 
improvement. Exports from Sri Lanka  to Brazil are yet much below their potential. We stand ready to, 
in cooperation with the Sri Lankan au thorities and businessmen, do the ut most to change that situation 
and intensify bilateral trade.     
107. An important step towards strengthened coope ration between our two countries was the entry 
into force, in August 2010, of the Bilatera l Framework Agreement on Technical Cooperation. 
Together with structuring and implementing soci al programs, the agreement foresees bilateral 
cooperation in the development of technology, pro duction and distribution of bio-fuels as well as 
research, production and commercialization of agri cultural and livestock pr oducts. Strengthened 
cooperation in those areas among othe rs will pave the way to a larger  volume of bilateral trade and 
investment.  
108. Brazil feels encouraged by the Sri Lankan commi tment to the rules-based multilateral trading 
system and to modernize its trade and investment regime.  We hope that the recent progress achieved by the people and the Government of Sri Lanka is only the beginning of a much needed virtuous 
cycle, which will push the country towards greater stability and prosperity in the coming years. 
109. Brazil stands ready to further enhance its c ooperation with the Sri Lankan Government, as we 
are convinced that strengthening South-South Cooperation is an important means to enable the 
sharing of technologies and practices common to developing countries.  
TURKEY 
110. We would like to start by commending Sri La nka for its very positive and steady economic 
growth since the last Review. Doubling of the per capita GDP in five years is a very significant 
success.  We noted that Sri Lanka has continued to reform and modernize its economy despite many 
development challenges and the recent economic cris is.  While Sri Lanka is seeking opportunities to 
increase and diversify its export base, we believe that such efforts need to be complemented by further 
steps to improve the business environment. 
111.
 Foreign companies may contribute to Sri Lanka's  objective of expanding the industrial base 
by focusing on industries with higher value added, provided they will have a conducive environment.  WT/TPR/M/237 
Page 22  
 
  Sri Lanka needs to repeat in various fields its suc cess of achieving one of the shortest, cheapest and 
simplest import operation procedures in Asia. 
112. In this respect, ensuring furthe r transparency and predictability in Sri Lanka's trade regime is 
a necessary step forward in this direction.  We welcome recent partial simplification of tariffs since its last Review, as well as the overall reduction in the tariffs, and elimination of import surcharge on 
most imports in June 2010.  Obviously, there are still certain challenges on tariffs and other charges 
front. 
113. On this occasion, we would like to express our hope that the import surcharges will be 
eliminated completely in the near future as they increase the cost of exporting to Sri Lanka to a large 
extent.  One example is our export of lentils whic h decreased by almost 90% since the introduction of 
the special commodity levy in 2007.   Turkey also thanks Sri Lanka for its active participation in the 
DDA.  We work together in the G-33 and we  appreciate the insights it provides regularly. 
114. Lastly on bilateral relations, we would like to point out that trade plays a major art in our 
relations.  Our imports constitute about 80% of the total trade with  Sri Lanka, which also benefits 
from Turkey's GSP regime for a number of products .  Our trade turnover with Sri Lanka was around 
US$130 million in 2009, and it is expected to grow by about 25% this year.  Sri Lanka's economic 
success is also clearly visible in its doubling of te xtile and clothing exports to Turkey since the last 
Review. 
EUROPEAN UNION 
115. This review indeed takes place at a critical juncture in Sri Lanka's recent history as May 2009 
marks the end of the 30-year internal armed conflict. 
116. The EU trusts that this collective evaluation of Sri Lanka's trade policies and practices and 
their impact on the functioning of the multilateral tr ading system and rules will guide and assist Sri 
Lanka positively in defining its most outstanding issu es for her immediate and future policy actions in 
this area. 
117. The EU takes satisfaction in noting that d espite the armed conflict, despite the global 
economic downturn and despite the 2004 tsunami disast er Sri Lanka's annual average growth has been 
around 6% since the last Review. Furthermore, accordin g to the Department of Census and Statistics, 
Sri Lanka recorded an economic growth rate of 8. 5% in the second quarter of 2010, the highest ever 
recorded quarterly GDP growth since 2002, with th e three major sectors of the economy - agriculture, 
industry and services - registering significant growth rates of 5.1%, 9.2% and 8.8% respectively.  
118. From the Reports we also learn that Sri Lanka has been able to withstand the negative effects 
of the global economic crisis thanks to the fiscal  and economic stimulus measures. The EU would 
appreciate if Sri Lanka further elaborates on the content of these measures. 
119. During the previous Review in 2004, the EU ra ised questions concerning tariff policy, import 
licences, sanitary and phytosanitary standards, Sri Lanka's trade strategy and policy, government 
procurement, intellectual property rights, telecomm unications, electricity, financial and distribution 
services and insurance as well as corruption. We also urged Sri Lanka to continue with fiscal and 
economic reforms and policies and actions for export diversification and to liberalise services sectors 
in all areas covered by the WTO. During this Review , we would like to come back to some of these 
issues, as raised in detail in our written questions.  
120. There are still concerns regarding lack of tran sparent and predictable systems on the ground, 
and regarding for instance the complex import charges, where an importer might be subject  WT/TPR/M/237 
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  approximately to half a dozen of different of ta xes such as import duty, national building tax, VAT, 
excise duty, port and airport development levy, soci al responsibility levy, etc.  These charges increase 
considerably the cost of import, and in add ition, double taxation on importers applies. Foreign 
investors and traders need a simplified and unified tax structure.  
