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North American Free Trade Agreement and Its Implications for Sri Lanka: With Special Reference to the Garment Industry
(Institute of Policy Studies, 1994) Kelegama, Saman; Unamboowe, Indira
The only available literature that gives at least some indication of NAFTA’s implications for Sri Lanka is a study done for the World Bank by Safadi and Yeats (1993) on NAFTA and South Asia. The study is more focussed on South Asia and the conclusions are based on aggregate statistics. An aggregate analysis for the South Asian region is always biased by the inclusion of Indian statistics. Moreover, the analysis of Sri Lanka’s case is based on the regional model which may not necessarily be valid for a small country like Sri Lanka. In this study we have re-examined in detail NAFTA’s implications for Sri Lanka. In particular, we have investigated Sri Lanka’s competitiveness vis-à-vis Mexico in the US market. While supporting the basic conclusion of Safadi and Yeats, they go on to show that NAFTA, and the gradual abolition of the MFA, give new opportunities to further expand the apparel industry of Sri Lanka. However, we argue that this will not happen merely by the market mechanism. Substantial work needs to be done both on the marketing side as well as on the supply side, the latter being weak needing more attention. In regard to the Uruguay Round, our analysis shows that there are gains for Sri Lanka, but the gains are not very significant as argued by Safadi and Yeats (1993).