An Econometric Analysis of India-Sri Lanka Free Trade Agreement

In this study we try to find whether the India- Sri Lanka Free Trade Agreement (ISLFTA) has trade creation or trade diversion effects on rest of the World. We use highly disaggregated trade data at the 6 digit level (HS 1996 classification) to study the trade effects under ISLFTA. The method used resembles the one recently used by Romalis (2005) to study NAFTA. We compare the ISLFTA members ’ (country 1) import of goods from a group of control countries (country c) with China’s (country 2) import of the same products from these contro