At the same time, SAFTA is undergoing a transformation. The 2004 agreement brings together Sri Lanka, Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal and Pakistan to remove tariff and non-tariff barriers. However, according to CBSL Governor Indrajit Coomaraswamy, more than a third of intra-regional trade under SAFTA is on the sensitive list, while border restrictions between Pakistan and India hinder merchandise trade and prevent regional integration. Despite its proximity to India, Pakistan, Bangladesh and Nepal, intra-regional trade accounts for less than 5% of total trade in South Asia. This is partly due to limited logistics, major regulatory barriers and protectionist policies, as well as disproportionate trade costs in the region. According to the World Bank, South Asian trade costs 20% more than in the Association of Southeast Asian Nations. Although the South Asian Free Trade Agreement (SAFTA) has been in place since 2006, para-tariffs have discouraged activities. It does not make much sense to get concessions under a trade agreement if the country is unable to deliver the goods requested – it can be a constraint in the case of a small country like Sri Lanka. This is evident from Sri Lanka`s strawberry exports to India. Experience with ILFTA and attempts to extend the agreement into a Comprehensive Economic Partnership Agreement (CEPA) underscore the need for a broader public law dialogue in Sri Lanka on trade agreements on a regular and ongoing basis. Consultations should not be reserved exclusively at the level of governments – financial, commercial or commercial departments, but with stakeholders in general. This can alleviate the concerns of importers, show that challenges can be addressed in participatory ways in agreements, and contribute to a greater public awareness of the opportunities and benefits of agreements and their confidence. While Sri Lanka has been actively involved in all multilateral trade negotiations and has carried out trade reforms in accordance with WTO GATT principles, Sri Lanka has also participated in a series of regional trade liberalization initiatives.
Sri Lanka participates in two regional agreements, the South Asia Free Trade Agreement (SAFTA) and the Asia-Pacific Trade Agreement (APTA), two bilateral agreements, the Indo-Sri Lanka Free Trade Agreement (ISFTA) and the Pakistan-Sri Lanka Free Trade Agreement (PSFTA). This article highlights some of the key lessons learned from Sri Lanka`s experience in these existing free trade agreements, which must be taken into account when negotiating a trade agreement with China. The country has also made progress in creating international actors for the development of commercial, transport and logistics infrastructure, with an important objective for foreign direct investment (FDI). The increase in capital flows benefited the economy as a whole, with 2018 being the strongest year since direct investment began and investment increased by $2.3 billion. The lack of a stable body capable of addressing trade-related issues under the agreement is an obstacle to better use of free trade agreements.