Competitiveness of Sri Lankan Tea in the International Market: A Trade Flow Analysis

Abstract

For more than 150 years, Sri Lanka has had a significant influence on the world market for tea. Sri Lanka is one of the world's top producers and exporters of tea. However, Sri Lanka's tea industry encounters a number of challenges due to internal and external market conditions, including governmental regulations, rising labour costs, and supply chain disruptions. These challenges can affect the competitiveness of Sri Lanka’s tea exports in the global market. Therefore, it is important to understand how the competitiveness of Sri Lankan tea exports in the global tea market changed over time. The specific objectives of the study were to examine the relative contribution of Sri Lanka’s tea exports to the international market and to assess the level of competitiveness of Sri Lanka’s tea exports. Based on the positivist research philosophy and quantitative approach, this study adopted four indexes to assess the level of competition. These indices include export market share (MS), export unit price (EUP), revealed comparative advantage (RCA), and revealed trade advantage (RTA). The study's findings demonstrated that while the export unit price exhibited an upward trend, Sri Lanka's market share in the world tea market has decreased over time. According to the findings of the RCA and RTA indices, Sri Lanka's competitiveness in terms of international tea exports has continuously decreased. Kenya, on the other hand, has witnessed a rise in tea export competition, while China and India have seen a decline in tea export competition. This study emphasizes the need for implementing efficient production methods in order to provide Sri Lankan tea to the global market at a lower price. Additionally, government policies ought to focus on offering technical assistance to boost productivity in the Sri Lankan tea industry.