An Assessment of the Pakistan – Sri Lanka Free Trade Agreement

The Pakistan-Sri Lanka Free Trade Agreement was signed in July 2002. Trade between Pakistan and Sri Lanka has shown lackluster growth since the FTA’s inception. Pakistan’s exports to Sri Lanka grew from USD 154 million in 2004 to USD 316 million in 2013, whereas Sri Lanka’s exports to Pakistan grew from USD 46 million to USD 63 million during the same period. The terms of the Pakistan-Sri Lanka Free Trade Agreement are favorable, both countries have healthy markets for the other’s major exports and boast strong political ties, making the disappointing state of bilateral trade between the two all the more alarming. This Study suggests that a number of issues are standing in the way of stronger trade relations. Chief among them is an inability to establish connections between the two countries’ business communities and policymakers. Other issues apparently include unilateral amendments to FTA terms that disrupt trade and a lack of investment by government bodies in hosting singe country exhibitions and regular trade delegations. This Study identifies USD 1.7 billion trade potential for Pakistani exports to Sri Lanka, and USD 1.0 billion trade potential for Sri Lankan exports to Pakistan. Pakistan and Sri Lanka are capable of being major trade partners, since countless factors conducive to trade are already in place. Efforts therefore must be made to resolve existing issues in order to get Pakistan-Sri Lanka trade on track to achieving its considerable potential.