WTO and Sri Lankaas Farm Trade

Abstract

The study seeks to examine the impact of the WTO's agreement on agriculture (AoA) on Sri Lanka’s agricultural trade performance. It is found that under the AoA regime, Sri Lanka’s share in the world’s total agricultural trade has increased. The importance of farm trade in the country’s overall foreign trade has improved. Further, evidence suggests that Sri Lankan agriculture has opened in new economic environment. In new trade order, value of Sri Lankan farm exports has grown faster than that of imports resulting into significant expansion of trade surplus. The normalized trade balance in agriculture has enhanced dramatically. Furthermore, the study finds that in the emerging liberalized farm trade order Sri Lanka’s comparative advantage is much better than other leading farm producers especially in the exports
of: tea, copra, coconuts and natural rubber. For food grains Sri Lanka heavily relies on imports. In
the WTO trade negotiations, Sri Lanka may press for an effective and substantial cut in developed
countries protective measures and trade distorting agricultural subsidies, in order to safeguard and
enhance its food production capacity.

Full text

WTO AND SRI LANKA’S FARM TRADE
Ramphul
The study seeks to examine the impact of the WTO agreement on agriculture (AoA) on Sri
Lanka’s agricultural trade performance. It is found that under the AoA regime, Sri Lanka’s share in
the world’s total agricultural trade has increased. The importance of farm trade in the country’s
overall foreign trade has improved. Further, evidence suggests that Sri Lankan agriculture has
opened in new economic environment. In new trade order, value of Sri Lankan farm exports has
grownfasterthanthatofimportsresultingintosignificantexpansionoftradesurplus.Thenormalised
trade balance in agriculture has enhanced dramatically.
Furthermore, the study finds that in the emerging liberalised farm trade order Sri Lanka’s
comparative advantage is much better than other leading farm producers especially in the exports
of: tea, copra, coconuts and natural rubber. For food grains Sri Lanka heavily relies on imports. In
the WTO trade negotiations, Sri Lanka may press for an effective and substantial cut in developed
countries protective measures and trade distorting agricultural subsidies, in order to safeguard and
enhance its food production capacity.
Keywords: WTO, Agreement on Agriculture, Farm Trade, Sri Lanka, India, Pakistan, Bangladesh,
Comparative Advantage, Indo-Sri Lanka Free Trade Agreement.
1. INTRODUCTION
Agriculturehasbeen themost crucialsectorof
Sri Lankan economy. It is an important source of
grossdomesticproduct(GDP)with11.33percent
of it originating in this sector in 2006-07. This
sector provides employment to 29.40 per cent of
the country’s total labour force in 2007-08
[CentralBank ofSri Lanka, 2008,Pp.995-1080].
Besides, the sector is vital for food security,
poverty elimination and acceleration in tempo of
economic growth in the country as around 70 per
centoftheruralpopulation dependson thissector
for its livelihoods, surpassing the contribution of
anyothermajorsector.Intheemergingliberalised
farmtrade order the sector holds great promiseto
be a major source of foreign exchange earnings.
Moreover, its strong forward as an important
supplier of raw materials for the manufacturing
industry and backward as a source of income
for poor andas a sector using industrial products
such as agricultural machinery and fertilisers
linkages within the rural sector and with the
other sectors of the economy provide added
stimulus for more inclusive growth and faster
income generation [World Bank, 2008, Pp.
1-365].Arobustandvibrantfoodandagricultural
systemthus, constitutes animportant factorinthe
strategy of overall economic development of Sri
Lanka. Any change in agriculture sector has a
spill-over effect on the entire Sri Lankan econ-
omy.
Theworldagricultural tradingsystemhasseen
profound changes during the second half of the
20th century. The treaty on agriculture signed at
the ministerial meet on April 15, 1994 by 125
nationsincludingSri Lanka andtheagreement on
agriculture (AoA) became effective from 1st
January1995,withtheestablishmentoftheWTO.
