Sri Lanka Free Trade Research Articles

Do Trade Agreements Enhance Bilateral Trade? Focus on India and Sri Lanka

This article examines bilateral trade relations between the two important countries of South Asia, India and Sri Lanka, in light of the South Asian Free Trade Area (SAFTA) and the India–Sri Lanka Free Trade Agreement (ISFTA). The analysis period spans the years 1995 to 2020. The primary analysis found that bilateral trade has been sluggish and that the SAFTA and ISFTA agreements have had no discernible effect on these two countries’ bilateral trade performance. The causes of lackluster trade performance were investigated using the “revealed comparative advantage” and the “trade complementarity” indices. Clear evidence was found demonstrating that the reason for the bilateral trade’s consistent lackluster performance is due to both countries’ lack of revealed comparative advantage in the majority of product groups, followed by export similarity in the product groups where they do have a comparative advantage. The findings also confirm the suspicion of many observers that they are competitors rather than natural trading partners. Although any substantial future increase in their bilateral trade is improbable and fanciful, the paper reflects on methods of strengthening bilateral trade.

Anatomy of Non-tariff Barriers in India–Sri Lanka Free Trade Agreement: An Empirical Investigation

This article attempts to answer one crucial research question: why the utilization of India–Sri Lanka Free Trade Agreement (ISFTA) route for trade is very poor by the Indian exporters (13%) as compared to their Sri Lankan counterpart (65%) even after one decade of its implementation? The available studies have blamed the non-tariff barriers (NTBs) which are hamstringing the growth of trade between these partners development of international trade. However, these have considered NTBs as subset of non-tariff measures (NTMs) which are quite narrow sense of finding the hidden barriers within the International trade process. Therefore, this article has analysed in detail the logistic process involved in international trade between India and Sri Lanka to understand various NTBs sheltered within this logistic process. Further, the article has identified issues which are not directly beyond the logistic process which are affecting the international trade between these two countries. JEL: F0, F1

Realizing the Full Potential of Pakistan - Sri Lanka Free Trade Agreement A Critical Analysis Based on the Trade Complementarity Index

Realizing the Full Potential of Pakistan - Sri Lanka Free Trade Agreement A Critical Analysis Based on the Trade Complementarity Index

Trade Impacts of South Asian Free Trade Agreements in Sri Lanka

This article aims to examine the trade effects of the South Asian Free Trade Agreement (SAFTA) with a focus on Sri Lanka, by applying a gravity trade model. The study targets the following three FTAs: the SAFTA, the India–Sri Lanka Free Trade Agreement (ISFTA), and the Pakistan–Sri Lanka Free Trade Agreement (PSFTA). The outcomes of the gravity trade model estimation suggested that the trade creation effects were identified in the ISFTA, while those were not verified in the SAFTA and that the PSFTA had the trade creation effects only on the Sri Lankan imports. Those results seem to reflect the differentials in the preferential tariff rates. In particular, ISFTA could have the predominant positive effects on Sri Lankan trade flows due to its lowest preferential tariff rates, and thus the SAFTA effect might be crowded out at the current stage of Sri Lankan trade. JEL: F13, F14, O53

Anatomy of Non-Tariff Barriers in India-Lanka Free Trade Agreement

This paper attempts to answer one crucial research question, why the utilization of India Sri Lanka Free Trade Agreement (ISFTA) route for trade is very poor by the India exporters (13%) as compared to their Sri Lankan Counterpart (65%) even after one decade of its implementation? The available studies have blamed the non-tariff barriers (NTBs) which are hamstringing growth of trade between these partners development of international trade. However, these have considered NTBs as sub set of non-tariff measures (NTMs) which are quite narrow sense of finding the hidden barriers within the International trade process. Therefore, this paper has analyzed in detail the logistic process involved in international trade between India and Sri Lanka to understand various NTBs sheltered within this logistic process. Further, the paper has identified issues which are not directly beyond the logistic process which are affecting the international trade between these two countries.

