Opinion
Full understanding of Geneva Fiasco

My intention in this brief note is to point out some important matters that Dr. Sarath Gamini de Silva has omitted, and also facts of history that he has not correctly interpreted in his letter titled “Problems in Geneva : Facts that brought us here” (The Island 26.02.2021). When one deals with the “facts that brought us here” with reference to the UNHRC Resolutions against Sri Lanka, the history, the nature and the present status of the Tamil Problem are of vital importance, as that problem is the core issue leading to the Geneva Fiasco. Further, an assessment of the UNHRC activities, particularly its lack of neutrality due to Western pressure and influence which has made Sri Lanka reject the Resolutions calling them a political campaign, is critical in a discussion of this subject.
The fact that Western powers use the UNHRC to exert pressure on Third World countries on the pretext of human rights, to make them do their bidding has been totally disregarded by Dr.S, while he finds fault with the Sri Lankan governments for not doing enough in the implementation of the UNHRC recommendations. Further, the fact that the Western powers make use of Tamils to destabilize Sri Lanka, as they did with the LTTE, to get it to fall in line and that Tamil separatists are willing partners in this project, has not been considered by Dr. S. It is naive to think that mishandling or not solving the Tamil Problem “brought us here” and resulted in Geneva Resolutions.
One cannot discuss Geneva disregarding the Tamil Problem. To understand the nature of the Tamil Problem, and why it remains apparently unresolved, one must examine its history and origin. It has its origin in Tamil separatism which dates back to 1930s. Tamil separatism is a Tamil construct. When independence for Ceylon was being considered by the British Raj, as it was uneconomical to maintain their empire, the Tamil leaders petitioned the British Government requesting a separate state for the Tamils. A case had been prepared for this claim well in advance. Mudaliyar C. Rasanayagam in his book titled “Ancient Jaffna” (1926) attempts to show that an independent kingdom existed in Jaffna before it was conquered by the Portuguese in 1619. This is a distortion of facts. Mudliyar Rasanayagam’s views on Tamil habitation in Sri Lanka have been proved to be baseless, and less than a scholarly discourse of the matter by Prof. K. N. O. Dharmadasa (2007). Prof. Indrapala Karthigesu’s research work had shown that there is no evidence of Tamil habitation in Sri Lanka before the 10th Century CE. If there were Tamil kings in Jaffna, there should be inscriptions in Tamil, but not a single one has been found. On the contrary the earliest inscription found in Jaffna could be attributed to a Sinhala king, Parakramabahu II, who ruled Jaffna from Polonnaruwa.
In this context, it is important to see how this issue is being pursued at present. Former Chief Minister Wigneshwaran, has called for the creation of a Federal State for the Tamils, and to substantiate his claim had made reference to the ancient Tamil Kingdom and he has said Mahawamsa is fiction.. TNA leader R Sampanthan, speaking in the Parliament on the 8th January 2020, drew attention to the hitherto unresolved Tamil man’s problem (The Island, 10.01.2020). He has said 85% of Tamils have voted against Gotabaya Rajapaksa, which he says is an indication that their problem has not been addressed and that the Tamils have at every election repeatedly voiced the need for a solution to their problem. Since most of the economic, social, political and cultural needs of the Tamil community, in the Sri Lankan context, have been sorted out, one wonders what other grievances could be bothering the Tamils. However, when one reads Sampanthan’s speech, one would understand that his problem is the nature of the state of Sri Lanka as defined in the present constitution. What he wants obviously is to replace the word “unitary” in Chapter 1 Clause 2 of the Constitution, with the words “united, undivided and indivisible”. These words place the single sovereignty concept in jeopardy, and opens the way to federalism and separatism.
The above facts show how the Tamil leadership has made the Tamil Problem an intractable issue. Dr. S says, successive governments have failed to discuss these matters beginning from early times, and points out that the “50- 50” demand made by GG Ponnambalam, in 1939 in the State Council, and then to the Soulbury Commission in 1945, should have been discussed. When 50% of representation for the minorities is demanded disregarding population ratios, which is a crucial factor in universal franchise, could it be discussed? Similarly could the Thimpu Principles of recent times (1985) which the Tamils said were non-negotiable be discussed? Further, the TNA has submitted its proposals to the Experts Committee drafting the new Constitution, and these amount to a demand for an almost separate state for the Tamils. Are the Tamils serious in negotiating a solution?