The chief aim of WTO is to improve the welfare
of the peoples of the member countries [WTO,
2009, Pp.1-7]. By gradual elimination of imper-
fections in world agricultural trade, the AoA
Ramphul is Assistant Professor, Department of Business Economics, Maharshi Dayanand University, Rohtak, Haryana,
India. E-mail: ramphul.ramphul@gmail.com
The author is grateful to Professor Vikas Chitre, the editor, for evincing interest in the paper, and for his timely and
insightful comments and constructive suggestions on an earlier version of the paper and on the revised drafts. The author is
also thankful to Professor T. R. Kundu, Department of Economics, Kurukshetra University, Kurukshetra, for his helpful
suggestions and to University Grants Commission, New Delhi, for providing financial support for this research.

50 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
attempts to open up substantial trading
opportunities for leading agricultural producers
[Ramphul, 2008a, Pp. 113-134].
Thetrade reform provisions of AoAfall under
three main categories. These consist of: (i)
domestic support, (ii) market access, and (iii)
exports subsidies. AoA requires developed
countries to reduce trade-distorting domestic
subsidiesby20 per centofthe 1986-88levelover
theimplementationperiodof6years(1995-2000)
while for the developing countries the reduction
commitment is 13.3 per cent over the imple-
mentation period of 10 years (1995-2005). As
notified by Sri Lanka’s authorities to WTO and
explored by other studies [e.g.: Ingco and Kan-
diero, 2003, Pp. 1-37; Food and Agriculture
Organisation (FAO), 2000; WTO, 1995, Pp.
1-107; WTO, 2004, Pp. 1-137] that in terms of
domesticsupport (i.e.,product specific support +
non-product specific support) Sri Lankan agri-
culture has been net taxed rather than subsidised
right since 1986-88 (i.e., AoA base period for
reduction in trade distorting domestic subsidies).
AoArequiresthatmarketaccesstoagriculture
products is to be governed by only tariff regime.
It obligates the member countries to convert all
non-tariff restrictions on imports into equivalent
level of tariffs. The resultant tariffs are to be
reduced by a simple average of 36 per cent with
aminimum reductionof15 per cent pertariff line
by 2001 in the case of developed and 24 per cent
with a minimum of 10 per cent per tariff line by
2005 in the case of developing countries. All
WTO member countries which had bound their
tariff rates before Uruguay round are required to
maintain current access opportunities, i.e., the
quantityof importduring the period1986-88.For
tariff-ridden products, where such "current"
access had been less than 5 per cent of domestic
consumption of the products in question in the
base period, an (additional) minimum access
opportunity had to be opened on a most-
favored-nation (MFN) principle. It was ensured
that in 1995, current and minimum access
opportunities combined represented at least3 per
cent of the base-period consumption and were
gradually increased to 5 per cent of the con-
sumptionbyyear2001indevelopedcountriesand
by 2005 in the developing countries. However,
developing countries like Sri Lanka which had
not bound their tariff rates before Uruguay round
wereallowed havingceilingbindingswhich were
not subject to these reduction commitments, and
for these ceiling bindings there was no upper
limit.
As noted by Athukorala [2000, Pp. 169-193]
Sri Lanka embarked on an extensive economic
liberalisation process in 1977. The economic
gains, from the dramatic unilateral move to
replace quantitative restrictions with tariff as the
prime tool of trade policy in 1977 and the sub-
sequent tariff reductions, have been substantial.
Therefore, there is an unprecedented consensus
across all mainstream political groups in the
country over the desirability of further moves
towardstrade liberalisation. Aftertwodecades of
reforms, Sri Lanka today stands out as one of the
most open economies in the developing world
[Williamson, 1998]. However, at the time of
signingtheAoAinJanuary1995,bothhightariffs
and quantitative restrictions still remained
important deterrents to import trade in Sri Lanka
in a number of key agricultural commodities
[Athukorala & Kelegama, 1998, Pp. 7-26].