Impact of Sri Lanka's free trade agreement with China on India

In October 2014 a free trade agreement (FTA) between Sri Lanka and China was announced with a time frame of June 2015 for signing the agreement. On the other hand, Sri Lanka and India have an FTA since 2000 and a CEPA between them is under negotiation. Thus, the emerging trade dynamics between India and Sri Lanka due to this FTA calls for an in-depth study. The present study attempts to do this. Using the global trade analysis project (GTAP) the study does a number of simulations by calibrating trade liberalisation scenarios between Sri Lanka and China and studies the impact of the proposed FTA on its partners and the consequent impact on India. The results show that Sri Lanka's trade with India would fall as it will find it beneficial to substitute goods of Indian origin with goods of Chinese origin. While Sri Lanka takes home mostly positive gains, India's loss due to this FTA are pretty much apparent.

Impact of Sri Lanka's free trade agreement with China on India

In October 2014 a free trade agreement (FTA) between Sri Lanka and China was announced with a time frame of June 2015 for signing the agreement. On the other hand, Sri Lanka and India have an FTA since 2000 and a CEPA between them is under negotiation. Thus, the emerging trade dynamics between India and Sri Lanka due to this FTA calls for an in-depth study. The present study attempts to do this. Using the global trade analysis project (GTAP) the study does a number of simulations by calibrating trade liberalisation scenarios between Sri Lanka and China and studies the impact of the proposed FTA on its partners and the consequent impact on India. The results show that Sri Lanka's trade with India would fall as it will find it beneficial to substitute goods of Indian origin with goods of Chinese origin. While Sri Lanka takes home mostly positive gains, India's loss due to this FTA are pretty much apparent.

Indo – Sri Lanka free trade agreement: a critical appraisal of influence on trade between two countries

The Indo – Sri Lanka Free Trade Agreement (ISFTA) was a significant milestone in the trade relations between India and Sri Lanka, the objective of which was to boost the economies of the two countries through bilateral tariff concessions. Completing 13 years in operation since its implementation in 2000, several studies that have been made regarding the ISFTA have brought evidence to suggest that the Agreement has brought mixed results in terms of trade expansion between the two countries. However, the majority of these studies have been based on analyses of overall trade data which do not distinguish between trade patterns of goods receiving ISFTA concessions from those that do not. This paper is an attempt to assess the effectiveness of the ISFTA by evaluating the trends of imports and exports of items receiving concessions under the ISFTA with those do not, for the pre and post Agreement periods and to compare those patterns with Sri Lanka’s trade with countries other than India. The findings of the study suggest that the ISFTA has not been effective in significantly promoting trade between the two countries. Also, it is evidenced that Sri Lanka has not been able to secure benefits as expected from the ISFTA. The outcomes of the study therefore suggest that the drawbacks of the present Free Trade Agreement be resolved prior to considering further deepening of the bilateral liberalisation of trade between India and Sri Lanka. The study also produces lessons which are potentially useful in negotiating free trade agreements with other countries.

The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look

The India–Sri Lanka Free Trade Agreement has been in operation for more than a decade. The paper provides the Sri Lankan perspective of the Free Trade Agreement (FTA) highlighting both the positive outcomes and the negative aspects. The paper shows that the FTA has worked in favor of Sri Lanka but its full potential has not yet been realized due to market access problems in India, and the lack of supply capacity for some products in Sri Lanka. The India-Sri Lanka Comprehensive Economic Partnership Agreement addressed many of the negative aspects of the FTA in a broader economic integration framework but was unable come into operation due to public misconceptions and lack of entrepreneurial and political leadership in Sri Lanka.