121. In addition we remain concerned about:  govern ment procurement prac tices, which are often 
unclear and accompanied by long delays with a tendency of domestic supplier preference;  the 
investment regime, and more specifically, the setti ng up of companies by foreigners in Sri Lanka due 
to complexity of requirements of the Board of Inv estment of Sri Lanka and due  to other restrictions. 
These complicated procedures slow down the process of trade and FDI;  intellectual property rights 
enforcement, which despite the 2003 IPR comprehe nsive legislation remains a source for concerns. 
122. As the matter is mentioned in both reports, I would also briefly touch upon the temporary 
withdrawal of the GSP+ preferences.  One of the key priorities of the EU trade policy is to be 
consistent with and consolidate the objectives of th e development policy. This integration has been 
given greater prominence by means of the GSP+  scheme which aims at encouraging developing 
countries to comply with international standards relating to human and labour rights, environmental 
protection and good governance. It thus serves as an "incentive" for countries to ratify and implement 
key UN and ILO instruments. 
123. There are clear rules and procedures to be followe d in order to qualify for or to be removed 
from GSP+, laid down in the Regulation applying the scheme of generaliz ed tariff preferences 
(EC) 732/2008 of 22 July 2008. GSP+ beneficiaries know the rules, they are straightforward and transparent:  GSP+ preferences can be extended to a vulnerable country which has ratified and 
implemented international standards in the form of 27 international conventions. The preferences can 
be temporarily withdrawn if the national legislation of a beneficiary country no longer incorporates 
the international UN and ILO conventions listed in th e GSP Regulation or if that legislation is not 
effectively implemented. 
124. The EU was happy to learn from the Reports th at in June 2010, the Government announced 
an overall reduction in tariffs, lowering many rates to zero, and eliminated a 15% import surcharge 
applied on most imports. Another positive development was that the Government of Sri Lanka intends 
to deepen the process of reform and moderniza tion the business environment by unifying and further 
reforming its incentives regime and introducing co mprehensive competition policy legislation. The 
latter is particularly important, since at the moment there is no comprehensive single law on competition. 
125. Another important policy development since the last Review has been the implementation of 
the WTO Customs Valuation Agreement (CVA). Howe ver, Sri Lankan legislation still grants the 
authorities the flexibility to depart from CVA rules when deemed necessary, in the interest of the 
national economy or for any other reason, allowing fo r the use of minimum values.  Also, we hope to 
get confirmation soon that the two bills contai ning provisions on antidumping, countervailing duties 
and safeguard measures will be  approved by the Parliament. 
126. Sri Lanka has been addressing a number of important dom estic factors for the furthering of its 
development and prosperity. Main streaming trade into national development strategies is a very 
important element and the EU as one Sri Lanka's main trading partners and donors welcomes this 
encouraging development. We also welcome the strengthened South-South cooperation in Aid for 
Trade activities. 
127. To conclude, we would encourag e Sri Lanka to continue its im portant work, embedded in its 
WTO Membership. Of course, trade and investment can only reach their full potential in a conducive WT/TPR/M/237 
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  environment. This is where economic progress needs to  be complemented by progress in areas such as 
the rule of law, individual freedoms and security . 
THAILAND 
128. Thailand and Sri Lanka have en joyed long and well established re lations for more than 800 
years. Our history dated back since the 12
th century when Sri Lanka first sent an envoy of Buddhist 
monks on a journey to help reform Buddhism in Th ailand. Since then, the relations between our two 
countries have broadened significantly, particular with  respect to trade and investment where we have 
exchanged a high growth and complimentary structure, covering both agricultural and non-
agricultural products such as cement, textiles, pl astic resins, sugars, je wellery and rubbers.   
129. When reading the Trade Policy Review Reports of Sri Lanka, it is, indeed, highly 
encouraging to see so many commendable stories. For instance, despite ex periencing the internal 
conflict, the aftermath of tsunami, and the global ec onomic crisis, Sri Lanka ha s nevertheless able to 
remain resilient and maintain robust and consecutive growth of more than 6% on average. This has 
been supported mainly by strong domestic de mand and imposition of fiscal measures which has 
allowed the GDP to double during the period under review.  
130. In terms of trade policy framework, Tha iland recognizes that Sri Lanka has increasingly 
integrated itself into the world economy through its  active participation in  various multilateral, 
regional and bilateral trade negotiatio ns. This effort will certainly he lp Sri Lanka in attracting FDI, 
expanding productivity and employment, as well as improving market access for its goods and 
services in various markets. We also appreciate the level of openness in its foreign investment regime together with a wide range of investment incentives.  
131. On trade policy development, autonomous and improved intellectual property rights 
protection and limited non-tariff barriers as well as internationalized technical regulations has 
demonstrated Sri Lankan commitments to trade liberalization.   
132. However, we share our view with the Secretaria ts that since agriculture plays an important 
role in Sri Lankan economy, therefore concerted efforts to continue reducing import protection 
measures, rationalizing domestic support, and implementing a more consistent trade policy would 
lead to more efficient allocation of resources, which will consequently lead to an increase in 
productivity as well as in farmers' incomes. 
133. In closing, we are of the view that with sli ght adjustment in trade policies and measures, Sri 
Lanka would indeed become a st rong contributor to the multilateral trading system.  In this 
connection, we have provided some specific questi ons in writing to seek for clarification on a few 
points of our concerns, and we appreciate Sri La nka for providing us the responses on our questions 
today and we will forward them to our capital for their consideration. 