Importduties on 8-digit harmonised system code
(HSC)itemsvariedinthewiderangeof5percent
to 100 per cent, with most of the essential food
crops clustering at the upper end of the distribu-
tion.
In compliance with its commitments under
AoA, Sri Lanka has bound all tariffs on agricul-
tural goods at a uniform rate of 50 per cent. As
informed by the Sri Lankan authorities to the
WTO, it implemented 99 per cent of its agricul-
tural tariff bindings with the entry into effect of
the WTO on 1st January 1995. The list of tariff

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 51
lines contained about 700 agricultural items
including meat, fish, milk, milk powder, fruits,
vegetables, nuts, spice, coffee, seeds, sugar,
maize,starches,oilsandfats,cocoa,pastries,fruit
juicesandfruitpreparations.Theboundtariffrate
(50 per cent) chosen by Sri Lanka was the lowest
not only among the four South Asian WTO
member countries but also amongall developing
countries WTO members [WTO, 1995, Pp.
1-107]. Moreover, in July 1996, following WTO
ruling, Sri Lankan authorities abolished import
licensing on potatoes, chillies, onions and rice.
Thiswasfollowed bya reductionof importduties
onpotatoes, chillies and onionsfrom 35 to 20 per
centinNovember 1996. Furthermore, Sri Lankan
authorities decided to apply a two-tier tariff of 10
and20percent(by1996)andtoachieveauniform
15 per cent tariff by 1997 or 1998. However, this
planwasset aside for the timebeing andthetariff
rates for most agricultural commodities in 1999
were35percent,exceptfortobacco,wheretariffs
were higher. For specific medicinal crops, the
tariffswereat10percent. Besides,tariffdutywas
waived off in a number of commodities for cost
of living considerations. Imports of all seed and
planting materials for agriculture were made
duty-free and the duty had been waived off on
machineryand equipment importedfor usein the
application of new and innovative technologies
in agriculture [FAO, 2000]. In case of rice, until
2000, tariff was 35 per cent plus a national
securitylevy of4-5per cent. From2002onwards,
when world prices were depressed, this was
replaced with specific tariff that ranged from Rs.
5/kg to 9/kg except for Rs. 20/kg during 2008-10
(plus 5-6 per cent security tax) [Karunagoda et
al., 2011, Pp. 245-263].
In this way, in terms of market access
obligation,Sri Lanka has notonly maintainedthe
AoAboundrates,buthas unilaterally reduced the
most-favored-nation (MFN) tariff rates substan-
tially compared to AoA final bound rates [WTO,
2004, Pp. 1-137]. Finally, in case of export
subsidies,SriLankahasnotprovidedanysubsidy
to agricultural exports which is prohibited by
AoA provisions [WTO, 2004, Pp. 1-137].
ThedevelopingcountrieslikeSriLankahoped
for improving their net farm exports earnings. It
is, therefore, pertinent to estimate the impact of
AoA on Sri Lanka’s agricultural trade. Analysis
of agricultural trade performance will lead to
formulation of appropriate strategies to grab the
advantageous opportunity thrown up by AoA of
the WTO.
The AoA in its article XX incorporates the
provision to review the experience of member
countries regarding its implementation and to
begin fresh negotiations for continuing the pro-
cess of opening up of world agricultural market
and reducing distortions.
The committee on agriculture of WTO began
renegotiations on agriculture in March 2000. The
prospects of the negotiating proposals received
by the committee were improved by the outcome
ofthefourthministerialconferenceofWTO,held
at Doha (Qatar) November 9-14, 2001. The aim
of the negotiations on agriculture is ‘to establish
afairandmarket-orientedtradingsystemthrough
a programme of fundamental reform encom-
passing strengthened rules and specific commit-
mentsonsupportandprotectioninordertocorrect
and prevent restrictions and distortions in world
agriculturalmarkets’[WTO, 2001].Fairness is to
be achieved through incorporating special and
differential treatment for the developing and
least-developed countries, and efficiency is to be
achieved through improving market access,
phasing out all forms of export subsidies and
substantially reducing trade-distorting forms of
domesticsupport[Maclaren, 2005, Pp. 229-247].
