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Sri Lanka’s Free Trade Agreements with India and Pakistan: Are They Leading Bilateral Trade Beyond Normalcy?

Author

Listed:
  • Sirimal Abeyratne

    (Professor of Economics, Department of Economics, University of Colombo, Sri Lanka.)

Abstract

Bilateralism arises as a “second-best” option when countries seek benefits beyond those of regional approaches to free trade and those of unilateral liberalization. In spite of the regional initiatives for free trade in South Asia along with policy reforms in individual countries, Sri Lanka entered into bilateral free trade agreements (FTAs) with India (2000) and Pakistan (2005). In a situation where trade within the South Asian region has been sluggish despite higher economic growth, trade liberalization, and regional initiatives for integration and cooperation, this article examines from the Sri Lankan point of view whether the bilateral FTAs have resulted in above-normal trade performance. The analysis suggests that better performance in bilateral trade cannot be attributed exclusively to the success of the FTAs any more than weak performance can be attributed to their shortcomings. Apart from this, merchandise trade does not appear to have performed in isolation as the extent of overall bilateral connectivity set the groundwork for greater integration. The article confirms that bilateral FTAs that seek reciprocity in integration and cooperation are indeed a “second-best” option, compared to the potential trade performance associated with unilateral liberalization in trading partner countries.

Suggested Citation

  • Sirimal Abeyratne, 2012. "Sri Lanka’s Free Trade Agreements with India and Pakistan: Are They Leading Bilateral Trade Beyond Normalcy?," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 17(Special E), pages 315-337, September.
    • Handle: RePEc:lje:journl:v:17:y:2012:i:sp:p:315-337
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    References listed on IDEAS

    as
    1. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, vol. 54(1), pages 169-187, October.
    2. Prema-chandra Athukorala, 2011. "Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?," Asian Economic Papers, MIT Press, vol. 10(1), pages 65-95, Winter/Sp.
    3. Dushni Weerakoon, 2009. "Bilateral FTAs in South Asia: Recasting the Regionalism Debate," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 14(Special E), pages 155-170, September.
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    Cited by:

    1. Sirimal Abeyratne, 2013. "Integration of Sri Lanka into Indian Supply Chains under the Bilateral Free Trade Agreement," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 14(2), pages 275-292, September.

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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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