COLOMBO (News 1st); Deputy Minister of Finance and Planning Anil Jayantha Fernando has warned that the newly concluded European Union-India Free Trade Agreement could reshape the competitive landscape for Sri Lankan exports, even as the government moves to safeguard the country's preferential access to one of its most important markets.
Addressing the implications of the landmark trade agreement, Fernando said Indian exporters are expected to gain preferential or duty-free access to the European Union similar to the benefits currently enjoyed by Sri Lanka under the GSP+ scheme. Such a development, he noted, could challenge the competitive advantage Sri Lankan exporters have long relied upon in the lucrative EU market.
The EU-India FTA negotiations concluded on January 27, 2026, although the agreement has yet to enter into force pending the completion of internal approval processes on both sides. However, Sri Lankan authorities are already assessing its likely impact on key export sectors, particularly apparel, which remains heavily dependent on access to European markets.
Fernando pointed out that Sri Lanka currently benefits from regional accumulation provisions under the EU GSP framework, allowing manufacturers to source fabrics and raw materials from India while still qualifying for preferential tariff treatment. Once the EU-India agreement comes into effect, the availability and scope of these arrangements could change, potentially affecting supply chains that have supported Sri Lanka's export industry for years.
Despite those concerns, the Deputy Minister highlighted that a two-year transition period will allow Sri Lankan exporters to continue using existing regional accumulation arrangements after the implementation of the EU-India FTA. During that period, the government intends to work closely with trade chambers and industry bodies, including the Joint Apparel Association Forum (JAAF), to ensure exporters remain competitive.
Fernando also sought to reassure businesses over the future of the GSP+ facility, stressing that Sri Lanka's preferential access to the European market is expected to continue beyond 2027. The European Union has already adopted a new GSP framework covering another ten-year cycle beginning January 1, 2027, creating a pathway for Sri Lanka to retain its trade benefits through a fresh application process.
Under the new system, Sri Lanka will need to reapply for GSP+ benefits between January 2027 and December 2028 and secure EU approval to continue enjoying preferential market access. According to Fernando, the government has already begun efforts to ensure a smooth transition and preserve the advantages currently enjoyed by Sri Lankan exporters.
At the same time, policymakers are preparing for a future in which Sri Lanka's economic progress could alter its eligibility for concessionary trade schemes. With the country recording upper-middle-income status in 2026, authorities are exploring long-term alternatives, including deeper economic partnerships and comprehensive trade agreements with the European Union, to secure sustainable market access should Sri Lanka eventually graduate from the GSP+ programme.
The warning underscores a growing reality for Sri Lanka's export sector: while preferential trade access remains secure for now, the emergence of powerful new trade partnerships could force local businesses to adapt quickly in order to maintain their foothold in one of the world's largest consumer markets.
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