ARGENTINA 
134. Despite the negative impact of the global financia l crisis on the growth of trade in developing 
countries over the last two years, we welcome the fa ct that Sri Lanka's economy grew at an average 
rate of 6% in the period 2004-2009.  Such growth is also a reflection of policies aimed at achieving 
greater integration of the country in the world economy by encouraging foreign direct investment and enhancing overseas market access for Sri Lankan products. 
135. Nonetheless, although trade reform includes st eps to enhance transparency it has also 
introduced new border levies which have, on average, increased protection and have, in some cases, 
risen above the bound rates.  Since its previous Re view, Sri Lanka has made extensive use of various  WT/TPR/M/237 
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  taxes that significantly increase costs at the border beyond the tariff rates, which in some cases may 
exceed 100%. 
136. Although Sri Lanka makes relatively little u se of non-tariff barriers, the Imports 
(Standardization and Quality Control) Regulations  2006 provide for the application of technical 
standards to over 100 tariff headings, which incl ude agricultural products such as powdered milk, 
butter, and soya bean and sunflower seed oil. 
137. The Secretariat Report further notes that import r estrictions are maintained mainly relating to 
sanitary and phytosanitary measures.  Argentina's questions in this connection are directed at 
obtaining more extensive information regarding these products of considerable interest to Argentina. 
138. Implementation of the WTO Agreement on Cust oms Valuation is worthy of mention during 
this review period.  We trust that the near futu re will see Sri Lanka adjust the margin of flexibility 
allowing its authorities to apply minimum values and thus depart from the provisions of the Agreement when necessary in the interest of the national economy. 
139. Also of note are Sri Lanka's ambitious targets under the "Mahinda Chintana" Framework, 
which identifies international trade as one of the significant macroeconomic instruments to achieve 
the country's development goals.  We hope that  Sri Lanka will continue to focus on increasing 
integration of its economy in global markets. 
NIGERIA 
140. Nigeria enjoys excellent relations with Sri La nka.  Both are members of the G-33, and share 
the position that addressing the underlying problems of food and livelihood security, as well as rural 
development needs of developing countries, cons titute a concrete expr ession of our rights to 
development and poverty reduction. 
141. On the basis of the Secretariat's Report, Nigeria wishes to commend Sri Lanka for 
maintaining a fairly open and transparent regime, incl uding relatively low tariffs.  It is also worthy of 
note that the performance of Sri Lanka's economy  during the period under review was strong despite 
various challenges, inter alia , internal conflict, the unfortunate effect of a tsunami, and external 
shocks arising from food prices and the global econom ic and financial crisis.  In spite of these 
prevailing challenges, it is interesting to note th at the GDP expanded by a solid growth of 6%.  
Expectedly, Sri Lanka responded through a number of  fiscal measures to in crease taxes, including 
measures in support of export-oriented industries.  We believe that sustainable economic growth, 
ongoing reforms and further opening of the economy, w ould no doubt contribute to export growth and 
diversification. 
142. Agriculture remains the backbone of Sri Lanka's economy.  The challenges facing the 
Government include:  increasing production to en sure food and nutritional security, raising small 
farmers' income levels, shifting to commercial agri culture and promoting diversification into higher 
value added products.   With the hi gh level of rural poverty, the sector has been linked to the issue of 
achieving food security and rural development.  This largely explains the active role that Sri Lanka is 
playing in the agriculture negotiations through its  membership of the G-33.  According to the 
Government Report, several po licies being implemented by th e Government include import 
liberalization, relaxation of excha nge controls, facilitating foreign dir ect investment and private sector 
driven economic strategies.  These initiatives are responsible for making Sri Lanka an attractive 
location for international business. 
143. 
In conclusion, Nigeria like others, would like to  acknowledge Sri Lanka's contributions to the 
multilateral trading system especially, its strong commitment and support towards a successful WT/TPR/M/237 
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  conclusion of the DDA negotiations through constructiv e and analytical contributions, notably in the 
area of technical barriers to trade, geographical indications, preferences and trade facilitation.  Hence, its main trade policy thrust continues to be aime d at achieving greater integration into the world 
economy, as highlighted in the Secretariat Report.   Sri Lanka, as a net food importing developing 
country, places importance on the need for flexibilities to safeguard rural development, the livelihood 
of farmers and food security.  Furthermore, Sri La nka should be encouraged to benefit from schemes 
such as GSTP and Aid for Trade to enable her addr ess several of the challenges highlighted above.    
MALDIVES 
144. The Maldives notes the efforts of Sri Lanka to  enhance their trade policy and the progress 
made since last review in early 2004.  During the review period, Sri Lanka h as maintained an average 
economic growth rate of 6% a nd has doubled the per-capita income from US$1,062 to US$2,053. 
This impressive growth was achieved in spite of the previous civil conflict, the global economic 
downturn and the devastation of the tsunami of  December 2004. The economic performance during 
the review period highlights the r esilient nature of the economy.  
145. The Maldives supports the ongoing efforts of th e Sri Lanka Government to diversify its 
economy and make it more competitive, including th rough bilateral and regi onal initiatives with the 
neighbouring countries. As mentioned in the Gove rnment's report, we appreciate that Sri Lanka 
provides preferential tariffs to agreed products un der the South Asian Preferential Trade Agreement 
(SAPTA)  and the South Asia Free Trade Agreem ent (SAFTA). Also we note from the Government 
report that their trade policy aims at minimizing the use of non-tariff barriers.  
