Study on China-Sri Lanka Free Trade Agreement

trade agreements with China in addition to Japan in view of the high trade deficit Sri Lanka runs with
these countries.
Currently, Sri Lanka is a party to a number of trade agreements: Indo-Lanka Free Trade Agreement
(ILFTA), Pakistan-Sri Lanka Free Trade Agreement (PSFTA), South Asia Free Trade Agreement (SAFTA)
and Asia Pacific Trade Agreement (APTA). These four agreements account for 21 per cent of Sri
Lanka’s total trade. 13 Under APTA, Sri Lanka receives tariff concessions 14 for over 1858 products
exported to China. 15 These account for around 50 per cent of total exports to China from Sri Lanka
(Kelegama, 2009). However, the utilization of these concessions remains low. 16
Discussions on having a FTA with China was launched when President Mahinda Rajapakske visited
Beijing in May 2012 during which both countries expressed an interest in upgrading political and
economic relations. 17 Both countries now have agreed in principle that they would embark on a free
trade agreement, which is hoped to open up the vast Chinese market to Sri Lanka’s producers and
manufacturers 18 including the apparel and tea sectors. 19 This would not only boost bilateral trade 20
but help to reduce Sri Lanka’s dependence on traditional markets in Europe and USA. 21 In this
regard, it is imperative that the agreement covers a substantial number of tariff lines and trade to
ensure its utility to exporters as well as address non-tariff barriers that might hinder export
expansion. There are reservations amongst some sections of the business community about adverse
effects of a FTA with China; general view is that Chinese imports are far more competitive and could
have the potential to decimate local industries. 22 Thus the agreement needs to be prepared carefully
taking into account asymmetrical relationship between the two economies, 23 with a rational
negative list and a longer phase-out liberalisation schedule to protect local producers and
manufacturers to allay fears of a China threat. 24
In this context, it is necessary to undertake an in-depth study as well as for the government engage
and consult various stakeholders in the country- traders, producers/manufacturers and consumers -
13 Senewiratne, H. (2013, July 16). China to expedite FTA. Daily News. Retrieved from www.dailynews.lk
14 Andree, M. (2010, April 3). Formal China-Lanka trade pact needed. Retrieved from www.island.lk
15 Daily FT. (2012, September 27). Sri Lanka wakes up to massive APTA.
16 Kelegama, S. (2009). China-Sri Lanka Economic Relations: An Overview. Sri Lanka-China Business Forum.
Colombo.
17 Ali, A. S. (2014, January 23). Feasibility study on Sri Lanka-China FTA due soon; deal signing slated before end
of 2014. Retrieved from DailyFT: http://www.ft.lk/2014/01/23/feasibility-study-on-sri-lanka-china-fta-duesoon-deal-signing-slated-before-end-of-2014/
18 Channel News Asia. (2013, September 17). Sri Lanka, China "to agree free-trade deal soon". Retrieved from
www.channelnewsasia.com
19 Koelmeyer, C. (2013, September 22). Chinese FTA evokes mixed reactions. The Nation. Retrieved from
www.bilaterals.org
20 Ali, A. S. (2014, January 23). Feasibility study on Sri Lanka-China FTA due soon; deal signing slated before end
of 2014. Retrieved from DailyFT: http://www.ft.lk/2014/01/23/feasibility-study-on-sri-lanka-china-fta-duesoon-deal-signing-slated-before-end-of-2014/
21 Koelmeyer, C. (2013, September 22). Chinese FTA evokes mixed reactions. The Nation. Retrieved from
www.bilaterals.org
22 Deeptha. (2013, November 4). China, CHOGM and FTA. Daily FT. Retrieved from ww.ft.lk
23 Koelmeyer, C. (2013, September 22). Chinese FTA evokes mixed reactions. The Nation. Retrieved from
www.bilaterals.org
24 Deeptha. (2013, November 4). China, CHOGM and FTA. Daily FT. Retrieved from ww.ft.lk
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