Making SAFTA Effective: An Approach to Prune Sensitive Lists in South Asia

A major barrier that holds the progress of SAFTA Agreement is that members continue to include a large number of items in their respective sensitive lists. The tariff liberalisation programme under SAFTA requires members to review and reduce their sensitive lists every four years or earlier. However, any review is purely voluntary in nature as there is no formal binding or commitment. Consequently, no significant effort has been made by countries to prune their lists.

For this reason, this study examines Sri Lanka’s sensitive list maintained with SAFTA members and suggests an approach to prune the list. The analysis entails a quantitative assessment of the competitiveness of the products placed in Sri Lanka’s SAFTA Sensitive List. For this assessment, the concepts of revealed comparative advantage and trade potential was used. This process helps in identifying items in which Sri Lanka is competitive and those where the exporting SAARC country is not competitive. Such items are recommended for removal from Sri Lanka’s sensitive list. The study recommends that only the vulnerable items should be retained on the sensitive list but should be removed gradually in a phased manner. However in some cases, removal from sensitive lists needs to be approached with caution, particularly in cases of imports from India being in large enough quantities to disrupt domestic production structures and potentially having revenue implications as well for Sri Lanka.

Research team

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