The UNHRC Resolution 30/1 and the subsequent resolutions on Sri Lanka were sponsored by the Western countries, who indirectly supported LTTE terrorism and almost stopped the war being conducted to its finish. The Resolutions are biased because they make unsubstantiated accusations that the Sri Lankan armed forces have committed war crimes and these have to be investigated by international judges. No examination of the witnesses by the defense is allowed. Further no consideration whatsoever has been given to the available evidence that shows no war crimes have been committed by the armed forces. The evidence provided in the diplomatic dispatches filed by Lt. Col. Anthony Gash the Defence Attache of the British High Commission, and the revelations by Lt. Col. Lawrence Smith the Defence Attache of the US Embassy, which could be considered as reliable as these officers were aware of the ground situation during the final stages of the war, have totally been disregarded by the UNHRC and the sponsors of the Resolutions. Recently Lord Naseby has written to the UNHRC about these evidence, and he has brought these facts to the notice of the British House of Lords.
Is it such a UNHRC and its dubious resolutions that Dr. S wants our government to take seriously as the “day of reckoning” closes on us as Dr. S puts it? Does Dr. S think that the West is genuinely motivated by human rights issues? Surely he knows that they are the worst HR violators. Would the West withdraw these resolutions if we implement their recommendations? As a matter of fact, had we agreed to sign the MCC, ACSA and SOFA agreements of the US there would be no resolutions against Sri Lanka. And Mitchel Brechtlet would play a different tune. UNHRC Resolutions against Sri Lanka are nothing but tools of hegemony and imperialism.
Further the International Community, whose opinion and dictate Dr. S wants our government to pay heed to while dealing with human rights and UN Resolutions, is nothing but the Western power block, which uses human rights as a bludgeon against small countries while murdering millions of civilians all over the world. Is China with the largest population or Russia the largest country included in this International Community. The UK just a few weeks ago passed a law prohibiting accusation of war crimes against their armed forces. And their armed forces are not innocent of war crimes either, their brutal excesses in Iraq are well known. And it is the UK that led the crusade against Sri Lanka in Geneva.
It is very easy to say that if the government looks after the minorities there would be no Geneva resolutions against us. But when we are dealing with minorities who know that they can exploit the geo-political situation that exists in the Indian Ocean region to their advantage, by helping the West to get a grip on the strategically situated Sri Lanka, it is difficult to negotiate a solution that would be fair by all stakeholders. The Tamil separatists know this and they will make the Western powers pressure the Sri Lankan government to give in to their demands. The minorities will want to dictate terms and get their pound of flesh. However, the minorities must realize that everybody stands to lose if the imperialist West is allowed to take a stranglehold on our country. Tamils must give up their campaign which they started before the time of independence, and ask for a reasonable and realistic solution.
N.A.de S. AMARATUNGA
Opinion
Remembering Dr. Samuel Mathew: A Heart that Healed Countless Lives

It is with a deeply heavy heart that I express my sincere condolences on the passing of Dr. Samuel Mathew Kalarickal on the 20th of April 2024. Born in 1948, Dr. Samuel was not only a pioneer of interventional cardiology in India but a giant in South Asian healthcare whose influence extended far beyond national borders.
A Beacon of Excellence and Compassion
Known as the “Father of Angioplasty” in India, Dr. Samuel introduced life-saving coronary interventions when they were still rare. His leadership at Apollo Hospitals and Kokilaben Dhirubhai Ambani Hospital brought cardiac care to global standards. But beyond the accolades, it was his humility, compassion, and unwavering dedication to patients that truly set him apart.
A Lasting Impact on Sri Lanka
Dr. Samuel played a pivotal role in shaping modern cardiac care in Sri Lanka. In the 1990s and early 2000s, many Sri Lankan patients sought his expertise in India, trusting him with their lives. He treated them with care and dignity, leaving lasting impressions on families across the island.
He also trained and mentored numerous Sri Lankan cardiologists, generously sharing knowledge of advanced procedures and technologies. His efforts helped uplift cardiac care back home and empowered many of us to bring those skills to our own communities.
