Sri Lanka Assesses Export Risks as EU-India Trade Deal Raises Competitive Pressure
August 24, Colombo (LNW): Sri Lankan trade officials and industry representatives have begun examining how the European Union’s proposed free trade agreement with India could affect the country’s position in one of its most important export markets.
The issue was discussed at a high-level meeting involving the Sri Lanka Export Development Board (EDB), European Commission consultants Paul Baker and Talal Rafi, and representatives of the local apparel sector. EDB Chairman Mangala Wijesinghe and Joint Apparel Association Forum (JAAF) Secretary General Yohan Lawrence were among those taking part.
The EU and India concluded negotiations on their long-awaited Free Trade Agreement on 27 January 2026. The agreement is expected to take effect once the necessary legal, signing and ratification processes have been completed.
For Sri Lanka, the development could have significant implications. The agreement is expected to give Indian exporters substantially improved access to the European market, including reduced or zero tariffs on a broad range of labour-intensive products. Apparel, footwear, leather goods, marine products, chemicals, rubber and plastics, sports equipment, toys, and gems and jewellery are among the sectors expected to benefit.
India’s stronger tariff position could put additional pressure on Sri Lankan exporters, particularly in industries where the two countries compete directly. At the same time, officials noted that changing European requirements could provide opportunities for Sri Lankan businesses able to compete on quality, sustainability and reliability rather than price alone.
Wijesinghe highlighted the strategic importance of the EU, which remains Sri Lanka’s second-largest export destination after the United States and accounts for around 24 per cent of the country’s merchandise exports.
Sri Lankan shipments to Europe also performed strongly during 2025, with exports to major markets such as Germany, Italy, the Netherlands, France and Belgium increasing compared with the previous year.
The EDB chairman stressed that maintaining Sri Lanka’s preferential access under the EU’s GSP+ framework would become even more important as Indian exporters gain greater tariff advantages. He also called for continued attention to the requirements of the EU’s evolving GSP system, particularly if Sri Lankan companies are to preserve their preferential treatment.
Baker, an international trade economist and European Commission consultant, said modelling suggested that the EU-India agreement could lead to a substantial rise in Indian exports to Europe and potentially encourage greater foreign investment in India.
However, he pointed out that price competitiveness would not be the only factor determining success in the European market. European buyers and regulators are placing increasing emphasis on environmental performance, sustainability, supply-chain traceability and compliance with increasingly complex standards.
Against that backdrop, Sri Lankan exporters were encouraged to move towards higher-value products, strengthen their sustainability credentials and reconsider their market strategies rather than competing primarily on cost.
The apparel industry raised a separate concern over rules governing the origin of materials. JAAF Secretary General Yohan Lawrence highlighted the importance of regional cumulation provisions, particularly where Sri Lankan garment manufacturers use fabrics or other inputs sourced from India before exporting finished products to the EU under GSP+.
Industry representatives warned that restrictions on the use of Indian-origin materials under such arrangements could leave Sri Lankan garment manufacturers at an even greater disadvantage once Indian clothing exports begin benefiting from the new trade agreement.
The EDB said the Government would engage with the European Union on the possibility of establishing suitable cumulation arrangements involving India. Such measures, officials noted, could help Sri Lankan manufacturers remain competitive while also encouraging deeper integration of regional supply chains.
The discussions will feed into a wider assessment being prepared for the European Commission. Baker and Rafi thanked the Sri Lankan authorities and industry representatives for their input, saying the concerns and proposals raised during the meeting would be considered in the final study.
For Sri Lanka, the EU-India agreement could therefore prove to be both a competitive challenge and a catalyst for change, placing greater emphasis on innovation, value addition, sustainability and the ability of exporters to meet demanding international standards.
The post Sri Lanka Assesses Export Risks as EU-India Trade Deal Raises Competitive Pressure appeared first on LNW Lanka News Web.
