Trade Impacts of South Asian Free Trade Agreements in Sri Lanka. Issue 1 (March 2019)

• Record Type: Journal Article
• Authors: Taguchi, Hiroyuki; Rubasinghe, Don Chalani Imasha
• Is Part Of: South Asia economic journal. Volume 20:Issue 1(2019)
• Page Start: 1
• Page End: 18
• Publication Date: 2019-03
• Subjects: South Asia -- South Asian Free Trade Agreement (SAFTA) -- India-Sri Lanka Free Trade Agreement (ISFTA) -- Pakistan-Sri Lanka Free Trade Agreement (PSFTA) -- South Asian Association for Regional Cooperation (SAARC) -- gravity trade model; South Asia -- Economic conditions -- Periodicals; South Asia -- Economic policy -- Periodicals; Periodicals; 330.95405
• DOI: 10.1177/1391561418822203
• Languages: English
• ISSNs: 1391-5614

Abstract

This article aims to examine the trade effects of the South Asian Free Trade Agreement (SAFTA) with a focus on Sri Lanka, by applying a gravity trade model. The study targets the following three FTAs: the SAFTA, the India–Sri Lanka Free Trade Agreement (ISFTA), and the Pakistan–Sri Lanka Free Trade Agreement (PSFTA). The outcomes of the gravity trade model estimation suggested that the trade creation effects were identified in the ISFTA, while those were not verified in the SAFTA and that the PSFTA had the trade creation effects only on the Sri Lankan imports. Those results seem to reflect the differentials in the preferential tariff rates. In particular, ISFTA could have the predominant positive effects on Sri Lankan trade flows due to its lowest preferential tariff rates, and thus the SAFTA effect might be crowded out at the current stage of Sri Lankan trade. JEL: F13, F14, O53