A Mentor Who Lit the Path
To me, Dr. Samuel was more than a mentor—he was a fatherly figure. I fondly recall our time at the 2011 Coimbatore meeting, where he urged me to form the Sri Lanka STEMI Forum. His guidance helped us create national strategies and treatment models for heart attack care—an initiative that continues to save lives today.
A Legacy That Lives On
Dr. Samuel leaves behind more than medical breakthroughs. He leaves behind a legacy of service, inspiration, and heart. His memory will live on in every life he touched, every doctor he guided, and every patient he healed.
You will be remembered always, Sir—not just for what you did, but for who you were.
May your soul find eternal peace.
– Dr Gotabhaya Ranasinghe
Opinion
Trump tariffs and their effect on world trade and economy with particular reference to Sri Lanka – Part V

(Continued from yesterday)
Domestic Market Development
While Sri Lanka’s relatively small domestic market (22 million people) limits the potential for inward-focused development, there may be opportunities to reduce import dependence in certain sectors and develop stronger linkages between export industries and domestic suppliers. This could create more balanced growth and reduce vulnerability to external shocks.
Policies to support domestic market development might include,
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Import Substitution in Strategic Sectors: Targeted support for domestic production of essential goods and inputs to export industries, reducing dependency on imports.
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Strengthening Domestic Supply Chains: Developing stronger linkages between export-oriented firms and local suppliers to increase domestic value addition.
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Addressing Income Inequality: Policies that increase purchasing power among lower and middle-income Sri Lankans could expand the domestic market for locally produced goods and services.
Such approaches would need to avoid the pitfalls of earlier import substitution models that created inefficient, protected industries. The focus should be on developing competitive domestic capabilities rather than simply erecting barriers to imports.
Policy Recommendations
Based on the analysis of both short-term and longer-term strategies, several specific policy recommendations emerge for Sri Lanka,
Industrial Policy Reforms
Sri Lanka should develop a comprehensive industrial policy that goes beyond the current focus on export promotion to address structural vulnerabilities revealed by the tariff shock. This policy should,
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Identify priority sectors for diversification based on a realistic assessment of Sri Lanka’s competitive advantages and global market opportunities.
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Provide targeted support for research and development, skills training, and quality infrastructure in these priority sectors.
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Reform regulatory frameworks to reduce barriers to business formation, innovation, and growth.
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Develop specific strategies for upgrading within existing export sectors like textiles, helping firms move into higher-value activities.
Investment in Innovation and Skills
Human capital development represents a critical foundation for economic resilience and diversification. Sri Lanka should,
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Align education and training systems more closely with emerging economic opportunities, emphasizing technical skills, digital literacy, and innovation capabilities.
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Support university-industry collaboration to develop applied research relevant to Sri Lanka’s economic challenges.
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Facilitate knowledge transfer through diaspora engagement, international partnerships, and strategic foreign direct investment.
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Develop innovation hubs and incubators focused on priority sectors for diversification.
Sustainable Debt Management
The tariff shock highlights the importance of building greater resilience into Sri Lanka’s approach to external debt. Recommendations include,
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Advocating for reforms to international debt restructuring frameworks that would explicitly link repayment obligations to export performance, similar to the London Debt Agreement model.
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Developing contingency clauses in future debt agreements that would automatically adjust payment terms in response to external shocks beyond the country’s control.
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Prioritizing concessional financing over commercial borrowing where possible to reduce vulnerability to market sentiment.
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Building stronger foreign exchange reserves during periods of stability to provide buffers against future shocks.
Social Protection for Affected Workers
Finally, Sri Lanka must develop more robust systems to protect vulnerable workers during economic transitions. Recommendations include,
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Establishing a dedicated adjustment assistance program for workers displaced by trade shocks, providing income support, retraining, and job placement services.
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Developing community-based support initiatives in regions highly dependent on export industries.
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Engaging international partners to support these efforts through technical and financial assistance.
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Ensuring that economic diversification strategies explicitly address employment creation for workers with different skill profiles.
Implementing these recommendations would require significant political will, institutional capacity, and international support. However, the current crisis created by President Trump’s tariffs also presents an opportunity to address long-standing structural vulnerabilities and build a more resilient economic model for Sri Lanka’s future development, just like what Sri Lanka did post economic crisis, such as tax reforms, SOE reforms and cost reflective pricing.
