China eyes Sri Lankan free-trade deal

Fashion brands from Hong Kong, Europe and the United States could gain from a possible free-trade agreement between Sri Lanka and mainland China that would remove all tariffs on goods from the island nation.

Sri Lanka, whose earnings from garments account for half of its entire industrial output, has long been a manufacturing hub for upmarket lingerie, T-shirts and blouses. The country is the largest supplier for Victoria's Secret and an important manufacturing hub for Gap, Marks and Spencer and other European brands.

"International brands could win big shipping their products from Sri Lanka to China if the free-trade deal is reached," said Ashroff Omar, chief executive of Brandix, Sri Lanka's largest apparel exporter.

If the free-trade deal materialises, all textile products from Sri Lanka would be exempt from tariffs, which currently range from 14 per cent to 25 per cent, depending on the product type. Under a previous preferential trade agreement between eight countries in the Asia-Pacific region, garment products from Sri Lanka enjoyed a discount of 3 to 5 per cent.

Sri Lanka's central bank governor Ajith Nivard Cabraal said the free-trade talks could be completed by next year.

"Formal discussion between the new Chinese president and our president began three months ago. The idea is that we will enter into a regional agreement. Officials are still working on the details but we believe it will happen reasonably quickly, perhaps by early next year," he said.