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FTA Analysis

 
A Comparative Analysis of Tariff Concessions offered by Sri Lanka to
India under Various agreements signed by India & Sri Lanka
 
India and Sri Lanka enjoy a strong trade and investment relationship, with bilateral trade growing between the two countries. Trade trends for the last few years are placed below:
 
Values in US $ Millions

 
2006-07
(Apr-Mar)
2007-08
(Apr-Mar)
2008-09
(Apr-Mar)
2009-10
(Apr-Mar)
2010-11
(Apr-Mar)
2011-12(P)
(Apr-Jan)
EXPORT
2,258.30
2,830.43
2,425.92
2,188.01
4,039.90
3,612.97
%Growth
 
25.33
-14.29
-9.81
84.64
19.58*
IMPORT
470.33
634.96
356.57
392.19
501.73
623.64
%Growth
 
35.00
-43.84
9.99
27.93
56.15*
TOTAL TRADE
2,728.63
3,465.39
2,782.49
2,580.20
4,541.62
4236.61

Source: DOC: NIC
P: Provisional
*As compared to corresponding period i.e. Apr-Jan 2011
 
As per ITC trade data, Sri Lanka’s Global imports in 2010 were USD 12.35 billion and India was the top supplier to Sri Lanka accounting for 20.64 % of its total imports. Much of this could be attributed to the various bilateral and regional trading agreements that India has signed with Sri Lanka in the past.
 
India-Sri Lanka FTA
 
India-Sri Lanka Free Trade Agreement (ISLFTA), which was signed in 1998, has become operational in 2000.  Sri Lanka is India’s largest trading partner country in the SAARC region. The Agreement provides duty free market access to both the countries on a preferential basis in a phased manner.
 
The Free Trade Agreement has boosted the bilateral trade between India and Sri Lanka and also consolidated the close economic, commercial and political relations between the two countries through increased trade and investments.
 
Objectives:
 
  • To promote through the expansion of trade the harmonious development of the economic relations between India and Sri Lanka.
  • To provide fair conditions of competition for trade between India and Sri Lanka
  • In the implementation of this Agreement the Contracting Parties shall pay due regard to the principle of reciprocity
  • To contribute in this way, by the removal of barriers to trade, to the harmonious development and expansion of world trade 
SAPTA & SAFTA

The South Asian Association for Regional Cooperation (SAARC) comprising seven South Asian countries; Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka was formed in 1985 with the adoption of its Charter at its first Summit in Dhaka, Bangladesh. It was created for the purpose of holding periodic, regional consultations on matters of mutual interest and to explore the possibility of cooperation in economics, social, cultural and other fields. The rationale was based on the success of similar regional groupings elsewhere and strength of the concerted action in international representation with enhanced competitive position ensued.
 
Following the Sixth SAARC summit held in Sri Lanka in 1991, an Inter-Governmental Group (IGG) was set up to prepare an agreement to establish a South Asian Preferential Trade Arrangement (SAPTA) by 1997. The framework agreement on SAPTA was approved in 1993 and implemented in December 1995, two years ahead of the scheduled.
 
SAPTA is a preferential trading arrangement, aims at promoting and sustaining mutual trade and economic cooperation through exchange of concession within the region through step-by-step approach. SAPTA was seen as a first step towards South Asian Free Trade Area (SAFTA) which was initially planned to establish before 2005. It was anticipated that SAPTA will facilitate greater specialisation and cost reduction generating substantial trade creation in the region in the view of significant tariff reductions and removal of other non tariff barriers (NTBs), given the existing complimentarity in resource endowment, technical
know-how and expanding production capability.
 
Agreement on South Asia Free Trade Area (SAFTA): The Agreement on South Asian Free Trade Area (SAFTA) came into force from 1st January, 2006. India, Pakistan and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCS) and Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States (LDCS). Afghanistan which became the eighth member of SAARC during the 14th SAARC Summit held on 3-4 April 2007 in New Delhi is due to become a party to the SAFTA Agreement as an LDC member.
 
Objectives:

The Objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia:
 
  1. eliminating barriers to trade in, and facilitating the cross border movement of goods between the territories of the Contracting States;
  2. promoting conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development;
  3. creating effective mechanism for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and
  4. establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this Agreement.
 ASIA-PACIFIC TRADE AGREEMENT

(formerly known as the Bangkok Agreement)
 
The Asia-Pacific Trade Agreement (APTA), previously named the Bangkok Agreement, signed in 1975 as an initiative of ESCAP, is a preferential tariff arrangement that aims at promoting intra-regional trade through exchange of mutually agreed concessions by member countries namely Bangladesh, China, India, Republic of Korea, Lao People’s Democratic Republic and Sri Lanka. ESCAP functions as the secretariat for the Agreement.  
 
Objectives:

The objectives of this Agreement are to promote economic development through a continuous process of trade expansion among the developing member countries of ESCAP and to further international economic co-operation through the adoption of mutually beneficial trade liberalization measures consistent with their respective present and future development and trade needs.
 
(Details of all these agreements are available on Ministry of Commerce website i.e. www.commerce.nic.in)
 
FIEO had done a comparative Analysis of the tariff Concessions under the above three agreements. The analysis would assist Indian exporters to choose the agreement for exports of a particular tariff line product offering maximum concessions.
 
Analysis : (Please click)
 
 
Margin of preference: means the percentage difference between the Most-Favoured-Nation (MFN) rate of duty and the preferential rate of duty for the like product, and not the absolute difference between those rates.
 
Margin of preference = (MFN duty– tariff rate conceded under the Agreement) × 100(per cent)
MFN duty


 

 
 
FTA Analysis