CONCLUSION
The imposition of sweeping tariffs by the Trump administration represents a profound disruption to the global trading system with far-reaching consequences for economies around the world. As we have seen throughout this analysis, these tariffs are not merely technical adjustments to trade policy but potentially transformative shifts that challenge fundamental assumptions about economic development, international cooperation, and the distribution of benefits and costs in our interconnected global economy.
For Sri Lanka, the 44% tariff rate imposed on its exports to the United States threatens to undermine a fragile economic recovery and reverse hard-won progress following the devastating crisis of 2022. With the United States accounting for 23% of Sri Lanka’s exports and the textile industry, which employs 350,000 workers, particularly vulnerable to this trade shock, the human consequences could be severe. Projected losses of $300 million in annual export earnings not only threaten jobs and livelihoods but also raise serious concerns about Sri Lanka’s ability to service its external debt obligations, despite recent restructuring efforts.
Sri Lanka’s experience illuminates broader structural vulnerabilities in the global economic system. The export-led development model promoted by international financial institutions for decades has created deep dependencies on continued access to wealthy consumer markets, particularly the United States. When this access is suddenly restricted through unilateral policy decisions, developing countries bear disproportionate adjustment costs with limited capacity to cushion the impact. The international trade and financial architecture offer inadequate mechanisms to address such shocks, with debt sustainability frameworks failing to properly account for trade performance and multilateral institutions lacking effective tools to prevent or mitigate the damage.
This situation calls for both immediate crisis response and longer-term structural reforms. In the short term, Sri Lanka must pursue diplomatic engagement with the United States, provide targeted support to affected industries within its fiscal constraints, and implement emergency measures to protect vulnerable workers. Over the longer term, strategies for market and product diversification, value chain upgrading, regional integration, and domestic market development offer pathways to greater resilience, though none provides a quick or easy solution to the current challenge.
Beyond Sri Lanka’s specific circumstances, President Trump’s tariffs may accelerate broader shifts in global trade patterns. We may see increased regionalization of trade, a greater role for China as both market and investor for developing economies, production relocation to avoid tariffs, and renewed interest in South-South cooperation and domestic market development. These shifts could fundamentally reshape the global economic landscape in ways that create both risks and opportunities for developing countries.
The tariff shock also highlights the need for more fundamental reforms to the international economic system. A more equitable approach to trade and development would recognize the structural challenges facing developing economies and provide meaningful policy space for them to pursue diversification and resilience-building strategies. Debt sustainability frameworks should explicitly link repayment obligations to export performance, acknowledging the fundamental importance of trade capacity to debt service ability. And multilateral institutions should develop more effective mechanisms to prevent unilateral actions that disproportionately harm vulnerable economies.
For Sri Lanka specifically, this moment of crisis also presents an opportunity for reflection and reform. The country’s heavy dependence on a narrow range of exports to a small number of markets has created vulnerabilities that predate President Trump’s tariffs. A comprehensive strategy for economic diversification, encompassing both products and markets, could create greater resilience against future shocks while potentially opening new pathways for more inclusive and sustainable development.
Ultimately, the story of Trump’s tariffs and their impact on Sri Lanka reminds us that behind abstract economic policies and trade statistics lie real human lives and communities. The textile worker in a factory outside Colombo, the small business owner supplying packaging materials to exporters, the rural family dependent on remittances from a daughter employed in the garment industry, these are the people who will bear the true cost of these tariff policies. Their futures hang in the balance as global economic forces shaped by decisions in Washington ripple outward to distant shores.
As the international community responds to this disruption in global trade, we would do well to centre these human impacts in our analysis and policy responses. A truly equitable international economic system must not only facilitate the efficient exchange of goods and services but also ensure that the benefits of global integration and the costs of economic adjustment are distributed fairly between wealthy and developing nations. President Trump’s tariffs have exposed how far we remain from this ideal, and how urgently we need to work toward a more balanced and inclusive model of global economic cooperation.
Rethinking Trade Metrics: It’s the Current Account, Not Just the Trade Balance
While the Trump administration frames its tariff decisions around bilateral trade deficits in goods, that gives a very skewed picture. The true measure of how our economies are actually connected between nations is the current account, which includes not just the balance of goods, but also services, investment income, and transfer payments.
