Sri Lanka’s efforts to phase out its Ports and Airport Development Levy (PAL) and CESS para-tariffs in the next four years, alongside India’s tariff-cut commitment to the European Union and the UK, would each represent a 9-percentage-point cut in the simple average ad valorem import duties applied, the World Bank Group said in its latest South Asia Economic Update report for April.
“India’s tariff-cut commitments toward the European Union and the United Kingdom, as well as Sri Lanka’s planned para-tariff phase-out, would each represent a 9-percentage-point reduction in the simple average ad valorem import duties applied,” the report said.
Addressing the changes Sri Lanka aims to make to its existing tariff framework, the report added: “The simple average of Sri Lanka’s total import duties is 19%. Yet, less than half of these import duties are statutory tariffs. Of the 19%, 11 percentage points are accounted for by para-tariffs.”
“In line with the new National Tariff Policy, the Government of Sri Lanka is planning a four-year reform to fully eliminate its PAL and CESS para-tariffs by 2029. This phase-out of Sri Lanka’s two largest para-tariffs would represent a 9-percentage-point cut in the simple average ad valorem import duties applied,” it said, referring to the Indian subcontinent.
The report further added that the removal of para-tariffs could raise consumption by 3.1% on average, with larger increases for the poorest households in Sri Lanka.
According to the report, India’s FTAs with the European Union and the United Kingdom comprise tariff cuts on more than 95% of traded goods, along with trade facilitation measures for both goods and services.
“India’s new FTAs are doubling the scope for international market access for domestic firms from currently one-sixth to one-third of global GDP, exceeding the global market access of emerging markets such as Brazil, China, and Turkiye.”
It noted that India’s tariff-cut commitments toward the European Union and the United Kingdom especially target the manufacturing sector, while many agricultural goods have been exempted.
“India’s textile and leather products industries – which are characterised by a modest revealed comparative advantage – face output tariff cuts of 17-19 percentage points, but also 5-7 percentage point cuts in input tariffs.”