Impact of FTAs on Trade Flows: A Study of the India– Sri Lanka Free Trade Agreement

Jump To References Section

Authors

  • Anoma Abhyaratne
     ,IN
  • Sumati Varma
     ,IN

Keywords:

Trade, Economic Integration

Abstract

The current global business environment has undergone a significant change in the last few decades driven by changes in the patterns of trade and investment flows. This has been accompanied by a strong wave of regional economic integration in the world economy, visible through the increasing number of RTAs (regional trading agreements) in different parts of the world. Economic integration in the South Asian region has seen characterized by multilateral trade liberalization, alongside regional, sub-regional and bilateral liberalization. This paper examines the impact of the India Sri Lanka Free Trade Agreement (ISFLTA) on trade flows between the two countries. The study uses the gravity model in a panel data estimation using the Weighed Least Squares Method for the period 1990-2014. The results provide evidence that the FTA has promoted trade between the countries. It was found that the FTA has created large trade creation effects. There is no diversion effect of exports of other South Asian countries to India and Sri Lanka. Larger trade creation effects that exceed the diversion effects indicate the welfare gains from the free trade agreement between India and Sri Lanka.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

Downloads

Published

2018-05-23

How to Cite

Abhyaratne, A., & Varma, S. (2018). Impact of FTAs on Trade Flows: A Study of the India– Sri Lanka Free Trade Agreement. Journal of Business Thought, 7, 18–34. Retrieved from http://informaticsjournals.com/index.php/jbt/article/view/21328

Issue

Volume 7, April 2016 - March 2017

Section

Articles

License

All the articles published in JBT are distributed under a creative commons license. The journal allows the author(s) to hold the copyright of their work (all usages allowed except for commercial purpose).
Received 2018-05-23
Accepted 2018-05-23
Published 2018-05-23

 

References

Aitken, N.D. (1973), "The Effect of the EEC and EFTA on European Trade: A Temporal crosssection Analysis”, American Economic Review, 63, 881-892.

Anderson J.A. (1979), "A Theoretical Foundation for the Gravity Model”, The American Economic Review, 69, 106-116.

Bhagwati, J. and Krueger, A. (1995), "The Dangerous Drift to Preferential Trade Agreements”, Washington DC: AEI Press.

Blundell, R. and S., Bond, (1997), "Initial conditions and moment restrictions in dynamic panel data models”, Journal of Econometrics, 87,115-143.

Braga, J.C. and Mendez, J.A. (1983), "Economic Integration among Developed, Developing and Centrally Planned Economies: A Comparative Analysis”, Review of Economics and Statistics, 67(4), 549-556. (November 1985)

Deshal de Mel. 2010. Bilateral free Trade Agreements in SAARC and Implications for SAFTA, In Sadiq Ahmed et.al, Promoting Economic Cooperation in South Asia. Sage Publications: New Delhi.

Dushni Weerakoon and Jayanthi Thennakoon. (2006). India Sri Lanka FTA: Lessons for SAFTA, CUTS International, Jaipur. http://www.thecommonwealth.org/fi les/178424/FileName/IndiaSri%2520Lanka%2520FTA--Lessons%2520for%2520SAFTA--Final.pdf (accessed 15 November 2010).

Dutta, D. (2000) ed., "Economic Liberalisation and Institutional Reforms in South Asia: Recent Experiences and Future Prospects”, Delhi : Atlantic Publishers and Distributors.

Endoh, M. (1999), "Trade Creation and Trade Diversion in the EEC, the LAFTA and the CMEA: 1960-1994,” Applied Economics, 31, 207-216.

Endoh, M. (2005), "The Effects of the GSTP on Trade Flow: Mission Accomplished?”, Applied Economics, 37(5), 487-496.

Frankel, J.A. (1997), "Regional Trading Blocs in the World Economic System”, Institute for International Economics. Washington DC

Frankel, J.A., Stein, E. and Wei, S.J (1995), "Trading blocs and the Americas: the natural, the unnatural, and the super-natural”, Journal of Development Economics, 47(1), 61-95.

Fukao, K. Okubo, T. and Stern, R. M. (2003), "An Econometric Analysis of Trade Diversion under NAFTA,”, Research Seminar in International Economics, The University of Michigan, Discussion Paper No.491.

Gilbert, J., Scollay, R. and Bora, B. (2004), "New Regional Trading Developments in the AsiaPacific Region,” in Global Change and East Asian Policy Initiatives edited by S. Yusuf, M. Altaf and K. Nabeshima, The World Bank : Oxford Univ. Press.

Jayasuriya, S., and Weerakoon, D. (2001), "FDI and Economic Integration in the SAARC Region” in T.N. Srinivasan (ed.), Trade, Finance and Investment in South Asia, New Delhi: Social Sciences Press.

Joshi, V. (2012), "Econometric Analysis of the India-Sri Lanka Free Trade Agreement”, Asian Economic Journal, 26(2), 159-180.

Kelegama, S. (2014), "The India–Sri Lanka Free Trade Agreement and the Proposed Comprehensive Economic Partnership Agreement: A Closer Look”, ADBI Working Paper Series No. 458.

Kelegama, S. and Mukherji, I.N. (2007), "India-Sri Lanka Bilateral Free Trade Agreement: Six Years Performance and Beyond”, RIS working Paper no 119.

Kelegama, S. (1999), „Indo-Sri Lanka Trade and the Bilateral Free Trade Agreement: A Sri Lankan Perspective"Ÿ, Asia-Pacific Development Journal, Vol.6, No.2, December 1999.

Law & Society Trust. 2010. An Act of Faith? Ten Years of the India-Sri Lanka Free Trade Agreement (ISLFTA), Law and Society Trust, New Delhi. http://www.lawandsocietytrust org/PDF/An%20Act%20of%20Faith%20India%20Sri%20Lanka%20Free%20Trade%20 Agreement%20Ten%20Years%20On%20March%202010-1.pdf

Rose, A.K. (2004) "Do We Really Know that the WTO Increases Trade?” American Economic Review, 94(1), 98-114.

Sahoo, P. (2006), "Foreign Direct Investment in South Asia: Policy, Trends, Impact and Determinants”, ADB Discussion Paper No: 56.

Solaga, I. and Winters, L.A. (2000), "Regionalism in the Nineties: What Effect on Trade?”, CEPR Discussion paper No. 2183.

Tinbergen J. (1962), "Shaping the World Economy; Suggestions for an International Economic Policy”, New York: The Twentieth Century Fund

Urata, S. & Okabe, M., (2007). "The Impacts of Free Trade Agreements on Trade Flows: An Application of the Gravity Model Approach”, RIETI Discussion Papers No. 07052.

UNCTAD (2014) Key Statistics and Trends in Trade Policy 2014, http://unctad.org/en/PublicationsLibrary/ditctab2014d3_en.pdf.

Viner, J., (1950), "The Customs Union Issue”, New York: Carnegie Endowment for International Peace.

World Bank (2004) "Trade Policies in South Asia”, World Bank, Washington DC.