146. As neighbouring countries, the Maldives and Sri Lanka enjoy close relations based on mutual 
respect, friendship and shared interests. We have hist oric trade links that goes back to centuries.  Our 
bilateral trade relations and econom ic cooperation continue to grow from fisheries to such areas as 
tourism and tourism support services. 
URUGUAY 
147. Sri Lanka made substantial efforts during the pe riod under review to enhance transparency 
and is to be commended for keeping and publishing figures and measures adopted in order to comply 
with the commitments undertaken in this Organization. 
148. Sri Lanka also accords due prominence to the development objectives of the 
Doha Development Agenda and con tinues to engage actively in the WTO negotiations with a strong 
belief that the rules-based multilateral trading syst em embodying transparency and equality is still the 
best option to address global economic challenges. 
NEPAL 
149. Nepal and Sri Lanka are ancient friends. The long history of friendship traces back to the birth 
of Lord Buddha and spread of Buddism in Sout h Asia. Both of these countries share common cultural 
heritage of Buddhism. Lord Buddha, who is also called the light of Asia, was born in Nepal around 
2,500 years ago and Buddhism is one of the most widely followed religions by the people of Sri 
Lanka. Sri Lanka has built a magnificent Buddhist Monument in Lumbini, the birth place of Lord 
Buddha, which was recently visited by Right Honorab le President of Sri Lanka.  Buddhism is one of 
the most important factors to contribute to closer ties between our two countries and recently has become one of the major sources of pilgrimage tourism in Nepal. Both countries are active and 
important members of SAARC and BIMSTEC regi onal agreements. As these agreements will 
intensify our economic relations will grow.  Even in the bilateral le vel we are seriously engaged in 
increasing our ever growing economic , cultural and political relations.  WT/TPR/M/237 
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  150. The people of Nepal have high regards to the great people of Sri Lanka and appreciate the 
pace of progress achieved by Sri Lanka even amidst the intensive armed conflict, natural disasters and 
several other crises. We believe that Sri Lanka will grow even faster in the coming years.  WT/TPR/M/237 
Page 28  
 
  V. REPLIES BY THE REPRESENTATIVE OF SRI LANKA AND ADDITIONAL 
COMMENTS 
151. Several delegations raised ques tions both orally and in writing which helped us to better 
understand the concerns of our tradi ng partners and we would certainly  take note of them for further 
improvement of our future trade policies.  Cons idering the wide variety of trade policy issues on 
which clarifications were sought, I wish to provide our responses under three broad themes:  
Economic and Institutional Environment, Trade Po licies by Measure, and Sectoral Policies, for 
purposes of clarity. 
Economic and Institutional Environment  
152. Firstly, as regards the economic policy and the fi scal deficit related issues, while thanking 
delegates for commending the achievements of Sri Lanka on economic and social fronts under 
challenging circumstances, we note that many delega tes wished to ascertain the steps that would be 
taken to reduce the fiscal deficit to a lower level. 
153. It must be appreciated that, as in the case of many other countries, Sri Lanka too was 
adversely affected by contraction of its external tr ade as a result of the global financial and economic 
crises.  In addition, other factors which contributed to the deficit are – the faster than expected aid 
disbursement on infrastructure projects, higher inte rest payments, shortfall in revenue due to the 
global recession and post conflict rehabilitation and humanitarian expenditure, as well as costly 
demining of the former conflict affected areas. 
154. The positive impact of ending the conflict and the recovery of the domestic economy has 
somewhat eased the pressure on fiscal management .  The government remains committed to fiscal 
consolidation in terms of a broad framework stipul ated in the Fiscal Management Responsibility Act 
(FMRA) to reduce the budget deficit to 5% in 2012.  The Government is also committed to maintain a 
flexible exchange rate regime with limited inte rventions in order to prevent wide fluctuations. 
155. Secondly, on the subject of trade and investme nt regime, there were concerns regarding the 
complexity of tax incentives for investments.  In  this regard, a Commission on Taxation has been 
appointed and its mandate includes assessing the im pact of incentive programmes.  Findings on this 
Commission, which include proposals to simplify th e tax regime, have already been presented and 
will be dealt with as appropria te, in the forthcoming budget. 
156. A number of delegations sought clarification on Sri Lanka's strategy on Aid for Trade and for 
mainstreaming trade into its national developmen t strategy.  The Govern ment of Sri Lanka has 
identified a number of priority areas, in this re gard, including trade policy analysis, negotiation and 
implementation, and building productive capacity thr ough export diversificati on and competitiveness.  
As stated in the Secretariat Report, the deve lopment strategy of the Government provides for 
particular focus on regional development, through pr ograms in regions outside of Colombo, including 
the establishment of export-oriented industries in  those areas.  With respect to infrastructure 
development, the focus is on connectivity, with ro ads, ports and airport development being key areas 
identified for development, along with  investment in power generation. 
