Sri Lanka’s renewed tariff reform agenda is confronting a question that policymakers failed to answer nearly a decade ago: who will bear the cost of liberalisation, and who will decide which industries deserve assistance?
The Centre for a Smart Future (CSF) has argued that the country already possesses much of the technical groundwork needed to answer that question. What remains missing is an institution with sufficient independence, analytical authority and political durability to ensure that trade adjustment does not become another exercise in selective protection.
The issue is gaining urgency as the Government advances its National Tariff Policy and considers resuming Free Trade Agreement negotiations. The policy sets a destination of four Customs duty bands, a phased reduction of CESS and PAL through 2029, advance notice of tariff changes and economic impact analysis before Cabinet decisions.
But the CSF warns that a tariff schedule alone cannot manage the social and economic consequences of dismantling protection.
Industries built around high tariffs may face import competition before they have improved productivity, found export markets or retrained their workforce. Smaller firms, informal workers, women and employees concentrated in poorer districts could be particularly exposed.
The danger is that the resulting pressure will not produce a transparent adjustment process, but a political contest in which the most influential industries secure exemptions while less-connected firms and workers receive little support.
Sri Lanka has experienced this pattern before. During the 2017–2019 liberalisation effort, the Government developed a Trade Adjustment Program alongside tariff reforms and FTA negotiations. The programme was approved by Cabinet in early 2019, and its first commission members were appointed. Yet the framework never became operational after a change of Government halted the process.
The CSF Policy Note, authored by Director Anushka Wijesinha, who helped formulate the earlier programme, says the technical templates and reference material remain available. The central lesson is that a mechanism cannot be created as a temporary response to industry protests. It must exist before the protests begin.
The proposed solution is an independent Trade and Productivity Commission, distinct from the NTPC. Its role would be to examine evidence, conduct structured industry hearings, evaluate adjustment plans and submit recommendations through the tariff policy process.
The CSF also proposes two analytical tools to determine vulnerability. An industry-level index would combine tariff and CESS protection with workforce size, gender composition, education and informality. A product-level tool would assess import exposure alongside employment, district concentration and female employment.
Such evidence would help prevent assistance from becoming a reward for political influence.
Transparency is equally important. The CSF calls for industry submissions, Commission recommendations, NTPC decisions and their justifications to be published online, drawing on the Central Bank’s public disclosure practices for monetary policy.
The proposed system would also include temporary Industry Competitiveness Councils to resolve regulatory, infrastructure and administrative bottlenecks, without becoming vehicles for subsidies or permanent special treatment.
For workers, the CSF recommends targeted severance waivers where retraining is available, expanded TVET conversion courses and regional employment service counters. It also calls for a roughly 12-month investment promotion campaign to attract export-oriented industries during the tariff transition.
The Government’s opportunity is clear: build the adjustment architecture now, or risk allowing the next round of liberalisation to be dictated by the very protectionist pressures it seeks to overcome.
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