The European Commission (EC) has warned the Sri Lankan garment trade to develop a survival strategy in the face of an impending India-EU trade deal.

India has requested a bilateral trade agreement with the EU.

"The process has already begun," said Roshan Lyman, head of politics and trade at the EC office in Sri Lanka, speaking at a workshop organised by the European Chamber of Commerce of Sri Lanka.

The EC office says the EU-India trade deal could erode Sri Lanka's zero duty advantage in European markets under the GSP+.

"India is of course looking for zero duty access into the EU. So if that happens for garments, Sri Lanka's zero duty advantage will be lost," said Lyman.

At the moment Indian clothing gets limited duty reductions under the EU's standard GSP scheme but Indian textiles were graduated out of GSP benefits.

The EC office says Sri Lanka must develop strategies that are not entirely dependent on duty concessions, to survive heightened Indian competition when the trade agreement comes through.

Sri Lanka has a limited time period to make adjustments.

"India would like to finish the negotiations before the 2009 Indian elections. But the EU feels that this is a bit too short to finalise an entire agreement. So what would be realistic is about three years," said Lyman.

By Dilshani Samaraweera.