157. Diversification of exports has been and w ill be an important pa rameter of our export 
development strategy plans to lessen the heavy de pendence for export earnings on a few items;  for 
example, over 60% of total export earnings of Sr i Lanka are derived from two products at present 
(garments – 44% and tea – 17%).  Therefore, the Government along with the private sector has taken 
the initiative to further diversify the country's e xports.  The diversification efforts will focus on 
expanding export earnings from the following prod uct sectors:  rubber based products, diamonds, 
gems and jewellery, food and beve rages, spices and allied produc ts, fish products, coconut based  WT/TPR/M/237 
 Page 29 
 
 
  products, electrical and electronics items, petrol eum products, printing and stationery and boat 
building.  In the area of services the focus is on ICT and BPO services as well as other professional 
services. 
158. Similarly, Sri Lanka would also need to dive rsify its markets to reduce its dependence on a 
few developed country markets for most of its exports.   It is also necessary to underline the fact that 
Sri Lanka's competitiveness in some of these markets has significantly eroded due to the 
discriminatory preferential trading arrangements adopted by these countries.  As a result, our 
exporters who pay high MFN rates have to compete in these markets, with countries which have duty free access. 
159. Sri Lanka has always used trade, particularly  exports, as one of the main instruments in 
achieving its sustainable development and poverty alleviation objectives.  Some of the initiatives 
undertaken by the private sector firms in this area include the green apparel factories, which are of 
path breaking nature.  The Government has also encouraged the establishment of export-oriented 
factories in the provinces, in order to achieve  more sustainable development in the country. 
160. However, the main obstacle to promote of su ch initiative stems from the trade policies of 
some of our developed country trad ing partners, many of whom provide trade preferences to countries 
at higher income levels without any requirement to  integrate sustainable development standards in 
their preferential arrangements.  This results in the diversion of trade and investment away from countries like Sri Lanka. 
161. Even the instruments that were developed to reward sustainable development appear to be 
guided by political objectives in their implementation, rather than by the objectives of the sustainable 
development.  In the implementation of the GSP+ arrangement, in particular, we note that different 
standards are applied against different countries, esp ecially with regard to the implementation of the 
27 Conventions.  The implementation of such arrange ments, we believe, should not only appear to be 
fair but should also truly be fair, as per WTO oblig ations.  We observe simila r disparity in treatment 
by some Members on the issues relating to governance and the rule of law. 
Trade Policies by Measure  
162. Let me now turn to the series of questions rela ted to certain trade policy practices maintained 
by Sri Lanka.  There was a question on customs procedures, border inspection and risk assessment.  In this regard, I wish to emphasize that presently over  90% of the consignments are released on the same 
day, provided duties and other levies are paid  and necessary approvals from other government 
authorities such as food, SLSI, quarantine, etc. are av ailable.  Some consignments are delayed due to 
reasons beyond the control of the Customs.  Howe ver, if the consignments are detained by the 
Customs for investigations on a suspected fraud, there could be delays. 
163. On the subject of custom valuation, several Members expressed their concerns over the 
valuation procedures adopted by the Sri Lanka Custom s.  The Customs values of used motor vehicles 
are determined according to the WTO Customs Va luation principles, through a depreciation-based 
mechanism.  The value of such vehicle when brand new is obtained from the local agent of the 
supplier and appropriate depreciation is considered for the period of usage to  determine the Customs 
value.  This method is recommended by the WCO Technical Committee on Customs Valuation.  The 
relevant Gazette Notification which refers to "m inimum value" has to be accordingly amended and 
this will be corrected in due course.  The Custom s Value of a brand new vehicle on the other hand is 
determined primarily on transacted value and not on a minimum value system. 
164. Several Members raised questions on tariffs , excise duties and other levies applied to 
imported goods.  These charges refer to a variety of protection measures which are in place with WT/TPR/M/237 
Page 30  
 
  different objectives.  First of all, as we have ela borated in our written answers, these charges were 
introduced during the latter part of the conflict for revenue objectives.  Secondly, most of these 
measures are applied in a non-discriminatory manne r between imported and do mestic products.  For 
example, excise duty is levied on both imports as well as domestic products.  Finally, we wish to mention that measures are being taken to simplify a nd streamline tariffs and other levies on most of 
the goods through the national budget. 
165. We appreciate questions raised by Members on i ssues relating to import license requirements.  
Sri Lanka maintains an import license requirement fo r some goods mainly due to health, security and 
environmental reasons.  Any individual, organizatio n or company can apply for import licenses.  The 
import control licenses, as gazetted under the Import and Export Control Act, are issued based on the 
recommendations from the line ministries taking into  consideration the objective of the relevant 
restrictions.  For example, if an item has b een brought under license because of environmental 
reasons, then the license is issued on the reco mmendation of the Ministry of Environment. 
166. Several delegations sought an upda te of our national legislation on trade remedial measures.  
Draft legislation on anti-dumping and countervailing duty measures is in the process of being 
submitted for parliamentary approval. 
167. A number of questions have been raised by several Members regarding procedures, standards 
and SPS measures maintained by Sri Lanka with re gard to the importation of animal products and 
products of animal origin.  Our responses are as follo ws.  All food and agricultural products imported 
for human consumption are regulated under the Food  Act and its regulations .  Regulations under the 
Food Act are formulated taking into account Codex guidelines and the WTO principles of the SPS 
Agreement.  Sanitary and phytosanitary measur es are increasingly being harmonized with the WTO 
Agreements;  however further institutional st rengthening to support the process is needed. 