During Doha round, the members committed
themselves for comprehensive negotiations
aimed at substantial improvements in market
access, reductions in, with a view to phasing out,

52 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
all forms of export subsidies and substantial
reductions in farm trade-distorting domestic
support measures.
A mini-ministerial negotiations meet at WTO
was held on July 21-29, 2008, at Geneva to
achieve a breakthrough in Doha round which
collapsed(Doharound commitmenthassurvived
manya collapse before, e.g., Cancun in 2003, the
mini-ministerialmeet inGeneva in 2006, the G-4
Potsdam meeting in 2007). In the area of agri-
culture, developing countries, including Sri
Lanka, invoked the right of the use of a special
safeguard (SSG) to be extended to them, through
the special safeguard mechanism (SSM)
1
and
special products (SPs).
2
The text proposed by WTO Director-General,
Pascal Lamy, on July 25, 2008, required
demonstrable harm to food security, livelihoods
and rural development before the SSM could be
used,whichundermined therationale of a special
safeguard(thataction canbe taken beforeserious
harm occurs). The United State (US) was willing
to set the trigger level at a 40 per cent jump in
farm imports (i.e., pre-Doha tariff rates could be
exceeded only if the increase in imports in the
current year was at least 40 per cent greater than
the average for the preceding three years) while
developing countries insisted on using SSM at a
10 per cent increase. The developing countries
argue that this is inappropriate because once
damageis done it is difficult to get farming going
again, unlike industry [Baldwin, 2009, Pp.
515-525].
In case of cut in agricultural domestic subsi-
dies, US announced that it would offer to cut its
allowable overall trade distorting support
(OTDS) to $15 billion. This was dismissed by
many developing countries including India,
BrazilandSriLankaasbeinginadequate,because
the actual applied OTDS of the US has already
dropped to about $7-8 billion in 2007-08 [Khor,
2008, Pp. 35-40]. The lowering of the allowable
and applied OTDS is also accompanied by rise in
the so-called Green Box support which is not a
partofOTDS.Alargepartofthedomesticsupport
of the US and EU has shifted to the Green Box
[Ramphul,2007,Pp.60-77].Recentstudies[e.g.,
OXFAME, 2005, Pp. 1-28; UNCTAD, 2007, Pp.
1-101] have shown that the Green Box support
can also be trade and production distorting
because they are more directly linked to pro-
duction. These subsidies are used for enhancing
international competitiveness of the domestic
agriculture sector. They affect production and
these impacts do generate spill-over effects on
other countries because of the wealth and risk
effects associated with these subsidies. Besides,
developedcountries’ GreenBoxsubsidiesreduce
the cost of production in these countries which
force developing countries’ small-scale farmers
out of farming because they become relatively
less cost efficient. Moreover, Green Box subsi-
dies provided by developed countries cause
excess supply of agricultural products in these
countries, which make the producer to dump it
into developing economies by cutting prices
below the long-run marginal cost, which depress
the world market prices. It results in the devel-
oping countries being disadvantaged in exports
and in competing withimports. The Lamy’sdraft
did not even mention the Green Box.
The ongoing debate over agricultural trade
liberalisation focuses on how best to eliminate
policy distortions that arise from price supports,
producer subsidies, import protection and export
subsidies. Although the most recent attempts to
reachanagreement undertheDohaDevelopment
Agenda (DDA) have been unsuccessful to date,
the push for greater trade liberalisation is unre-
lenting. So it seems that further reform of the
world agriculture market is inevitable.
An examination of WTO ongoing farm trade
negotiations indicates that in the emerging lib-
eralised farm trade order, countries having com-
parative advantage in producing a commodity

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 53
would dominate export in that commodity.
Therefore, it is imperative to assess the capabil-
ities of Sri Lankan farmers of becoming com-
petitive exporters of various agricultural
commodities.
