Sri Lanka continues negotiations with the United States to secure better trade terms while strengthening forced labour import controls, as officials warn that the current 10% additional tariff offers limited competitive advantage amid similar moves by regional competitors.

The Sri Lankan Government is actively engaged in trade discussions with the United States, though negotiations remain confidential with no final agreement yet in place. Trade Ministry and Commerce Department officials told Parliament's Committee on Public Finance on 11 August that discussions are proceeding under a non-disclosure agreement. Officials indicated that initial negotiations had successfully reduced a proposed 44% country-specific tariff down to 20% before a global 10% rate took effect instead.

The current 10% additional tariff is imposed on top of existing Most-Favoured-Nation duties, which vary by product category and average around 16.5%, according to officials. While this represents progress from earlier proposals, authorities cautioned that the tariff relief alone would not provide Sri Lankan exporters a sustained competitive advantage. The reduction from an initially proposed 12.5% category to the current 10% rate followed Sri Lanka's efforts to implement forced labour import controls, which were initially lacking enforcement mechanisms despite domestic laws addressing the practice.

Sri Lanka's improved tariff position reflects its recent regulatory measures to prevent imports of goods produced using forced labour, which were positively received by US authorities following the country's presentation at a US public hearing in July. However, the competitive landscape is shifting rapidly. Officials noted that among 60 countries subject to US Section 301 proceedings on forced labour concerns, 19 have achieved 10% treatment, while most of Sri Lanka's regional competitors have already reached the same rate.

In response, the Cabinet has directed a technical committee to develop longer-term compliance mechanisms, examining whether existing legal frameworks require strengthening or new legislation. The Government intends to prevent forced-labour-linked goods from entering Sri Lanka as inputs, undergoing processing, and being re-exported to the US. While larger exporters already conduct supply-chain verification, small and medium enterprises relying on third-party importers may face greater compliance challenges.