• Trade policy is not tested at a signing ceremony
• It is tested at the shop counter, the factory floor, the farm gate and the household kitchen
• A document signed abroad is not an outcome at home
• This is not an argument for economic subordination, It’s an argument for economic realism 

A few days ago, I stopped at a small shop and asked the owner how business was. His answer was immediate: “There is no business, but there is more tax, more Value Added Tax (VAT) and more paperwork.”

His remark was not a technical statement on tax law. A small trader below the statutory threshold may not be directly registered for VAT. Mandatory registration generally begins when taxable supplies exceed Rs 15 million in a quarter or Rs 60 million over 12 months, while the standard VAT rate remains 18 per cent. Yet, taxes embedded in supplies, together with electricity, transport, credit and compliance costs, reach the shop counter long before customers do.

That is where any serious discussion on the Regional Comprehensive Economic Partnership (RCEP), must begin. Trade policy is not tested at a signing ceremony. It is tested at the shop counter, the factory floor, the farm gate and the household kitchen.

This contradiction is equally familiar to the Indian Origin Malaiyaha community that I represent. Tea produced in Sri Lanka’s Central Highlands has travelled across the world for generations. Yet, many workers who sustained that global industry remain excluded from secure land ownership, enterprise finance, technology, branding and the higher levels of its value chain.

Sri Lanka has participated in global commerce for centuries. It has not yet transformed itself into a global enterprise economy.

The RCEP brings together 15 Asia-Pacific economies, including the 10 Association of Southeast Asian Nations (ASEAN) States, China, Japan, South Korea, Australia and New Zealand. Together, they account for about 30% of the global gross domestic product. Its potential value lies not only in tariff concessions, but also in common rules of origin that can connect businesses to regional production chains.

The question is not simply whether Sri Lanka should join. It is whether we will enter as a producer, exporter, services provider and investment platform, or merely as another market for goods manufactured elsewhere.

Economic multi-alignment

Sri Lanka’s non-aligned tradition should never be confused with economic disengagement. Non-alignment was intended to preserve strategic autonomy, not to isolate the country from markets, capital, technology and connectivity.

Today, that principle must evolve into economic multi-alignment. Sri Lanka should deepen economic relations with India, attract investment from China, build industrial and technological partnerships with Japan and South Korea, connect with the ASEAN, preserve the United States (US) and European Union (EU) as high-value export markets, and expand commercial engagement with the Gulf.

Wide engagement strengthens sovereignty. Concentrated dependence weakens it.

Our direction should therefore be clear: strengthen the neighbourhood, preserve the West, look East and trade with the world. But, sequence matters. Before seeking the advantages of a vast regional Agreement, Sri Lanka must demonstrate that it can implement the agreements and commitments that it has already made.

Finish the unfinished

Sri Lanka’s problem is not a shortage of agreements. It is a shortage of implementation.

The India-Sri Lanka Free Trade Agreement (FTA) has operated since 2000 and is now fully implemented in tariff-phasing terms. However, it remains limited to trade in goods and does not itself eliminate non-tariff barriers. India also retains tariff-rate quotas on several significant Sri Lankan exports, including tea, pepper, clothing and coconut products.

The proposed Economic and Technology Cooperation Agreement (ETCA) has gone through 14 negotiating rounds. It is intended to cover goods, services, standards, customs procedures, rules of origin, technology cooperation and dispute settlement, it remains unfinished.

After so many rounds, Sri Lanka must bring the process to an honest conclusion. That does not mean signing at any cost. It means negotiating a balanced agreement with safeguards for vulnerable sectors and domestic employment, or explaining clearly which unresolved issues prevent completion.

The Singapore-Sri Lanka FTA entered into force in May 2018. Yet, the Commerce Department states that Sri Lanka has not implemented its Trade Liberalisation Programme. The Thailand FTA was signed in February 2024, but, the latest World Trade Organisation review recorded that it is still undergoing Sri Lanka’s domestic ratification process.

Before the RCEP, the Government should publish a timetable to implement the Singapore Agreement, complete and publicly confirm all steps required to bring the Thailand Agreement into effective commercial operation, and resolve the ETCA process. Existing FTAs with India should also be reviewed against actual export utilisation, unresolved non-tariff barriers and investment outcomes.

The same discipline must apply to memorandums of understanding (MoUs) and announcements arising from Presidential and Ministerial visits. Each commitment should have a responsible agency, a financing source, a deadline and a measurable economic objective. A document signed abroad is not an outcome at home.

For a small economy, bilateral agreements are not inferior to multilateralism. Bilateral arrangements can address a specific market-access problem, service restriction, investment requirement or non-tariff barrier more directly.

The RCEP may eventually become the roof of Sri Lanka’s Asian trade architecture, but, functioning bilateral relationships must form its foundation.

India and the first economic circle

That foundation must begin with India and South Asia. India is not an RCEP Member, it is Sri Lanka’s nearest major economy, an important source of imports, tourists, investment and development cooperation, and a gateway to a much larger regional market.

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Reliable passenger and cargo ferries, interoperable digital payments, streamlined Customs, energy cooperation and carefully assessed electricity-grid and transport links can reduce costs and expand the operating space available to Sri Lankan businesses. Every project must satisfy transparency, environmental, security and commercial tests.

Geography gives Sri Lanka strategic value. Connectivity converts that value into economic power.

A look East policy that bypasses India would ignore geography. An India policy that excludes the ASEAN and the wider world would ignore opportunity. Sri Lanka needs both.

Build an exporter-friendly State

The most urgent reform however, is domestic.

