The newly concluded European Union-India Free Trade Agreement could reshape the competitive landscape for Sri Lankan exports, even as the government moves to safeguard preferential access to a vital market.
Deputy Minister of Finance and Planning Anil Jayantha Fernando stated that Indian exporters are expected to gain duty-free or concessionary access to the European Union comparable to benefits Sri Lanka receives under GSP+, challenging the competitive edge local exporters currently possess.
Negotiations for the EU-India FTA wrapped up on January 27, 2026, though internal ratifications remain pending before entry into force.
Sri Lankan authorities are currently evaluating potential effects on major export sectors, particularly garment manufacturing, which relies heavily on European buyers.
Under current EU GSP provisions, local factories utilize regional accumulation rules to source raw materials from India without losing preferential tariff treatment.
Once the EU-India accord takes effect, the structure of these supply chain arrangements may undergo alterations.
A two-year transition window will permit Sri Lankan businesses to maintain regional accumulation usage, during which state authorities plan to coordinate with groups like the Joint Apparel Association Forum (JAAF) to maintain trade competitiveness.
Preferential access for Sri Lanka is expected to extend past 2027 under a revised 10-year EU GSP framework commencing January 1, 2027.
Local authorities must submit a fresh application between January 2027 and December 2028 to maintain GSP+ status under the revised rules.
Preparatory steps are underway to ensure an uninterrupted transition and protect current trade advantages.
Following Sri Lanka’s attainment of upper-middle-income status in 2026, officials are also researching comprehensive bilateral agreements and economic partnerships with the EU to prepare for eventual graduation from concessionary trade frameworks.
Source : Hiru News