c. Free Trade AgreementsRecent years have seen a greater emphasis in Sri Lankan policy circles onregional/bilateral free trade agreements (FTAs). The sluggish economic recoveryof developed countries following the global financial crisis, the termination ofGSP plus preferential market accesses by the European Union in 2009, and theremarkable resilience of China, and other emerging economies in the region, tothe global economic slowdown is often cited as the rationale for this policyemphasis.Sri Lanka is currently a member of two regional agreements: the South AsiaFree Trade Area (SAFTA) Agreement and the Asia-Pacifi c Trade Agreement(APTA) (covering Bangladesh, China, India, South Korea, Sri Lanka, Laos), andtwo bilateral agreement: Indo-Sri Lanka Free Trade Agreement (ISFTA) and Pakistan-Sri Lanka Free Trade Agreement. Negotiations are also underway forentering into FTAs with Egypt, Bangladesh and a number of other countries. TPRhas a comprehensive coverage of the FTAs in operation and those under negotiation.But it has stopped short of discussing the actual trade impact and how theseagreements comply with the WTO norms.Under Indo-Sri Lanka FTA (ISFTA), Sri Lanka ’ s trade with India has expandednotably, but predominantly on the import side. During 2005–2009, Sri Lanka ’ sannual average exports to India amounted to a mere US$500 million compared toimports of $2,335 from India (IPS, 2011, p. 50). So far, the impact of all otherFTAs on Sri Lanka ’ s trade has been negligible. Only about 6 per cent of all tarifflines (at the HS 6-digit level) of Sri Lanka ’ s foreign trade has come under regionaltariff concessions under these agreements. The share of intraregional trade coveredby these concessions in the country ’ s total trade was even lower (3 and 1 per centof imports and exports, respectively).Indeed, there are good reasons to re-assess the apparent enthusiasm for proliferatingFTAs and regional trade agreements. The FTAs approach to trade liberalisationis becoming a major distraction to the process of unilateral liberalisationwhich has served Sri Lanka so well in the past three decades. Proliferation of FTAsgenerates a serious problem of multiple ‘rules of origin’, which entail significantcosts for both government and private economic agents. They complicate customsof administration and weaken efficiency improvements in the custom system. Withmultiple FTA, the tariff structure becomes highly differentiated, depending on thecountry of origin, thus compromising the goal of uniformity in tariffs and givingrise to new inefficiencies in resource allocation and specialisation.
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