Study on China-Sri Lanka Free Trade Agreement

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2.3 India-Sri Lanka Free Trade Agreement The slow progress of SAPTA gave rise to bilateral trading arrangements between countries in South Asia. One of the significant bilateral FTAs to emerge in the region was the India-Sri Lanka FTA (ISFTA). ISFTA was signed on 28 th December, 1998 with an overall objective of facilitating and enhancing trade relations between the two countries in order to broaden economic integration and realize potential benefits thereof. 41 It was also an initiative undertaken to renew political confidence between Sri Lanka and India. Despite the delays in negotiations owning to domestic concerns, the agreement came into force on 1 st March, 2000 and has since continued to be implemented according to the schedules that were agreed upon. 42 Sri Lanka’s trade with India has gradually changed in terms of value and composition after the implementation of the ISFTA. Immediately preceding the agreement, in the period 1995-2000, average annual exports from Sri Lanka to India were US$39 million (close to 1 per cent of Sri Lanka’s overall exports) while average imports from India were US$509 million (close to 10 per cent of Sri Lanka’s overall imports). 43 While India was an important source of imports even prior to the FTA, it was not a major export market, and in 2000 it ranked 14 th in terms of export destinations of Sri Lanka. 44 By 2005, however, Sri Lanka’s exports to India have increased by ten-fold, reaching US$566 million, compared to 2000. 45 In 2008, India became the fifth largest destination for Sri Lanka’s exports, and by 2012 India had become the third largest export destination after the European Union (EU) and the United States (US). 46 The number of products exported by Sri Lanka to India has also increased since the implementation of the ISFTA. While in 1999 Sri Lanka exported 505 products to India, by 2005 this had doubled to 1,062, and by 2012 had further risen to 2,100. 47 In the early years of the FTA there appears to have been trade creation, with a number of new, value added products being exported from both countries. 48 In 1999, Sri Lanka’s main exports to India included pepper, waste and scrap steel, areca nuts, dried fruit, cloves, and waste paper. 49 By 2008, apart from the primary products exported to India, several value-added products such as insulated wires and cables, pneumatic tyres, ceramics, 41 High Commission of India (2013), “Handbook on the India-Sri Lanka Free Trade Agreement”, High Commission of India, Colombo, Sri Lanka. 42 Ibid. 43 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] 44 Ibid. 45 Ibid. 46 Ibid. 47 Kelegama, S & C. Karunaratne (2013), “Experiences of Sri Lanka in the Sri Lanka-India FTA and the Sri Lanka- Pakistan FTA,” Background Paper on Regional Value Chains, UNCTAD, available at: [http://unctad.org/en/PublicationsLibrary/ecidc2013misc1_bp10.pdf] 48 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] 49 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] Page 14 of 88
vegetable fats and oils, refined copper products, and furniture were among the top exports to India. 50 However, since the implementation of the ILFTA some unfavourable trends in Sri Lanka’s exports to India during 2005–2007 can be observed. The high growth in exports to India was driven mainly by two products (copper and Vanaspati - vegetable oil), which accounted for a 49.66 per cent share in Sri Lanka’s exports to India. 51 If Vanaspati and copper are excluded from the trade figures, Sri Lanka’s exports to India would have increased only by five-fold compared to the ten-fold increase. . 52 The rise in exports of these items was not due to any distinct comparative advantage on the part of Sri Lanka, but rather was due to a short-term tariff arbitrage by Indian manufacturers investing in Sri Lanka. Copper exports from Sri Lanka were also subject to much scrutiny from India, based on their low domestic value addition, with the Indians arguing that copper exports from Sri Lanka were under-invoiced and violated the ROO criteria. 53 Nevertheless exports to India have increased after the ILFTA, with over 70 per cent of Sri Lanka’s exports to India coming under the FTA during the post-2007 period. This figure increased to 83 per cent by 2011. 54 Imports from India to Sri Lanka have also escalated at a rapid rate following the implementation of the ILFTA. Imports from India amounted to US$600 million in 2000 have increased in six-fold by 2012, reaching US$3,640 million. 