India-Sri Lanka FTA: Lessons for SAFTA

Much before SAFTA came into existence, the India-Sri Lanka FTA came into effect in March 2000. One salient feature of this arrangement is that Sri Lanka, being a smaller developing country, has offered less than full reciprocal preferences to India. While many consider the FTA a success, others argue that most important items of export interest to both countries are being on the negative list, the impact on trade and welfare has been minimal. A close analysis of India-Sri Lanka FTA will help derive important lessons for SAFTA. The specific objectives of this paper are: (i) to provide a brief evolution of bilateral trade cooperation between India and Sri Lanka; (ii) to analyze the trends in trade between two countries before and after the formation of the FTA; (iii) to analyse the trends in investment flows and services trade between the two countries; (iv) to provide an assessment of the depth of preferences (both across sectors and sector-specific) taking into consideration of the products kept in the negative lists; and (v) to derive any lessons that may have relevance to implementation of SAFTA and its impact on other members.

Dushni Weerakoon and Jayanthi Thennakoon
Consumer Unity and Trust Society, India.