Sri Lanka trade deficit obsession misplaced: focus

May 18, 2013(LBO) – Sri Lanka’s obsession with trade deficits is misplaced because it ignores the broader exchanges including services that take place between citizens of one county and another, economists and officials have said. Saman Kelegama, head of the Institute of Policy Studies, a think tank, said the obsession was particularly strong in relation to free trade agreements.


“Always when a free trade agreement is signed with a large country there is the thinking that the sole objective of the free trade agreement should be to reduce the trade deficit between the large country and the small country,” Kelegama told a business forum in Colombo.

“Actually the objective of the agreement should not be mainly to reduce the deficit. Rather to give the best deal to the consumer, to get better access to the exporters of the smaller country, and also to give reasonable protection to the efficient import substitution industry.”

The so-called ‘negative list’ of the Indo Lanka Free Trade Agreement where Indian producers were able to block poorer Indians from buying Sri Lankan products was only 431 items.

But Sri Lankan producers were able to block poorer consumers from buying 1,220 Indian product