Take Sri Lanka, while it may appear to run a surplus in goods trade with the U.S., that surplus is more than offset by,
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Payments for U.S.-based tech and streaming services (Google, Netflix, Apple)
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Outbound tourism and overseas education costs
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Interest payments on sovereign debt owed to institutions like the IMF and World Bank, whose returns flow back to major shareholders, including the U.S.
This broader deficit in the current account illustrates that Sri Lanka is not exploiting the U.S., but rather taking part in a back-and-forth economic relationship that is already tilted toward the American economy.
Basing tariff policy solely on trade deficits in goods completely misses this bigger economic picture, and risks harming the very development partners whose growth would ultimately benefit the global economy, including the United States.
(Concluded)
(The writer served as the Minister of Justice, Finance and Foreign Affairs of Sri Lanka)
Disclaimer:
This article contains projections and scenario-based analysis based on current economic trends, policy statements, and historical behaviour patterns. While every effort has been made to ensure factual accuracy using publicly available data and established economic models, certain details, particularly regarding future policy decisions and their impacts, remain hypothetical. These projections are intended to inform discussion and analysis, not to predict outcomes with certainty.
by M. U. M. Ali Sabry
President’s Counsel
Opinion
Trump tariffs and their effect on world trade and economy with particular reference to Sri Lanka – Part IV

(Continued from yesterday)
Critique of the International Trade System
President Trump’s tariffs have also highlighted fundamental inequities in the international trade and financial architecture that governs economic relations between wealthy and developing nations.
The World Trade Organization, theoretically designed to provide a rules-based trading system that benefits all members, has proven largely powerless to prevent unilateral actions by powerful economies like the United States. While China has urged the WTO to investigate President Trump’s tariffs as violations of the “most favoured nation” principle that forms the bedrock of the multilateral trading system, the organization lacks effective enforcement mechanisms against major powers.
Similarly, international financial institutions like the IMF have failed to adequately account for trade shocks in their lending programmes and debt sustainability analyses. As discussed earlier, the IMF’s approach to Sri Lanka’s debt restructuring focused primarily on fiscal consolidation while paying insufficient attention to the country’s
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structural trade deficit and vulnerability to external shocks. When Trump’s tariffs suddenly reduce Sri Lanka’s export earnings, the IMF program offers no automatic adjustment mechanisms to accommodate this changed reality.
This situation stands in stark contrast to historical examples of more equitable treatment of indebted nations. The London Debt Agreement of 1953, which restructured West Germany’s external debts, explicitly linked repayment obligations to the country’s trade performance and capped debt service at a sustainable percentage of export earnings. Such an approach recognised the fundamental importance of trade capacity to debt sustainability, a recognition largely absent from contemporary debt restructuring frameworks.
The tariff shock thus reveals not merely technical flaws in trade policy but deeper structural inequities in how the global economic system distributes risks, rewards, and adjustment costs between wealthy and developing nations. While powerful economies can unilaterally reshape trading relationships to serve their domestic political objectives, developing countries must largely accept these changes as given constraints and bear disproportionate costs of adjustment.
Potential Reshaping of Global Trade Patterns
Looking beyond the immediate disruption, President Trump’s tariffs may accelerate several longer-term shifts in global trade patterns with significant implications for developing economies.
First, we may see accelerated regionalisation of trade as countries seek to reduce vulnerability to U.S. policy shifts. Asian economies may deepen integration through mechanisms like the Regional Comprehensive Economic Partnership (RCEP), while African countries might accelerate the implementation of the African Continental Free Trade Area (AfCFTA). These regional arrangements could provide alternative markets for exports previously destined for the United States, though the transition would be neither quick nor painless.
Second, China’s role as both a market and investor for developing economies may expand further. As U.S. tariffs effectively close off portions of its market, developing countries may look more intensively toward China as an export destination and source of development finance. This shift would have significant geopolitical implications, potentially accelerating the fragmentation of the global economy into competing blocs centred around major powers.
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Third, some production may relocate to avoid tariffs, creating winners and losers among developing countries. Nations with lower tariff rates or special exemptions could see increased investment as firms restructure supply chains to minimise trade costs. This dynamic could intensify competition among developing countries for foreign investment, potentially triggering a “race to the bottom” on labour and environmental standards.
