SAFTA: A Stumbling Trading Block

This study aims at analyzing the trade pattern of Sri Lanka with Pakistan and India. Sri Lanka has signed Free Trade Agreement with India and Pakistan and these three countries also members of SAFTA. Data reveals that bilateral trade between Sri Lanka and Pakistan is progressing under Pakistan-Sri Lanka FTA regime and same is the situation with India. Trade of Sri Lanka with these countries has nothing to do with SAFTA regime or agreement as trade is more favorable under bilateral FTA regime. Majority of the commodities trade under FTA are those which have higher value of revealed comparative advantage. Commodities which have lower comparative advantage are those which have MFN zero rated import duty or are not covered in FTAs. Therefore countries would not prefer to trade under SAFTA regime where preferential market access would be given to large number of countries. Keeping this in view reality, it may be concluded that SAFTA is a stumbling trade bloc.