Background

• India-Sri Lanka Free Trade Agreement signed in 1998 and became operational in 2000.
  
  
• The bilateral trade between India and Sri Lanka has grown four times in the last nine years increasing from US $ 658 million in 2000 to US $ 2719 million in 2009.
  
  
• Sri Lanka is India’s second largest trade partner in the SAARC region.
  
  
• The main Indian exports to Sri Lanka are Petroleum (Crude & Products), Transport Equipments, Cotton, Yarn Fabrics, Sugar, Drugs Pharmaceuticals & Fine Chemicals.
  
  
• The chief Sri Lankan exports to India are ,spices, electrical Machinery except electronic, Transport Equipments, Pulp & Waste, Natural Rubber and Paper Board.

Joint Study Group (JSG) and Comprehensive Economic Partnership Agreement (CEPA)

• A JSG was set up in April, 2003 to widen the ambit of ISLFTA to go beyond Trade in Goods to include Services and to facilitate greater investment flows between the two countries.
  
  
• Report of JSG was submitted in October, 2003.
  
  
• Based on the recommendation and conclusion of the JSG, CEPA negotiations were started in February, 2005 and concluded in July 2008, after Thirteen Rounds of Negotiations.
  
  
• Both sides had decided to sign the CEPA during the 15^th SAARC Summit held in Colombo but due to reservations expressed by Government of Sri Lanka , both sides have still not signed the Agreement. The Government of Sri Lanka can be asked the reasons of such delays and future course of actions.
  
  
• Both sides after 13 Rounds of Negotiations have agreed to enter into Comprehensive Economic Partnership Agreement, the last round being concluded in July, 2008

SALIENT FEATURES OF CEPA

Trade in Goods

• Reduction in Negative List by each country would provide additional market access
  
  
• The Agreement provides for review of Negative Lists together with TLP within (60) days of signing of CEPA.
  
  
• Both India and Sri Lanka have agreed to reduce tariff to zero percentage for items removed from Negative List within 3 years.

Trade in Services

• Both sides had agreed as a base level to offer their schedule of commitments at the WTO level – India at its Revised Offer to the WTO and Sri Lanka at its Initial Offer to the WTO.

Economic Cooperation

• Both countries have also agreed to promote economic cooperation in mutually identified sectors like fish, energy, drugs & pharmaceuticals, textiles, financial, infrastructure, tourism etc. for greater economic integration.

Investment

• The Investment Agreement will provide an institutional framework to create an enabling environment for greater flow of investments between the two countries;

CEPA also has the following agreements:-

• MRA on standards-The Agreement on Mutual Recognition/equivalence will facilitate recognition of each other’s standards, assessment procedures, equivalence arrangements etc.
  
  
• MOU on Harmonisation of Ayurvedic medicines will enable both countries to cooperate in traditional system of medicines.
  
  
• Custom Cooperation Agreement – The Agreement aims at simplifying custom procedures and expediting custom clearance.
  
  
• Agreement on Consumer Protection and Legal Meteorology aimed at protecting the interest of consumers and creating awareness amongst consumers in both countries.

CEPA has been negotiated but it has not been signed yet.