168. National Standards are formulated and adopted  through an inter-Ministerial Committee in 
which representatives from the Food Advisory Comm ittee also participate through a consensual 
process.  In a recent development, the Health Ministry has adopted national standards for food 
products developed by the Sri Lanka Standards In stitutions (SLSI) under the Food Act in the absence 
of similar standards under the Food Act.  However, SLSI is represented in the Food Advisory Committee where food related policy matters are discussed and therefore these institutions have 
proper coordination between themselves in relation to  food related standards and regulations.  The 
meat and poultry products are jointly inspected and certified by the Health Ministry and the Department of Animal Production and Health to prevent transmission of Zoonotic diseases. 
169. Some Members have requested further informa tion on the proposed EXIM Bank and its role 
in trade financing.  The creation of an Exim Bank has been a long felt need due to the limitations in 
existing trade financing schemes.  Plans to set up the bank also incorporate the objectives of 
integrating the Sri Lankan economy with the global economy by promo ting, financing and facilitating 
international trade and investments.  Op erational details are not yet finalized. 
170. On the question of compatibility of certain export schemes with the disciplines under the 
Agreement on SCM, Sri Lanka being a developing c ountry included in the Annex VII(b), enjoys the 
flexibility in Article 27.2(a).  Sri Lanka has not yet graduated from Annex VII(b)  of this Agreement.  
In addition, Sri Lanka has also reserved its rights in the General Council Decision of July 2007 in this 
regard. 
171. With regard to Members' concern about the tax system, it must be pointed out that the Tax 
Commission was appointed with a wider coverage to study the country's tax system, including the two 
tax regimes (i.e. BOI and non-BOI) and to propose a rational and equitable mechanism through which 
strategically important investments could continue  to be attracted.  The Tax Commission Report has  WT/TPR/M/237 
 Page 31 
 
 
  been submitted and its recommendations  would be considered for inco rporation as appropriate in the 
forthcoming national budget during November 2010, as stated before. 
172. With regard to the concerns raised ove r the operation of STEs, as we observe, the 
notifications to the WTO with respect to STE are la rgely limited to State enterprises which have been 
granted exclusive or special rights or privileges in cluding statutory or constitutional powers, in the 
exercise of which they influence through purchases or sales, the level or direction of imports or 
exports.  None of the Sri Lankan STEs are covered by this defin ition hence there is no need for 
notification.  The current policy of the Government is to encourage public-private partnership for the 
public enterprises as against privatization.  The G overnment is also contemplating broad basing of 
their ownership structures through the share market. 
173. On government procurement, Sri Lanka is not a party of the WTO GPA.  However, our 
guidelines represent a harmonized procurement policy wh ich are in line with international guidelines 
and documents such as FIDIC which embody the princi ples of public procurement such as fairness, 
transparency, open competition, etc.  These principl es therefore govern our government procurement 
system.  Moreover, an appeal process is also provided within the system to address procurement 
complaints.  Meanwhile, the Ministry of Finance con tinually maintains an overs ight of all government 
procurement activities. 
174. A delegation raised a question on competition polic ies.  While noting this specific area does 
not fall within the ambit of substantive WTO disci plines, I wish to state that Sri Lanka's draft 
competition legislation based on amendments to the existing Consumer Affairs Authority Act No. 9 of 
2003 is awaiting clearance from the Attorney General for Parliamentary enactment.   
175. Some Members have also raised queries about the steps that have been taken to address 
enforcement of IPR laws in Sri La nka.  Sri Lanka has already enacted intellectual property legislation, 
namely the Intellectual Property Act of 2003.  Th e National Intellectual Property Office has been 
conducting training for customs and police officers.  These activities are carried out in Colombo as 
well as in the regions.  These training and awareness building activities will continue and users of IP 
rights and the public will be educated on the importan ce of respect for IP rights, thereby discouraging 
their infringement to the maximum possible level.   Increased attention is being paid to the 
enforcement aspects in a more coordinated environmen t by the relevant authorities through training of 
enforcement official, awareness building on respect fo r IP rights, the establishment of special units 
within the Sri Lanka Police and Customs, and th rough a proposal to establish a national IP academy 
with WIPO assistance. 
Sectoral policies  
176. In relation to agriculture policies, as in many  developing countries, government intervention 
in agriculture in Sri Lanka is largely based on food security, livelihood security and rural development 
needs.  The agricultural sector consists of a majority  that is 90% of small holders with less than one 
acre of land and most remain resource-poor, namely small land holding size, subsistence cultivation, 
lack of capital, etc.  The Government encourages fu rther private sector involvement in agriculture to 
reduce rural poverty, malnutrition and unemployment,  where the national indicators remain matters of 
concern for policymakers.  Sri Lanka is also a Net Food Importing Developing Country. 
177. Frequently, the Government also has to main tain a delicate balance between the consumer 
interest and the interest of the producer.  Howeve r, the government intervention in agriculture is 
largely limited to research and development, input subsidies to smallholders and border protection 
through import duties which is th e only policy instrument available for us.  The scale of market 
interventions remains extremely limited.  Because of these policies, Sri Lanka was able to mitigate the 
impact of the global food crisis without adverse impact on the poorer segments of the society. WT/TPR/M/237 
Page 32  
 
  178. Agricultural policy instruments of Sri Lanka aim at stabilizing farmers' income, avoiding 
domestic price escalation, and managing the supply  situation.  The number of tariff lines on 
agricultural products subject to specific duties, rema in at minimum level while the majority of the 
products are subjected to ad valorem  duties.  The need to streamline the distribution channel of the 
fertilizers while encouraging the balanced use of  fertilizer through effective extension services has 
been recognized by the Government for future implementation. 