Fourth, there may be renewed interest in domestic market development and South-South trade as alternatives to excessive dependence on wealthy consumer markets. While the limited purchasing power in many developing countries constrains this option in the short term, over time it could lead to more balanced and resilient development models.
These potential shifts suggest that President Trump’s tariffs may represent not merely a temporary disruption but a catalyst for more fundamental reconfiguration of global trade patterns. For developing economies like Sri Lanka, navigating this changing landscape will require strategic foresight, policy innovation, and international cooperation to ensure that the emerging trade architecture better serves their development needs than the system currently being disrupted.
POTENTIAL MITIGATION STRATEGIES FOR SRI LANKA
Faced with the severe economic challenge posed by Trump’s 44% tariff, Sri Lanka must develop a comprehensive response strategy that addresses both immediate threats and longer-term structural vulnerabilities. This section explores potential approaches at different time horizons, from emergency measures to fundamental economic reorientation.
Short-term Responses
In the immediate term, Sri Lanka’s government and private sector must focus on crisis management to minimise damage to export industries and protect vulnerable workers. Several approaches warrant consideration.
Government Support for Affected Industries
The Sri Lankan government could implement targeted support measures for export sectors most affected by the tariffs, particularly the textile and apparel industry. These might include temporary tax relief, subsidised credit facilities, or reduced
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utility rates for export-oriented manufacturers. Such measures could help companies weather the initial shock while they develop adaptation strategies.
However, Sri Lanka’s fiscal constraints present a significant challenge to implementing such support. The country’s IMF programme imposes strict limits on government spending and deficit targets, while tax increases have been a central component of the economic stabilisation strategy. Any support measures would therefore need to be carefully designed to remain within these constraints or negotiated as exceptions with the IMF based on the external nature of the shock.
One potential approach would be to reallocate existing resources rather than expanding overall spending. For instance, funds previously earmarked for export promotion in the U.S. market, if any, could be redirected toward supporting market diversification efforts or providing temporary relief to affected companies.
Diplomatic Engagement with the United States
Sri Lanka should pursue active diplomatic engagement with the United States to seek modifications to the tariff regime. While the country’s limited economic leverage makes a complete exemption unlikely, there may be opportunities to negotiate targeted relief for specific product categories or to secure technical assistance for adjustment.
The Sri Lankan government could emphasise several arguments in these discussions, the disproportionate impact of the tariffs on a country still recovering from economic crisis, the potential humanitarian consequences of mass unemployment in the textile sector, and the strategic importance of economic stability in Sri Lanka for regional security in the Indian Ocean.
One of the most compelling arguments Sri Lanka can make is the need to move beyond narrow fixation on the trade balance and instead consider a broader current account. While Sri Lanka may show a surplus in goods trade with the U.S., that figure is only a part of the story. Our economy is deeply integrated with U.S. linked services. We pay for American banking and credit card services, subscribe to streaming platforms like Netflix and Amazon, purchase of software and apps from Apple and Google, remit interest payment on loans from international banks, bond holders and multilateral institutions, and spend on tourism and education. When all of these outflows are taken into account, the so called “imbalance” is far more nuanced if not fully offset. This is why a fair and modern economic analysist must consider the full current account, not just goods trade in isolation.
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Engagement should occur through multiple channels, including direct bilateral discussions, multilateral forums like the WTO, and coordination with other affected developing countries to amplify collective concerns. Sri Lanka might also leverage its relationships with international financial institutions like the World Bank and IMF, which could highlight the risks the tariffs pose to the country’s economic recovery program.
Emergency Economic Measures
If the full impact of the tariffs materializes, Sri Lanka may need to implement emergency economic measures to maintain macroeconomic stability. These could include temporary foreign exchange controls to prioritize essential imports, accelerated disbursement of already-committed international financial support, or emergency borrowing from friendly countries or international institutions.
The Central Bank of Sri Lanka might need to adjust monetary policy to respond to potential currency pressures resulting from reduced export earnings. However, any such adjustments would need to be balanced against inflation concerns, which remain sensitive following the recent crisis.
Social Protection for Affected Workers
Protecting workers who lose jobs or face reduced hours due to the tariff impact should be a priority. The government could expand existing social safety net programs to specifically target affected textile workers, potentially with support from international donors or development agencies.
