Firm Use of FTAs in Sri Lanka: An Analysis of the India-Sri Lanka FTA and the Pakistan-Sri Lanka FTA

In South Asia, Sri Lanka has been an active proponent of regionalism, hopping on to the ‘bandwagon of regionalism’ with the signing of the India-Sri Lanka FTA (ISFT A) in 1998 and subsequently the Pakistan-Sri Lanka FTA (PSFT A) and the South Asia FTA (SAFTA) in 2002 and 2004, respectively. Past studies’ highlight that at the macro-level Sri Lanka is reaping gains from the ISFTA and PSFTA through increased utilization of these agreements. In order to, however fully realize benefits, it is fundamental to enhance FTA utilization at the firm-level. The proposed study aims to explore three intertwined research questions, detailed below, with the objective of assessing the current firm-level utilization of the two agreements and analyzing firm-level characteristics/determinants which encourage FTA utilization, in order to offer policy prescriptions that would promote further utilization of these agreements at the firm-level: Do firms, and if so, what types of firms currently utilize the ISFTA and PSFTA? What factors restrict or stifle firms from fully utilizing these agreements? What can be done to encourage FTA utilization at the firm level?