Developing International Trade
By Lakshman I. Keerthisinghe
As we learned after President Herbert Hoover signed the Smoot-Hawley tariff at the outset of the Great Depression, vibrant international trade is a key component to economic recovery; hindering trade is a recipe for disaster
Asa Hutchinson-US Lawyer
Although in the ancient world individual countries thrived on self-sufficient economies. In modern times in the global village international trade has become a sine qua non for the prosperity of all such countries in the closely knit world. Cross-border transactions of goods, services, technology, capital, and knowledge now have become essential for an economy to function smoothly and advance further resulting finally in substantial inter-dependencies among economies.
Thus the present Covid pandemic has given rise to a severe fall in international trade practices which has caused a global crisis resulting in a badly affected Sri Lanka as well giving rise to an increased trade deficit. This coupled with the existing budget deficit has hit Sri Lanka/s economy quite adversely. All patriotic Sri Lankans should rally round the Government and the newly appointed able Finance Minister in the efforts to rise from this pit without wasting valuable time in fruitless political criticisms which further aggravates the pathetic position.
During the past two decades, Sri Lanka’s uncompetitive trade position had continuously resulted in negative trade balances. The economy was negatively affected as its two main export destinations, the European Union and the USA had a severe outbreak of COVID-19 in their first waves. Swift measures enacted by the SL government helped the Nation to control the first wave of COVID-19. However, these measures had a particularly negative effect on tourism, manufacturing, and transportation, while collapsing global demand had a negative impact on the textile industry. World Bank reported a 3.6 percent contraction in the Sri Lankan economy in 2020. According to CBSL, Sri Lanka recorded a trade deficit of 840.30 USD Million in April of 2020 which is closer to the highest trade deficit record low of -1100.70 USD Million in November of 2011. During the past few months, Sri Lanka was able to successfully narrow down the record-breaking trade deficits due to a larger decline in imports compared to the decline in exports. On a cumulative basis, the trade deficit of US$ 7.997 billion in 2019 had decreased to US$ 5.978 billion in 2020.
There is speculation that subsequent to the ‘Third Wave’ and the outbreak of Delta variant, there might be a fourth wave. How long can Sri Lanka maintain the current import barriers? What are the strategies of Sri Lanka to face pressure from global trade? How effectively can Sri Lanka boost its exports and tourism? Most importantly, how can Sri Lankan healthcare professionals maintain their renowned control over the COVID-19 spread? As a Nation, these are few challenges that Sri Lanka should overcome strategically.
In order to overcome this vital and challenging period, some economic experts opine that first and foremost the Sri Lankan healthcare professionals with the cooperation of the general public should adhere to the health guidelines which are necessary to flatten the curve. If the pandemic goes out of control, Sri Lanka will have to experience the tragic stage which India struggles to overcome at present. Secondly, Sri Lankan policymakers should design policies to acquire a competitive advantage rather than the natural advantage in the export and tourism industries. The Nations who achieve high economic growth, have adopted different approaches and strategised their trade policies according to the environmental reforms. Thirdly, Sri Lanka should create a sound internal cushion in order to face the external shocks and to reduce the vulnerability. Minimising the degree of dependency by strengthening the local production and demand would divert the Sri Lankan economy from dependency to interdependency in international trade to a greater extent. Furthermore, to maintain the import barriers Sri Lankan policymakers need to come up with creative strategies to promote import substitution while carefully reading and critically analysing the current import structure. The fate of the Sri Lankan economy will be determined by the aforesaid questions and the solutions the experts conclude.
As the tourism trade has been severely affected the Government is now attempting to build up the trade amidst protested by medical experts who fear spread of a thirds wave. The foreign employment of Sri Lankans has suffered by many workers been sent back home resulting in a severe reduction in Sri Lanka’s foreign exchange earnings. The government authorities have been taking suitable steps to strengthen this area too.
In conclusion, by meticulous planning with the assistance of all political parties working together to assist our motherland to overcome this horrendous difficulty Sri Lanka would rise from this debacle in usher in prosperity so that all our people can live happily in the future as world-wide restoration of durable peace van be created by stable international trade practices.
The writer is an Attorney-at-Law with LLB, LLM, MPhil.(Colombo)-[email protected]