179. In the area of services, Sri Lanka has al ways remained a liberal market though its 
commitments in GATS remain modest.  Sri Lanka is presently considering increasing its level of 
commitments in GATS as well as through the re gional trading arrangements, namely SAARC 
Agreement in Trade in Services a nd Asia Pacific Trade Agreement. 
180. In the area of basic telecom services, Sri La nka's level of liberalization has already gone 
beyond the level of its commitments in GATS, even though the Government is yet to undertake an 
economic need assessment regarding future teleco m infrastructure requirements.  Depending on the 
outcome, suitable decisions will be taken to expand  existing investments and/or inviting new entrants 
to the sector.  In the area of financial services, the Central Bank of Sri Lanka pays special emphasis to 
the economic needs criteria, for example, economic growth and banking density, with priority given 
to service enhancing proposals that are capable of addressing presently unfulfilled needs in sectors 
such as the small and medium enterprises.  The gui delines on Opening of New Banks in Sri Lanka can 
be accessed on the CBSL website under th e section titled Laws and Regulations. 
181. In conclusion, this TPR gives us an opportu nity of understanding our trading partners' 
concerns and to reflect upon in order to improve our trade policies.  I therefore thank all the Members 
who participated in our Review for their ques tions, interventions and constructive comments. 
DISCUSSANT 
182. I think it is worth highlighting that yesterday,  delegations made positive observations in their 
statements, especially on Sri Lanka's impressive  economic growth and forward-looking measures, 
which point to a promising future for Sri Lanka. Sri Lanka's role in th e DDA negotiations and its 
commitment to the multilateral trading system we re also a common theme in the interventions. 
Several delegations mentioned that their bilateral trade with Sri Lanka has been on a rising uptrend, 
with good potential to continue in this direction.  Some also pointed out th at they have companies 
operating in Sri Lanka, and hope to sust ain and expand these investments.   
183. It is with this in mind that delegations had po sed questions geared around an interest in seeing 
Sri Lanka work towards greater participation in the WTO and implement policies that enhance its 
attractiveness as a trade and investment destination.  I believe that one of th e most useful aspects of 
the TPRB is the opportunity it gives Members to provide frank assessments and encouragement to the 
Member economy undergoing the Review. It is my hope that the constructive suggestions Members 
have made on issues such as reducing import charges, streamlining licensing systems, simplifying tax structures, and implementing commitments and legi slation, among others, w ill be taken on board and 
considered positively.  These suggestions are geared  towards the aim of seeing a more predictable 
business environment in Sri Lanka.  It is my belief th at once taken on, Sri Lanka will be able to ensure 
even more impressive future growth through trade and investment.  In the long run, this will be to the 
advantage of Sri Lanka, and to South Asia as a whole.   
184. 
I take this opportunity to mention that Singa pore is, of course, among those who enjoy good 
relations with Sri Lanka and we hope to see our bilateral trade, investment, and tourism trends 
continue in its positive path.  I must thank our I ndian colleague for reminding us yesterday of the 
deep, personal, and historical links that Singapore sh ares with Sri Lanka.  We have been fortunate to 
have had many prominent Singaporeans of Sri Lankan descent serve our country.  This includes our 
first Foreign Minister S. Rajaratnam, who later went on to also serve as Deputy Prime Minister.   WT/TPR/M/237 
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  185. On this note, I will conclude, by again expressi ng thanks to the Sri Lankan team and the other 
delegations, all of whom participated actively in  this session.  The good level of engagement has 
certainly contributed to a meaningful excha nge at Sri Lanka's third Trade Policy Review. 
EUROPEAN UNION 
186. We do have a few follow-up comments and questio ns which we will s ubmit in writing and we 
expect a reply in due course.  I w ould only refer to the issues that we would like to seek some further 
clarification and comments from Sri Lanka. 
187. The first comment refers to the Annual Report and Statement of Account of the Bribery and 
Corruption Commission. The EU would like to know whether the latter Report and the Statement of 
Account are public documents, and also, if Sri Lanka could report on progress and results among the 
activities implemented by this Commission.  
188. The second comment relates to the same topic.  We  have noted in the reply by Sri Lanka that 
there have been anti-corruption activ ities in the past by special interest groups from outside as well as 
within the state sector. Therefore we would kindly ask Sri Lanka to mention some of such activities, 
and by which groups they were carried out. 
189. The third comment relates to the measures whic h have been taken by Sri Lanka to simplify 
and streamline tariffs and other levies on most of the goods through the national budget which the EU 
would like to welcome. We have noted in the repl y by Sri Lanka that most of the import levies as 
described in the Secretariat's Report are non-discrimin atory.  However, we see that many of these 
levies are directed only to imports.  The Eur opean Union would therefore once again like to 
emphasise the importance of bringing these measur es in compliance with WTO rules requiring non-
discrimination.  
190. Fourthly the EU would like to thank Sri Lanka in presenting a very comprehensive list of all 
the duties, taxes, levies it applied to imported sp irits and locally produced spirits. Based on these 
tables, there appears to be discrimination between  imported and domestic goods due to the several 
taxes levied only on imports.  Therefore we have to seek a few more specific clarifications on that 
which we prefer to submit in writing. 
191. Fifthly and lastly, Sri Lanka mentions in its reply that the two bills containing relevant 
provisions on safeguard measures are in the process of Parliamentary approval and are fully compatible with the WTO rules in this area.  We would like to seek further information on the content 
of these bills. 