55 Furthermore, India has become Sri Lanka’s main source of imports since 1997. Nevertheless, the major cause for the increased imports has been the escalating cost of petroleum products in the global markets at the time. Since petroleum imports are in Sri Lanka’s negative list, the import of petroleum products from India has not been affected by the ILFTA. 56 In fact, the bulk of Indian imports to Sri Lanka (petroleum, vehicles, sugar, cotton, iron and steel, and pharmaceutical products) are not subject to reduced tariffs under the Agreement. 57 Over 70 per cent of Sri Lanka’s imports from India have been from products that are either in the negative list or are exempt from MFN duty. 58 Tariff Rate Quotas: To provide Sri Lanka with market access to a certain degree, India has allowed tariff rate quotas for major export products from Sri Lanka under the Agreement. Initially, quota utilization has been 50 Ibid. 51 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] 52 Ibid. 53 IPS (2008), “ International Economic Environment” in State of the Economy, Institute of Policy Studies of Sri Lanka, Colombo, Sri Lanka. 55 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] 55 Kelegama, S. (2014), “The India-Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look,” ADBI Working Paper Series, available at: [http://www.adbi.org/files/2014.02.06.wp458.india.sri.lanka.free.trade.agreement.pdf] 56 Ibid. 57 Kelegama, S & C. Karunaratne (2013), “Experiences of Sri Lanka in the Sri Lanka-India FTA and the Sri Lanka- Pakistan FTA,” Background Paper on Regional Value Chains, UINCTAD, available at: [http://unctad.org/en/PublicationsLibrary/ecidc2013misc1_bp10.pdf] 58 Ibid. Page 15 of 88
Page 1 and 2: Study on China-Sri
Page 3 and 4: IPS Team of Researchers Janaka Wija
Page 5 and 6: • Tariff-rate Quotas: Although ta
Page 7 and 8: 1. Background to the study While hi
Page 9 and 10: efore the agreement is finalized, w
Page 11 and 12: 2.1 Introduction While Sri Lanka ha
Page 13: Rules of Origin: The rules of origi
Page 17 and 18: margin to 889 products from India i
Page 19 and 20: 2.3 Pakistan-Sri Lanka Free Trade A
Page 21 and 22: Sri Lanka has been involved in both
Page 23 and 24: Trade facilitation issues: Further,
Page 25 and 26: 3.1 Introduction China has emerged
Page 27 and 28: 3.2 China-ASEAN Free Trade Agreemen
Page 29 and 30: Product specific rules pertaining t
Page 31 and 32: verification networking system on c
Page 33 and 34: Table 3.4: China’s Tariff elimina
Page 35 and 36: Rules of Origin (ROO) are a critica
Page 37 and 38: Parties China , New Zealand Date of
Page 39 and 40: Table 3.9: China’s Tariff elimina
Page 41 and 42: One of the quantitative restriction
Page 43 and 44: 3.5 China-Singapore Free Trade Agre
Page 45 and 46: exportation of any good destined fo
Page 47 and 48: with the following: elimination of
Page 49 and 50: under the Agreement, corresponding
Page 51 and 52: Table 3.17: China’s Tariff Elimin
Page 53 and 54: 3.7 China-Peru Free Trade Agreement
Page 55 and 56: Liberalization of Tariff Lines: Bot
Page 57 and 58: articles. In 2026, the overall aver
Page 59 and 60: 3.8 China-Costa Rica Free Trade Agr
Page 61 and 62: Both the countries have gradually e
Page 63 and 64: China maintains a negative list wit
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3.9 China-Switzerland Free Trade Ag
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3.11 Conclusion China’s shift in
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HS section and description Table 3.
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2013. 170 China is now demonstratin
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4.1 Introduction Over the past 55 y
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Using World Bank’s WITS database
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39 4 391231, 391239, 392321, 392620
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4.4 Identification of Potential Exp
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Table 4.7: Summary Analysis of Chin
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Table 4.8: Tariffs for Top 10 Curre
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Table 4.9: Tariffs for Top 10 Indic
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5. Conclusion to the study Section
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