This second Trade Policy Review of Sri Lanka has provided a constructive exchange of views between Sri Lanka and its trading partners, thereby clarifying many aspects of Sri Lanka's trade policy regime. The resulting discussion has been greatly facilitated by the valuable contributions of Secretary Wickremasinghe, together with the other members of his delegation, and our discussant, Ambassador Muhammad Noor Yacob.

Members commended the Government's efforts to press ahead with the reconstruction and rehabilitation programme outlined in the policy document “Regaining Sri Lanka? encouraging the authorities to continue trade and other economic reforms, which along with lasting peace would be essential for the achievement of sustained economic growth and poverty reduction. Members reiterated their support for Sri Lanka's peace and reform process and expressed their readiness to contribute to it. They praised Sri Lanka's privatization initiative and steps to deregulate the petroleum and energy sectors. Concerns were raised about Sri Lanka's heavy dependency on a few export markets and products, such as textiles and clothing.

Members appreciated Sri Lanka's constructive involvement in the WTO and urged the authorities to continue its active participation in the current negotiations on agriculture, industrial products and services. They noted Sri Lanka's shift towards regional agreements. In response, the authorities reiterated the country's firm commitment to the primacy of the multilateral trading system, stressing that their regional agreements would complement multilateralism.

Several Members expressed concern about the tariff regime's lack of predictability and transparency. They also noted, inter alia: the high level of applied MFN tariffs, particularly for agricultural products; the low percentage of bound rates; the large gap between bound and applied rates; high tariff escalation and consequently high effective protection. Members also remarked on other import charges (notably the surcharge and the Ports and Airports Development Levy) and encouraged Sri Lanka to overhaul its duty exemptions. Members referred to the special import licensing regime and sought clarification on which goods were subject to licensing for “economic reasons? In addition, questions were raised regarding import restrictions on meat products, import prohibitions on GM products, standards, and contingency measures.

Members welcomed the simplification of customs procedures, particularly the introduction of computerized systems for customs clearance, and encouraged further streamlining. On government procurement, Members commented, inter alia, on the existence of price preferences for locally manufactured products and local work contracts as well as on the opacity of tendering procedures. Sri Lanka was encouraged to reform the procurement system and Members welcomed Sri Lanka's announced intention to apply for observer status in the GPA. Members welcomed the introduction of new intellectual property legislation, and emphasized the need to follow this up with effective implementation and enforcement.

On services, Members expressed their appreciation of steps taken by the authorities to reduce state involvement and eliminate foreign equity restrictions in financial services. They commended efforts to liberalize the telecommunications market and encouraged Sri Lanka to continue this process.
Members also expressed their appreciation of the oral and written responses provided by the Sri Lankan delegation; they look forward to receiving replies to any outstanding questions.

In conclusion, this Review has provided Members with considerable insight into Sri Lanka's trade and trade-related policies. It has helped to identify areas where further reforms could establish the basis for sustained economic growth, and thus lasting peace and prosperity. Members encouraged Sri Lanka to liberalize its trade regime further and to continue its active participation in the DDA negotiations.