In the final round talks, to be held in Colombo from July 9 to July 12, both sides would also finalise provisions regarding services and investment that form part of CEPA other than the trade in goods section. However, owing to the sensitivities of industries in both the countries, so far there has been no agreement on proposals regarding reduction of their respective negative list (items not subjected to tariff reduction commitments).

Both sides have held more than 12 rounds of talks so far since February 2005. The two countries, had in March this year, finished the implementation of the Free Trade Agreement on trade in goods inked in March 2000. Though New Delhi and Colombo had recently asked industry bodies to respond to suggestions on a possible reduction of negative list to enhance bilateral trade and expand the scope of FTA, the response has been discouraging, a senior government official said, adding that they have decided to go ahead with the current negative list. Both sides are targeting to achieve a bilateral trade of $5 billion by 2010.

India-Sri Lanka trade in 2006-07 was $2.72 billion, marginally up from the previous fiscal’s $2.6 billion. Bulk of Indian export to Sri Lanka includes petroleum products and transport equipments (almost 50% of the total), while primary and semi-finished iron and steel is also a fast growing export item. Among the significant import items are coffee, tea, edible oil, non-ferrous metal imports, spices and electrical machinery.

At present, in its effective negative list India has 429 items comprising products from sectors like chemicals, plastics, small-scale industry products, textiles and edible oils. Apart from these items, India has placed 598 other items (all from the textile sector) where a 25% duty concession has been given, making them comparatively easier to trade in. On the other hand, Sri Lanka has kept 1,180 items in its negative list comprising mostly products from the agriculture, automobiles and capital goods sectors.

In the services side, both the countries have exchanged a schedule of commitment to give greater market access to each other’s services industry and have agreed to make the pact WTO-plus.