The rest of the study is organised into four
sections. Section II reviews the existing relevant
literature,identifiestheresearch gapsandsetsout
the objectives of the study. Section III discusses
the methods of analysis used in the study and
mentions the sources of data. Section IV is
devoted to assess the performance of Sri Lanka’s
agriculturaltradeandto workoutSriLanka’sand
other South Asian countries’ comparative
advantage in farm trade. In the same section,
sources of Sri Lanka’s overall export growth,
positionofbilateralfarmtradebetweenSriLanka
and India and determinants of Sri Lanka’s farm
exports growth are also estimated. The final
sectionsummarisesthemainfindingsofthestudy
and draws their policy implications.
2. REVIEW OF LITERATURE
There are a few studies which attempt to
analyse the implications of AoA on Sri Lankan
agriculture. Of these, prominent studies include
the following.
Athukorala and Kelegama [1998, Pp. 7-26]
3
broaden the understanding about the constraints
facedby developing countriesin their attemptsto
comply with Uruguay Round Agreement on
Agriculture (AoA) rules through a comparative
case study of Sri Lanka in South Asian context.
Theyfind that SriLanka’s policy initiativessofar
under the AoA to be unique among the South
Asian countries. In a notable departure from the
hesitant policy responses of the other countries,
Sri Lanka has made use of the window of
opportunityprovided by the AoA to significantly
liberalise agricultural trade as well as to lock in
the ongoing trade reform process at low duty
levels, and to remove non tariff measures and
reduce tariffs on agricultural imports except
wheatandwheatflour. ItwasnotedthatSriLanka
hadnotacquired comparativeadvantageinwheat
production.Thismovehaslaidthefoundationfor
further trade liberalisation with the aim of
restructuringtheagriculturalsectorinaccordance
with Sri Lanka’s comparative advantage. Kele-
gama [2003, Pp. 96-140]
4
assessed the implica-
tions of the Uruguay Round Agreement on
Agriculture (AoA) for Sri Lanka. It is found that
SriLankanexportquantitiesaswellaspriceshave
not been significantly influenced by the imple-
mentationoftheAoAintradingpartnercountries.
However, there has been an increase in import
quantities and prices and this can be attributed to
liberalisation in these particular agricultural
commoditiesmarkets.Theimplementation of the
AoA has not resulted in the expected increase in
marketaccess for the exportsof countries such as
Sri Lanka. This may be because of dirty tariffi-
cation practices (since AoA requires tariff
reduction only on an un-weighted average basis.
Many countries took advantage of this by main-
tainingaveragelevelsoftariffs butimposinghigh
level of tariff on their key sectors. For example,
some commodities likedairy products, sugarand
meat were protected with highlevel oftariff), the
occurrence of tariff escalation, and the use of a
range of non-tariff barriers (e.g., use of Sanitary
and Phytosanitary measures as a barrier to farm
trade) by industrialised countries. Sri Lanka’s
agriculturaltradeisnow governedpredominantly
by a progressive tariff regime, but there is still a
rangeofmarketdistortingelementsvisiblewithin
thesector(e.g.,the import controls onpaddyrice,
maize,andwheat).Takingall ofthese factorsinto
consideration, it is apparent that the overall
impactonSri Lanka’stradeand tradersduring the
implementation of the AoA has been minimal.
Kelegama [2007, Pp. 19-41]
5
attempted to
assess the feasibility of a South Asian common
position in future WTO negotiations. In the area
of agriculture, it was noticed that the dynamism
of the agriculture in South Asia is uneven and
requires country wise assessment of needs. For

54 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
instance, Sri Lanka supports the Swiss Formula
of hightariff cuts for higher tariffs, while India is
perhaps opposed to it because of the country’s
high agricultural tariffs. Moreover, countries in
the South Asian region compete with each other
to gain export market share in the same markets
for the same products. For instance, Sri Lanka
competeswithIndia,BangladeshandPakistanfor
market share in the US and EU for apparel and
textile.In addition,it was noticed thatSouth Asia
cannot afford to place regionalism above multi-
lateralism. Because, the WTO provides the best
optionin facilitating trade flows while protecting
the interests of the economically and politically
vulnerable economies.