Book Review: Handbook on the India–Sri Lanka Free Trade Agreement

Book Review: <i>Handbook on the India–Sri Lanka Free Trade Agreement</i>

Econometric Analysis of the India–Sri Lanka Free Trade Agreement*

This paper investigates whether the India–Sri Lanka Free Trade Agreement (ISLFTA) has had trade creation or trade diversion effects on the rest of the world. Using data on tariffs at the six‐digit level of the Harmonized System classification for the period 1996 to 2006, the methodology of the present paper follows a study on the North American Free Trade Agreement by Romalis (2005) We use the commodity and time variation in the tariff preferences allowed under ISLFTA to identify its effect on sourcing of different products from the ‘control country’ to the ISLFTA region. Using a fixed effects model, we find that the ISLFTA has had small trade creation effects in the control countries.

India–Sri Lanka Bilateral Trade

The India–Sri Lanka Free Trade Agreement (ISFTA) was signed between India and Sri Lanka in December 1998 and came into operation in March 2000. It is now 10 years since this FTA has been signed and during this period the bilateral trade between these two economies has reached new heights and dimensions. Against this backdrop the present article proposes a theoretical framework which provides a general equilibrium determination of the commodity pattern of trade between the economies that helps to isolate their pattern of comparative advantages. The empirical implementation of the model considers trade in 33 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The article also explores the pattern of bilateral trade when each economy has a choice to produce goods by utilizing its own or the other country’s technology.

Restrictive Rules of Origin and Their Circumvention

This study is placed in the context of the emerging concerns regarding Rules of Origin (RoO) in Free Trade Agreements (FTAs). The first set of RoO for India, embedded in the text of the India–Sri Lanka Free Trade Agreement (ISLFTA), is analyzed with respect to its design and implementation issues. The first finding is high restrictive score of ISLFTA RoO on a comparative scale with RoO of other world FTAs. Absence of supplementary rules in their design seems to be the culprit, though such absence makes them procedurally simple. The effect of such restrictiveness on businesses is commented upon. The second issue is the circumvention of RoO norms in case of copper exports from Sri Lanka. This shows how problematic the issue of enforcement of RoO is, especially in a developing country perspective. A re-look into policy issues regarding both design and implementation of RoO is suggested.

Exploiting Sri Lanka's Free Trade Agreements with India and Pakistan

The article looks at the impact of preference, given under the bilateral free trade agreements Sri Lanka has signed with India and Pakistan. The focus here is on the export side and away from the import angle. This article identifies where the greatest preferences are offered to Sri Lanka-based exporters and analyzes the relationship between preferences and the export outturn. Preferences are calculated incorporating the current levels of protection in India and Pakistan. The article argues that successful Sri Lankan exporters’ penetration of the large Indian market, as reflected by the doubling of total exports over 2003–05, actually reflects a very concentrated increase in exports of a few products. Controlling for industry effects, preferences do not have a statistically significant impact on exporting to India.

Performing 'Dis-respectability': New Tastes, Cultural Practices, and Identity Performances by Sri Lanka's Free Trade Zone Garment-Factory Workers

This article describes and analyzes how female garment-factory workers in Sri Lanka's Free Trade Zones collectively express their difference from dominant classes and males and articulate their identities as a gendered group of migrant industrial workers by cultivating different tastes and by engaging in oppositional cultural practices. In the urban, modernized, and globalized areas of the FTZs, women develop unique tastes in the realms of music, dance, film, reading material, styles of dress, speech, and mannerisms. By performing subcultural styles that are subversive critiques of dominant values in public spaces, they pose a conscious challenge to the continued economic, social, and cultural domination they endure. But while workers' participation in a stigmatized culture is explicitly transgressive and critical at some levels, their demonstrated acquiescence to different hegemonic influences marks the inseparability of resistance and accommodation.

Performing 'Dis-respectability': New Tastes, Cultural Practices, and Identity Performances by Sri Lanka's Free Trade Zone Garment-Factory Workers

This article describes and analyzes how female garment-factory workers in Sri Lanka's Free Trade Zones collectively express their difference from dominant classes and males and articulate their ide...