Sri Lanka Pakistan Trade Agreement

Some Sri Lankan exports to the United States enjoy duty-free privileges under the United States` Generalized System of Preferences (GSP), which grants duty-free preferential treatment for up to 5,000 products (clothing is excluded) from certain beneficiary countries. The U.S.-Sri Lanka Bilateral Trade and Investment Framework Agreement (CIRA) provides a framework for both governments to discuss and resolve trade and investment issues at an early stage. The last TIFA discussions took place in June 2019. The free trade agreements with India and Pakistan cover only trade in goods. The agreements provide for duty-free imports and tariff preferences for industrial and agricultural products. A national value added of 35% is required in order to benefit from the concessions granted under the agreements. Trade and economic relations between Pakistan and Sri Lanka are strong and have existed for a long time. Pakistan is Sri Lanka`s second largest trading partner in the SAARC region. Sri Lanka was the first country to sign a free trade agreement with Pakistan. Significant growth in bilateral trade has been recorded, particularly following the implementation of the Pakistan-Sri Lanka Free Trade Agreement (ALEPPO) in 2005. The value of total trade between the two countries increased from $158 million in 2005 to more than $508 million in 2018. The trade balance (BOT) has always been in Pakistan`s favour and the trade gap has widened considerably over the years.

The Pakistan-Sri Lanka Free Trade Agreement (ALEPPO) was signed between the two governments in August 2002 and entered into force in July 2005. Sri Lanka enjoyed immediate duty-free market access for 206 products, while Pakistan enjoyed duty-free access to 102 products. The terms of ALEPPO granted Pakistan and Sri Lanka immediate concessions of 100% for the main export products. Pakistan`s exports to Sri Lanka increased from $97 million in 2004 to $355 million in 2018, nearly 3.6 times more over the 14-year period, apparently due to the positive impact of ALEPPO on trade. Similarly, Sri Lanka`s exports to Pakistan increased from $47 million in 2004 to $105 million in 2018, almost double those of the same period. The study, which examines trade between Pakistan and Sri Lanka under its Free Trade Agreement (FTA), concludes that ALEPPO has provided Sri Lanka and Pakistan with a significant market share. The study shows that the emerging trade relationship between Pakistan and Sri Lanka offers many opportunities and opportunities to increase current bilateral trade to more than US$2.7 billion. Currently, the volume of trade amounts to only 460 million US dollars. The second part of the study deals with the terms of the structure of the Pakistan-Sri Lanka Free Trade Agreement and briefly discusses the prospects and mutual benefits of ALEPPO. The third part of the study includes a detailed comparative analysis of the benefits of ALEPPO and compares it to trade under bilateral agreements.

The study uses the Trade Complementarity Index instrument to see if Sri Lankan exports meet Pakistan`s import demand and to determine a level of sectoral agreement or mismatch between Sri Lanka and Pakistan. In addition, the study examines that there has been a significant increase in trade for both countries, but Sri Lanka`s trade deficits with Pakistan have remained high. Under ALEPPO, tariff restrictions and non-tariff barriers overshadowed the effects of tariff rationalization, so this was the main obstacle to both countries` export performance. The study shows potential properties that can meet the demand of their market. Due to the lack of awareness, exporters in both countries are not fully exploiting the market potential and benefits of the free trade agreement. The study also draws the attention of entrepreneurs and exporters in both countries to explore new markets and pathways in their economies. To boost current bilateral trade, the study suggests that both countries need to diversify their products through research, innovation and value creation in order to adapt to the needs of each other`s markets. Since opportunities are documented, a channel for the exchange of ideas and suggestions must be developed in order to translate the available opportunities into a real volume of transactions. Therefore, the study recommends that the trade organizations of the two countries facilitate trade delegations and full communication between the business communities of the two countries in order to strengthen and strengthen bilateral trade relations between Pakistan and Sri Lanka.

Sri Lanka has signed free trade agreements (FTAs) with India, Pakistan and Singapore and is currently negotiating a free trade agreement with the PRC. In May 2017, Sri Lanka regained the privileges of the European Union`s (EU) Generalised System of Preferences (GSP+) for Sri Lankan exports. .