Weerakoon and Wijayasirsi [2002, Pp.
95-106] investigate the impact of South Asian
Regional Cooperation, i.e., SAARC Preferential
Trading Arrangement (SAPTA) on the Sri Lan-
kan economy using descriptive measures. They
find that most of the preferential tariff
concessions offered toSri Lanka areirrelevant to
Sri Lanka’s export interests and thus do not
generate much benefit. Of the 1,750 concessions
offered to Sri Lanka, only a fraction of the total
(126) is of exportinterest to Sri Lanka. However,
Sri Lanka’s concessions on base metals, chemi-
cals and textile articles are likely to prove bene-
ficial to its partners in South Asia. A significant
number of products in these categories are in fact
being imported into the country from the region.
Given the limited number ofconcessions and the
irrelevance of much of the concessions that have
been offered so far under SAPTA and more
importantly the limited depth of tariff cuts, it has
had no discernible impact on Sri Lanka’s trade
withtherest of South Asia.Derosa and Govindan
[1996, Pp. 293-315] investigate the effects of
pursuing SAPTA compared with pursuing more
general liberalisation of South Asia’s trade rela-
tions with the world at large. They found that
SAPTA would expand intra-SAARC trade
substantially, especially in food commodities.
Nettradecreation isfoundto belimited however,
owingtoextensivetradediversionunderSAPTA.
In comparison, when SAARC trade relations are
liberalized on a most-favored-nation basis food
security and economic welfare in South Asia are
vastly improved with little or no trade diversion.
Thennakoon and Amrit [2007, Pp. 117-140]
discussed Sri Lanka’s negotiating position at the
WTO. It was emphasised that as a food-deficit
small economy, Sri Lanka’s main concerns on
agriculture negotiations included food security,
livelihoodsecurityandoverallruraldevelopment
aspects.
Rafeek and Samaratunga [2000, Pp. 143-154]
assessedcompetitivenessofSriLankanriceinthe
context of an importable hypothesis (See section
3.11 below.) applying Nominal Protection
Coefficient (NPC) and Effective Protection
Coefficient (EPC) measures using data for the
period1990-98. It was found thatSri Lankanrice
sector was highly protected. Trade liberalisation
will lead to decline in rice production. Food and
Agricultural Organisation (FAO) [2000]
examined Sri Lanka’s experience of implemen-
tationof AoAcomparingtrends onvaluesoffarm
exportsand importsbeforeandafterWTO.Itwas
found that the farm trade surplus had been on a
stronglydownward trendduring theentireperiod
of 1985-94. This situation improved during
1995-98. FAO [2007,Pp. 1-4]estimatedtrend on
Sri Lankan imports of milk powder for pre and
post-WTO periods. It was found that the growth
rate of Sri Lanka’s imports of milk powder
accelerated from4 per cent during 1985-94 to 4.9
per cent per annum during 1995-2005. One of
possiblecausal factorsforsurgesin importsis the
low tariffs being applied to milk powder. Chand
andBathla[2005,Pp.1-22]comparedSriLanka’s
agriculturalexports andimportsseriesforpreand
post-WTO periods. They reported a favourable
impact of WTO on Sri Lanka’s farm trade.