Measures might include temporary unemployment benefits, retraining programmess for displaced workers, or community-based support initiatives in areas with high concentrations of textile employment. Given fiscal constraints, international support would likely be necessary to fund such programmes adequately.
Medium to Long-term Strategies
Beyond immediate crisis response, Sri Lanka must develop strategies to reduce vulnerability to future trade shocks and create a more resilient economic model. Several approaches deserve consideration.
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Market Diversification Beyond the United States
Reducing dependence on the U.S. market represents an obvious but challenging strategy. Potential alternative markets include,
* European Union: Already Sri Lanka’s second-largest export destination, the EU offers preferential access through its GSP+ scheme. Expanding exports to Europe would require meeting stringent standards and potentially adjusting product offerings to suit European consumer preferences.
* Regional Markets: Increasing exports to India, China, and other Asian economies could leverage geographical proximity and growing middle-class consumer bases. This would require navigating complex regional trade agreements and potentially developing new product categories better suited to these markets.
* Emerging Markets: Countries in the Middle East, Africa, and Latin America represent potential growth opportunities, though penetrating these markets would require significant market research and relationship building.
The Joint Apparel Association Forum’s statement that “We have no alternate market that we can possibly target instead of the US” reflects the difficulty of this transition. Established buyer relationships, specialized production capabilities, and compliance certifications all create path dependencies that make market diversification a multi-year project rather than an immediate solution.
Product Diversification Beyond Textiles
Sri Lanka’s heavy reliance on textile and apparel exports creates vulnerability to sector-specific shocks. Diversifying the export basket could create greater resilience, though this too represents a long-term structural challenge rather than a quick fix.
Promising sectors for export diversification include:
* Information Technology and Business Process Outsourcing: Sri Lanka has developed a growing IT/BPO sector that could be expanded with appropriate investment in education, infrastructure, and international marketing.
* High-Value Agricultural Products: Speciality tea, spices, and organic produce could command premium prices in international markets while building on Sri Lanka’s agricultural traditions.
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Sustainable Manufacturing: Leveraging Sri Lanka’s relatively strong environmental credentials to develop green manufacturing capabilities in emerging sectors like electric vehicle components or renewable energy equipment.
Tourism Services: While not directly affected by goods tariffs, expanding tourism could help diversify foreign exchange earnings. However, this sector’s vulnerability to external shocks (as demonstrated during the pandemic) suggests it should be one component of a diversification strategy rather than its centrepiece.
Successful product diversification would require coordinated public-private investment in research and development, skills training, quality infrastructure, and international marketing. It would also necessitate a supportive policy environment that reduces barriers to innovation and entrepreneurship.
Value Chain Upgrading
Even within existing export sectors like textiles, Sri Lanka could pursue strategies to capture more value and reduce vulnerability to tariffs. Moving up the value chain from basic contract manufacturing to design, product development, branding, and direct-to-consumer sales could increase margins and provide greater control over market access.
Some Sri Lankan companies have already begun this transition, developing their own brands or establishing direct relationships with consumers through e-commerce platforms. Government support for such initiatives through design education, intellectual property protection, and export promotion could accelerate this evolution.
Regional Trade Integration
Deepening integration with regional trade blocs could provide both alternative markets and opportunities for participation in regional value chains. Sri Lanka is a member of the South Asian Free Trade Area (SAFTA) and has bilateral trade agreements with India, Pakistan, and Singapore, and more recently with Thailand, though implementation challenges have limited their effectiveness.
More ambitious regional integration through mechanisms like the Regional Comprehensive Economic Partnership (RCEP) or the proposed Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free
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Trade Area could create new opportunities. However, managing domestic concerns about increased competition from larger economies like India and China would require careful policy design and implementation. (To be continued)
(The writer served as the Minister of Justice, Finance and Foreign Affairs of Sri Lanka)
Disclaimer:
This article contains projections and scenario-based analysis based on current economic trends, policy statements, and historical behaviour patterns. While every effort has been made to ensure factual accuracy using publicly available data and established economic models, certain details, particularly regarding future policy decisions and their impacts, remain hypothetical. These projections are intended to inform discussion and analysis, not to predict outcomes with certainty.
(To be concluded)
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