ARGENTINA 
192. Argentina hopes to maintain the contacts it has es tablished here in Gene va because replies to 
its questions are still pending.  As  we understand it, our questions on SPS matters may have been too 
specific and our suggestion is that the next SPS Co mmittee meeting could perhaps be an opportunity 
to obtain replies to our questions from the Sri Lankan delegation.  Argentina has also submitted 
two further questions - one relating to policy in the manufacturing sector and the other concerning 
legislation on biotech products, to which we hope to receive answers as soon as possible. 
CANADA 
193. We would simply like to note that we will be fo llowing up with a couple of questions just to 
seek some further clarifications.  WT/TPR/M/237 
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  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
194. This third Trade Policy Review has allowed us to understand better the efforts undertaken by 
Sri Lanka to continue its economic reform process,  keeping overall an open approach to trade and 
investment, notwithstanding important domestic a nd external challenges.  Our discussions have 
benefited from the participation of Mr. Tilak Collu re, Secretary in the Ministry of Industry and 
Commerce;  Mr. Gomi Senadhira, Director General of Commerce;  Ambassador Silva, Permanent 
Representative to the WTO, and their delega tion from Colombo and Geneva.  We thank 
Ambassador Tan for her valuable contribution as a discussant, and Members for their constructive 
engagement in this review.   
195. Sri Lanka was praised by WTO Members for its  solid economic performance over the period 
under review, despite the internal strife, the global economic crisis, and a major natural disaster.  In 
particular, Members commended Sri Lanka for almost  doubling its per capita GDP during the review 
period.  Members encouraged Sri Lanka to build on th e return to peace and stabil ity in order to deepen 
the reform process so as to achieve sustainabl e economic growth and de velopment and further 
improve the living standards of its population.   
196. While noting that Sri Lanka had weathered the effe cts of the global financial crisis relatively 
well, Members highlighted the importance of addr essing some remaining challenges, including public 
finance consolidation, a comprehensive tax reform , the restructuring of state-owned enterprises, 
deepening regulatory reform, including competition po licy, and improving the business environment. 
Members welcomed the fact that Sri Lanka had mainstreamed trade policy in its development strategy and encouraged it to step up efforts to diversify expo rt products and markets.  In this connection, it 
was noted that export diversifica tion was one of the areas identified by Sri Lanka for aid-for-trade 
assistance.   
197. Members noted that Sri Lanka's trade and investment regime is generally open.  It was also 
noted that Sri Lanka's trade policy relies mainly on the use of price-based measures, while resort to 
non-tariff measures is relatively limited.  Member s commended Sri Lanka for lowering tariffs and 
eliminating a 15% tariff surcharge in June 2010.  However, they noted that the current average MFN 
tariff was higher than in the previous review.  Members also expressed concern regarding the large 
number of charges and taxes on imports still in pl ace, which resulted in high border protection and 
added complexity to the trade regime.  Member s were concerned about some 103 tariff lines that 
exceeded their bound rates;  Sri Lanka was also inv ited to increase the scope of its tariff bindings in 
the WTO.   
198. While acknowledging that Sri Lanka had star ted implementation of the WTO Customs 
Valuation Agreement during the review period,  some  Members were worried that national legislation 
allowed for the discretionary use of minimum va lues.  Members sought further clarification on 
Sri Lanka's regulatory framework for sanitary and phitosanitary measures as well as on technical 
regulations that apply to about 100 tariff lines including some agricultural products.   
199. Members questioned the rationale for grantin g tax concessions contingent upon export 
targets, and encouraged Sri Lanka to streamline its investment incentive regime.  Members noted 
Sri Lanka's use of domestic preferences in gove rnment procurement practices and encouraged 
Sri Lanka to consider the benefits of joining th e WTO Government Procurement Agreement.  They 
also encouraged Sri Lanka to st ep up enforcement of intellectual property rights and to adopt 
competition policy legislation.    
200. Acknowledging the importance of agriculture for Sri Lanka's economy, Members 
recommended further efforts to reduce import protect ion, rationalize domestic support, and implement  WT/TPR/M/237 
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  a more consistent trade policy so as to improve  resource allocation and enhance productivity in 
agriculture.    
201. Members recognized Sri Lanka's liberalization efforts in a number of services activities, in 
particular in financial services and telecommuni cations, which had led to market expansion and 
increased competition.  However they noted that th e State retained a strong presence in some areas, 
including transport, infrastructure and banking.  Members, thus, encouraged Sri Lanka to renew 
efforts to advance regulatory reform, increase priv ate sector participation, and establish a level 
playing field for new entrants. 
202. Let me conclude this Review by congratulati ng Sri Lanka for its accomplishments during the 
last few years, including high economic growth and improvements in living standards, and keeping a 
generally open trade regime amidst difficult ci rcumstances.  The Trade Policy Review Body 
encourages Sri Lanka to continue on this path and address the remaining challenges identified in this 
review.   The interesting questions raised and the many interventions indicate Members' interest in 
Sri Lanka's trade policy, and by the same token, the comprehensive answers provided by Sri Lanka 
are a reflection of the importance it attaches to the multilateral trading system, as expressed by 
Mr. Collure in his opening statement yesterday.  I would once again like to thank the Sri Lankan 
delegation for their efforts, the discussant for her comments, and Members for contributing to what 
has been a very enlightening two days of discussions. 
__________