The think tank calls for independent analysis, transparent monitoring and targeted support for firms and workers affected by tariff reforms.
CSF urges independent oversight as Sri Lanka advances tariff rationalisation
The Centre for a Smart Future (CSF) has urged the Government to establish a credible trade adjustment mechanism with sufficient institutional authority, analytical capacity and monitoring powers to support Sri Lanka’s renewed tariff rationalisation programme.
The independent public policy think tank welcomed indications that a trade adjustment framework is being considered alongside the Government’s tariff reforms and the possible resumption of Free Trade Agreement (FTA) negotiations. However, it cautioned that a consultative committee alone would be insufficient unless supported by an independent institution capable of assessing vulnerabilities, evaluating proposals and monitoring implementation.
The recommendations were presented in a new CSF Policy Note titled Designing a Credible Trade Adjustment Program for Sri Lanka’s Renewed Tariff Rationalisation Plans. The paper was authored by CSF Director Anushka Wijesinha, who previously served as Adviser to the Development Strategies and International Trade Minister and was involved in the formulation of Sri Lanka’s 2018–2019 Trade Adjustment Program.
According to the CSF, Sri Lanka’s National Tariff Policy, issued by the Department of Trade and Investment Policy in February 2026, proposes a simplified four-band Customs Import Duty structure, a phased reduction of the CESS levy through 2029 and a move away from open-ended tariff exemptions as a means of supporting industries.
The policy identifies the existing system as an “Anti-Export Bias Duty Regime”, which has encouraged investment in protected, domestic-market-oriented sectors rather than export-oriented activities. The CSF cited a World Bank estimate that Sri Lanka loses approximately US$10 billion in unrealised annual export potential because of this distortion.
While the think tank described tariff reform as a justified long-term objective, it warned that the transition could create short-term costs for firms and workers, particularly in labour-intensive industries that have developed under high levels of protection. Small and medium enterprises, less productive firms, rural workers, women and less-skilled employees could face disproportionate difficulties during the adjustment process.
The CSF identified three risks if reforms proceed without a structured support mechanism. Firms and workers could be left to absorb the costs without assistance, affected industries could rely on direct lobbying to secure exemptions, and political pressure could build to delay or reverse the reforms.
The organisation noted that Sri Lanka had already developed a Trade Adjustment Program between 2017 and 2019, when an earlier tariff rationalisation effort coincided with discussions on new FTAs. The programme was jointly prepared by the ministries responsible for development strategies and international trade, industry and commerce, and finance. It was approved by the Cabinet of Ministers in early 2019 but was never operationalised following a change of government.
The CSF argued that the earlier work provides a substantial foundation for the current initiative. “The templates and reference material for technical design already exist,” the Policy Note states, adding that the immediate requirement is the institutional commitment to implement them effectively.
At the centre of the CSF’s proposal is an independent Trade and Productivity Commission (TPC), operating alongside but separately from the National Tariff Policy Committee (NTPC), which is chaired by the Secretary to the Treasury.
The CSF said the NTPC is intended to review tariff proposals, generally on a quarterly basis, but is not designed or equipped to conduct the detailed sector-level and firm-level analysis required for a comprehensive adjustment programme. The proposed TPC would assess industry vulnerability, conduct structured hearings, evaluate adjustment plans and provide evidence-based recommendations.
The think tank warned that a body limited to collecting industry submissions and forwarding them to ministers would not constitute an effective trade adjustment mechanism. Without a permanent institutional structure, the process could again become vulnerable to inaction, political accommodation or pressure from well-connected industries.
The earlier framework proposed a seven-member commission, including representatives nominated by the Finance Ministry and the ministry responsible for trade. Members would be appointed by Cabinet for four-year terms. The CSF also referred to a later proposal to strengthen the Commission’s independence by placing its appointment and governance under the Constitutional Council, although such a model would require enabling legislation.
The proposed Commission would require a dedicated secretariat to process submissions, conduct or commission vulnerability assessments, prepare case files and maintain a public record of recommendations and decisions. The CSF also recommended updating analytical tools previously developed to identify vulnerable industries, products, workers and districts.
These tools assess factors such as import exposure, tariff and CESS protection, workforce size, gender composition, education levels, informality, district concentration and female employment. The CSF said such evidence should guide decisions instead of informal or politically driven committee discussions.
Transparency was another central recommendation. The think tank called for industry submissions, Commission recommendations, NTPC decisions and the reasons behind them to be published online. It suggested that the process could draw on the transparency practices used by the Central Bank of Sri Lanka in communicating monetary policy decisions.
Beyond the Commission, the CSF proposed Industry Competitiveness Councils to address sector-specific regulatory, infrastructure and administrative constraints within defined timelines. These councils, modelled partly on Peru’s “Mesas Ejecutivas”, should not become channels for subsidies or preferential treatment and should be dissolved once their assigned problems are resolved.
The CSF also recommended targeted severance waivers for formally affected firms whose workers have access to retraining, along with expanded Technical and Vocational Education and Training programmes. It cited earlier analysis indicating that vocational training can generate annual wage premiums of between 10% and 25%.
Finally, the think tank called for a time-bound, approximately 12-month investment promotion campaign aimed at export-oriented sectors identified under the National Export Development Plan. It stressed that adjustment assistance alone would not create new employment unless accompanied by investment and business expansion.
The CSF said the National Tariff Policy already provides a workable foundation, including the four-band tariff structure, the scheduled CESS and Port and Airport Development Levy phase-down, economic impact assessments, advance notice for tariff changes and an independent review after two years.
The organisation concluded that Sri Lanka does not need to rebuild its adjustment framework from the beginning. Instead, it needs to establish the appropriate institutions before industry pressure intensifies, ensuring that tariff rationalisation is supported by transparent, evidence-based and worker-sensitive policies.