Title: Impact of Sri Lanka's free trade agreement with China on India

Authors: Chandrima Sikdar

Addresses: School of Business Management, Narsee Monjee Institute of Management Studies, V.L. Mehta Road, Ville Parle (W), 400056 Mumbai, India

Abstract: In October 2014 a free trade agreement (FTA) between Sri Lanka and China was announced with a time frame of June 2015 for signing the agreement. On the other hand, Sri Lanka and India have an FTA since 2000 and a CEPA between them is under negotiation. Thus, the emerging trade dynamics between India and Sri Lanka due to this FTA calls for an in-depth study. The present study attempts to do this. Using the global trade analysis project (GTAP) the study does a number of simulations by calibrating trade liberalisation scenarios between Sri Lanka and China and studies the impact of the proposed FTA on its partners and the consequent impact on India. The results show that Sri Lanka's trade with India would fall as it will find it beneficial to substitute goods of Indian origin with goods of Chinese origin. While Sri Lanka takes home mostly positive gains, India's loss due to this FTA are pretty much apparent.

Keywords: Sri Lanka-China; FTA; Sri Lanka-India; trade; tariff liberalisation; welfare; CGE; GTAP; trade cost; cross border trade.

DOI: 10.1504/IJEPEE.2017.089160

International Journal of Economic Policy in Emerging Economies, 2017 Vol.10 No.4, pp.309 - 331

Received: 17 Jun 2015
Accepted: 24 Nov 2015
Published online: 09 Jan 2018 *

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