Investors do not commit long-term capital because another MoU is announced. They invest when taxation is predictable, contracts are enforceable, approvals are fast, infrastructure is reliable and policy survives a change of government.

Sri Lanka must move beyond slogans about ease of doing business and create an exporter-friendly ease-of-enterprise regime. This requires efficient Customs, predictable taxation and foreign-exchange rules, timely VAT refunds, faster land and investment approvals, reliable energy, export finance, digital public services, enforceable contracts, credible arbitration and time-bound dispute resolution.

The World Bank’s Business Ready framework assesses not only written regulations, but also public services and the operational efficiency that businesses experience in practice. Sri Lanka should apply the same test to itself.

It must also strengthen local enterprises before exposing them to deeper competition. This does not mean preserving inefficient protection forever. It means helping viable businesses upgrade technology, meet standards, access finance, improve productivity and enter export supply chains.

Liberalisation without adjustment support can favour importers and established corporations while smaller producers absorb the shock.

Recent instability in the Gulf has also reminded businesses that even established hubs require geographical diversification and business-continuity options. Sri Lanka cannot replace Dubai or Singapore, nor should it pretend to. But, with predictable legal, residency, taxation and financial frameworks, it can become a complementary Indian Ocean location for regional offices, family enterprises, digital services, arbitration, logistics, education, healthcare and tourism.

Global uncertainty may create an opening. Only Sri Lankan institutional reliability can turn it into an opportunity.

The RCEP is not a shortcut

The RCEP offers genuine possibilities. Its regional rules of origin can allow inputs from different Member economies to count towards preferential treatment within a single production chain. That could support advanced apparel, rubber products, processed food, gems and jewellery, electronics assembly, logistics, tourism and professional services.

Sri Lanka has entered the accession process. On 24 October of last year (2025), RCEP Members issued a preliminary questionnaire to assess applicants’ compliance with the Agreement and their readiness to offer commercially meaningful market access. Accession is therefore not a diplomatic photo opportunity. It involves substantial obligations and domestic adjustment.

Existing RCEP Members already possess greater manufacturing scale, technology, finance, logistics and production depth. If Sri Lanka liberalises before strengthening its productive capacity, local businesses may face stronger import competition while exporters remain unable to use the market access supposedly created for them.

Before final commitments are made, the Government should publish a sector-by-sector RCEP readiness assessment. For sensitive sectors, it must identify tariff exposure, import risks, safeguards and adjustment support. For potential exporters, it must identify the target market, the applicable rule of origin, standards, financing requirements, logistics routes and businesses capable of supplying at scale.

Trade agreements open markets. National capability determines who benefits.

Diversify without abandoning the West

The RCEP must not be presented as a retreat from the West.

In 2024, the US received 23.8% of Sri Lanka’s merchandise exports and the EU another 22.6%. Nearly half of our merchandise exports therefore depended on those two markets.

This concentration supports employment and foreign-exchange earnings, but, it also exposes factories and workers to changes in tariffs, Generalised Scheme of Preferences Plus conditions, labour standards, environmental rules and supply-chain requirements.

The answer is not to abandon these markets. Sri Lanka must retain them through stronger compliance and competitiveness while developing the additional demand in Asia, the Gulf, Africa and other emerging regions.

Diversification must reduce dependency, not exchange one dependency for another.

Globalisation must reach the ground

Workers’ remittances are indispensable, and migrant workers deserve national respect. But, exporting citizens cannot be the centre of a national development strategy. Migration should be a choice, not an escape from an economy unable to create productive employment.

Sri Lanka must become a country where citizens earn global incomes from home, international companies operate regional functions, entrepreneurs own brands and intellectual property, and investors produce for external markets.

That transformation must reach beyond Colombo. In plantation regions, land, housing, education, infrastructure and administrative inclusion should be recognised not only as social obligations, but as investments in productivity.

The Malaiyaha community must progress from wage dependence towards participation in smallholding, branded tea, tourism, food processing, digital services and export enterprise. A country cannot claim global competitiveness while keeping the community that sustained one of its greatest global industries at the economic margins.

The same test applies across rural and peripheral Sri Lanka. An FTA is not successful merely because national exports rise. We must ask who owns the new enterprises, where investment is located, which communities gain skills and whether household incomes improve.

A roadmap, not another announcement

Sri Lanka needs a 10-year global enterprise roadmap with annual, publicly reported key performance indicatoRs It should measure export growth, services income, foreign direct investment, the number of active exporters, FTA utilisation, Customs-clearance times, logistics and energy costs, commercial dispute-resolution periods, projects completed following foreign visits, and investment and employment created outside the Western Province.

Every agreement must answer five questions: What will Sri Lanka sell? Who will invest? Which barriers will be removed? By when? How will ordinary households benefit?

Before the RCEP, Sri Lanka must finish what it has started. It must implement the Singapore Agreement, complete and clarify the Thailand process, bring the ETCA to an honest conclusion, convert bilateral MoUs into measurable projects, restore investor confidence, build an exporter-friendly State and strengthen local enterprises.

Only then can Sri Lanka enter the RCEP from a position of capability rather than hope.

The ambition of achieving sustainable middle-income prosperity without becoming a global enterprise economy is not a development strategy. It is a fantasy that will make the connected richer while leaving the poor further behind.

Before asking Asia to open its markets to Sri Lanka, Sri Lanka must open its own State to enterprise.

We do not need another agreement to display. We need an economy ready to deliver.

The writer is the Co-Chair - Millennium Project, and the Vice President - International Affairs and Communications, Democratic People's Front, Tamil Progressive Alliance

The views and opinions expressed in this column are those of the author, and do not necessarily reflect those of this publication