📈 Sri Lanka’s Trade Strategy: The Need for Modern Agreements

An analysis of modern trade frameworks highlights the critical need for Sri Lanka to establish robust bilateral and plurilateral trade agreements to insulate its economy from global policy volatility, particularly from its largest export market, the US. • Dispute Resolution Gaps: The India-Sri Lanka Free Trade Agreement (ISLFTA), active since 2000, severely lacks an effective dispute resolution mechanism, relying heavily on political action by trade ministries rather than modern independent arbitration. • Global Context & Alternatives: With the WTO’s dispute system rendered ineffective by the US blocking appellate panel appointments, frameworks like the USMCA (via preapproved expert rosters in Article 31.8) and the Regional Comprehensive Economic Partnership (RCEP) offer working blueprints to bypass single-party deadlocks. • Strategic Pragmatism: For Sri Lanka, progressing with modern frameworks like the India-Sri Lanka Economic and Technology Cooperation Agreement (ETCA) and the RCEP is deemed unavoidable to secure market stability. • Negotiating Capacity: Sri Lanka faces a critical domestic capacity gap, having stalled trade negotiations since the mid-2000s. While the Economic Transformation Act, No. 45 of 2024 provided for an Office of International Trade (OIT), it remains unimplemented. • Next Steps: The government urgently requires a specialized agency to manage experienced trade consultants—similar to the 2022 sovereign debt restructuring modality—to guide negotiators and build long-term local expertise.