India Srilanka FTA

Gaurav Chugh (S-27) Joyee Bora (S-32) M A Jaffer Ali(S-39) Medha Prabhakar(S-41) Santhosh Kumar Singh(S-65) Uday Nangia(S- 74 )

INDIA-SRILANKA FTA
The year 1998 saw the biggest boost in economic relations when the two countries signed a bilateral Indo-Lanka Free Trade Agreement (ILFTA), which began implementation in March 2000. Contemporary political forces led to the signing of the Agreement. Negative list approach Preferential treatment on 5112 tariff lines NTBs (Indian state taxes) were also to be removed gradually. Asymmetry between the two countries was accommodated by special & differential treatment (SDT).

SIMILARITIES AND COMPLIMENTARITIES BETWEEN PARTNERS

India GDP Trading Partners US $ 1000 bn US,China, EU,Russia and Japan US $ 30 bn Exp US, EU, Middle east Imp-India, Singapore, Hongkong, China, Iran Agriculture, Forestry, fishing, Manufacturing, Construction, Utilities and Services Srilanka

Major Industries

Agriculture, Textiles , Jute, Steel, fertilizers, computer software, Services and Transportation.

Share an ethnic background and have similar cultures.

REASONS BEHIND SIGNING THE TREATY

Is a manifestation of the sheer frustration with the regional trade integration process initiated with the launch of SAARC Preferential Trading Arrangement (SAPTA) in 1993. To isolate Pakistan. Sri Lankas desire to gain a foothold in the largest market of the region. Provides SDT to the country to help it gain not only additional market access, but also phase in its trade liberalization measures with a higher transition period.

While both the countries have achieved high export growth in each others market, the gain for Sri Lanka is much more pronounced with total exports growing by almost 10 times between 2000 and 2005, although there has been a slight decline in exports since 2006

Industry That benefitted

Sri-Lankan Spice Industry

ISFTA gave plenty of meaningful concessions to spice exports from Sri Lanka to India On 1st March 2003 India introduced a zero percent tariff on exports of spices from Sri Lanka to India resulting in over 80% of Cloves, Pepper and Nutmegs exports ending up in India during the last few years.

Edible Oils / Palm Oil

0% duty on edible oils not only gave edge to Sri-Lanka over other countries in pricing but also made Indian manufacturers to invest in facilities heavily

Indian Cement Industry

Exports from India to Sri Lanka went up from INR 692 million in 2000-01 to INR 1.3 billion in 2003-04

Example of a firm/industry/sector who lose out?

Indian Spice Industry
Duty-free imports of high-quality black pepper from Sri Lanka was also resisted by farmers in Kerala and Karnataka

Indian Copper Melting Industry

Copper Scrap exported to Sri-Lanka Melted and re-shaped this into ingots for sale to users in India And imported back into India

Effect of Change in Policy

Imports of Edible Oils from Sri-Lanka made up to 28% of total exports Exports arose not due to any distinct comparative advantage that SL held, but due to short-term tariff arbitration by Indian manufacturers investing in SL The viability of the industry was only as long as there was a discrepancy between Indian & SL tariffs on palm oil imports In response to the increase in global commodity prices in 2007/08, India cut import taxes on food imports including palm oil, making edible oils exports from SL unviable Accordingly, edible oils exports in 2008 were US$ 31.96 Mn, a fall of 78% from exports in 2007 which amounted to US$ 145.32 Mn Edible oils exports became non-existent in 2009