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Journal of Economic Integration 2004 September;19(3) :568-589.
DOI: https://doi.org/10.11130/jei.2004.19.3.568
An Analysis of the Impact of Indo-Lanka Free Trade Agreement and Its Implications for Free Trade in South Asia
Mahinda Siriwardana 
University of New England
Copyright ©2004 Journal of Economic Integration
ABSTRACT

The Indo-Lanka Free Trade Agreement (ILFTA) which was signed in December 1998 between India and Sri Lanka has shown a promising start to trade liberalisation among SAARC (South Asian Association for Regional Cooperation) countries. This paper provides a quantitative assessment of the likely impact of the ILFTA. We perform simulations using the Global Trade Analysis Project (GTAP) model to quantify the impact of liberlised trade between Sri Lanka and India. GTAP is a computable general equilibrium (CGE) model of the world economy. Using the model simulations, the paper also examines the implications of extending the free trade agreement to other SAARC nations. Results indicate that both Sri Lanka and India will experience some welfare gains from ILFTA. The extension of such trade agreement to all SAARC nations may create significant welfare improvements in Sri Lanka.

JEL Classification: F15

Keywords: · Free Trade Agreement | General Equililorium | GTAP
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