Study on China-Sri Lanka Free Trade Agreement

As a result of the PSFTA Sri Lanka has diversified its export basket to Pakistan over time. Pakistan’s
negative list, which consists of 540 tariff lines, contained many of Sri Lanka’s main exports to
Pakistan including tea, rubber products, certain ceramics, paper products and several textile and
garment products. 77 For this reason, a range of new Sri Lankan products have penetrated Pakistan’s
market: fresh pineapple, sports goods, tamarind with seeds, edible oil, porcelain tableware and
kitchenware, ceramic tiles, furniture, electrical switches and sockets, herbal cosmetic products,
plastic articles, paints, glass paintings, leather products, frozen fish, prawns, lobsters, crabs, cut
flowers and foliage, gems and Jewellery and aquarium fish. 78 Sri Lanka’s negative list also consists of
697 products with mostly agriculture sector, rubber, products, paper products, footwear, ceramic
products, many motor vehicles and part, along with several metal products. 79
Non-tariff barriers:
Although both the countries maintain a negative list, to provide market access to each other to a
certain degree, Pakistan and Sri Lanka have allowed tariff rate quotas for major export products
from both countries (Table 2.2). Tea, apparel, betel and cosmetics were subjected to tariff rate
quotas for exports from Sri Lanka. Sri Lanka’s exports of these products to Pakistan have further
improved following a degree of revisions made for tariff rate quotas and margin of preferences in
2007.
Table 2.2: PSFTA Tariff Rate Quotas
Product Pakistan’s No. Sri Lanka’s No. Tariff Rate Quota
of Tariff Lines of Tariff Lines
Tea 4 - 10,000 MT
Apparel 21 - 35% Margin of Preference
Basmati - 1 Duty Free for 6,000 MT
Potatoes - 1 Duty Free for 1,200 MT
Betel 1 20% Margin of Preference
Cosmetics 11 50% Margin of Preference
Source, Table 4, de Mel, D., undated, India – Sri Lanka, Pakistan – Sri Lanka Bilateral Free Trade
Agreements, Institute of Policy Studies of Sri Lanka.
Rules of origin:
Stringent rules of origin criteria were one of the setbacks of ISFTA, which was considered while
negotiating the PSFTA. Having the experience with ISFTA, PSFTA negotiations adopted a less
restricted rules of origin criteria. The major difference between the rules of origin of the ILFTA and
PSFTA is the change of tariff classification criteria: the PSFTA adopts a change of tariff heading at HS
6-digit level, which is more favourable to Sri Lanka, particularly for blended tea.
2.4 Conclusion
77 IPS (2007), “ International Economic Environment” in State of the Economy, Institute of Policy Studies of Sri
Lanka, Colombo, Sri Lanka.
78 Ibid.
79 Ibid.
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