Free trade agreements are becoming increasingly popular worldwide, and Sri Lanka is no exception. With its strategic location in the Indian Ocean and fast-growing economy, Sri Lanka is emerging as a key player in global trade. Several free trade agreements have been signed by Sri Lanka over the years, with more in the pipeline. In this article, we will delve deeper into the benefits of free trade agreements for Sri Lanka and how they have impacted the country`s economy.
Firstly, what are free trade agreements? Simply put, these are agreements between two or more countries that eliminate or reduce trade barriers such as tariffs and quotas, thereby promoting free trade. By doing so, these agreements increase market access for goods and services, foster competition, and promote economic growth.
Sri Lanka has signed several free trade agreements over the years, the most notable being the South Asian Free Trade Area (SAFTA), the Pakistan-Sri Lanka Free Trade Agreement (PSFTA), and the Indo-Sri Lanka Free Trade Agreement (ISFTA). These agreements have played a significant role in boosting Sri Lanka`s trade and economic growth.
The SAFTA agreement, for instance, has helped Sri Lanka increase trade with its neighbours in South Asia, particularly India. This has opened up new markets for Sri Lankan businesses, leading to increased exports and job creation. The PSFTA agreement with Pakistan has also helped boost trade between the two countries, particularly in the areas of textiles, agriculture, and pharmaceuticals.
The ISFTA agreement between India and Sri Lanka is arguably the most significant of all free trade agreements signed by Sri Lanka. Since its implementation in 2000, bilateral trade between the two countries has more than doubled, from $658 million in 2000 to $1.4 billion in 2019. Sri Lanka has benefited from increased exports of apparel, tea, and spices, among other products. In turn, India has gained access to Sri Lanka`s growing market for automobiles, machinery, and pharmaceuticals.
Apart from these agreements, Sri Lanka is in the process of negotiating several new free trade agreements, including with China, Thailand, and Bangladesh. These agreements are expected to further boost Sri Lanka`s trade and economic growth by opening up new markets and increasing investment.
However, it is important to note that free trade agreements are not without their challenges. Critics argue that they can lead to job losses in certain sectors as domestic producers struggle to compete with cheaper imports. There are also concerns about the impact on the environment, particularly in industries such as mining and logging.
In conclusion, free trade agreements have played a significant role in boosting Sri Lanka`s trade and economic growth. They have opened up new markets, increased exports, and created jobs. With more agreements in the pipeline, Sri Lanka is well-positioned to further expand its trade and investment opportunities. However, it is important to carefully evaluate the benefits and challenges of each agreement to ensure that they are in the country`s best interests.