World Bank [1996, Pp. 1-39] assessed com-
petitiveness of Sri Lankan non-plantation farm
sector in context of an importable hypothesis

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 55
using the data for the period 1985-93 applying
four standard tools, namely: Nominal Protection
Coefficient (NPC), the ratio of the domestic to
world price of the product, Effective Protection
Coefficient(EPC), the ratio of value added under
existinginterventionintradableinputs overvalue
added at the world price, Effective Subsidy
Coefficient (ESC), the ratio of value added at
domestic prices adjusted for net subsidies on all
inputs (tradable and non-tradable) to the value
added at border price, and Domestic Resources
Cost (DRC), the ratio of the cost of domestic
resources (evaluated at shadow prices) to net
foreign exchange earnings through import sub-
stitution. It was found that major farm crops,
namely wheat, rice, chilli, big onions and potato
were highly protected with thevalue of incentive
coefficients, viz. NPC, EPC, ESC and DRC well
greaterthan unity. Itindicatesthat,onan average,
the barriers to import held the domestic farm
prices in Sri Lanka above the imports prices.
Perera [2008, Pp. 1-50] made a quantitative
assessment of impact of Indo-Sri Lanka Free
Trade Agreement (ISFTA) on macroeconomic
variables, welfare and output focusing on Sri
Lankan economy using descriptive trade mea-
sures and performing simulations applying the
Global Trade Analysis Project (GTAP) model
Version6. Thedescriptive trade measuresresults
indicated that Sri Lanka experienced an unfa-
vourable trade balance against India. Its trade
deficit with India widened from $ 542.1 million
in 2000-01 to $ 3024.7 million in 2008-09. This
has been driven largely by increasing oil prices
(which made up almost a third of import value
from India in 2008-09) and a fall in Sri Lanka’s
exports to India (vanaspathi & copper) [Central
Bank of Sri Lanka, 2010, Pp. 1-191]. The simu-
lation results demonstrate that industrial sector
willbebenefitedmorethanagriculturalsectordue
to trade liberalisation between the two countries.
None of the above reviewed study has
examined the pattern of Sri Lankan agricultural
trade in context of the size of its agriculture and
world agricultural trade.Secondly, there isa lack
of systematic and comprehensive analysis of the
implications of AoA for Sri Lanka’s farm trade.
The studyis an attemptto fill upthese gaps in the
literature.
6
Objectives
Thestudyisaimedatthe following objectives:
(a) To examine the impact of AoA on Sri Lan-
ka’s agricultural trade performance.
(b) To work out Sri Lanka’s comparative
advantage in the export of various crops.
3. METHODOLOGY
The analysis is carried out for a time span of
21 years, i.e., from 1985-86 to 2005-06. To
estimate the impact of AoA on Sri Lanka’s farm
trade performance a simple before and after
approach is used. Accordingly, the period under
analysis is divided into two parts, viz. pre-WTO
(1985-94) and post-WTO (1995-2005). For both
periods, we have applied various robust indica-
torsoffarmtradeperformance,namely:(i)annual
compound growth rate, (ii) instability index, (iii)
sources of overall exports growth, (iv) trade
openness calculated as the ratio of the total farm
trade(i.e.,exports +imports) to GDPagriculture,
(v) net terms of trade, (vi) income terms of trade,
(vii) gross terms of trade, (viii) exports required
to finance imports bill, (ix) normalised trade
balancein agriculturaltrade, and (x)tradeshares.
Comparison is made between various indicators
of trade performance during ten years period
preceding the AoA (1985-94) and during the
implementation period of AoA (1995-2005).
To identify the sources of Sri Lanka’s overall
exportsgrowth, the nominal exportgrowth rate is
estimated using a model originally developed by
the General Agreement on Tariffs and Trade
(GATT) in the 1966 and modified by the World

56 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Bankin 1997.ThecompetitivenessofSriLanka’s
chief farm traded commodities hasbeen assessed
in context of both importable and exportable
hypotheses (see section 3.11 below). To achieve
the goal Nominal Protection Coefficient (NPC)
measure has been used.
Sri Lanka’s comparative advantage in farm
trade has been worked out applying Export Per-
formance Ratio (EPR) as suggested by Ballassa
[1965, Pp. 99-124]. Because EPR provides the
presence or absence of comparative advantage,
comparative study can help in drawing a more
realistic conclusion. It is particularly true if sim-
ilar results are obtained for two or more com-
petitor countries. For the purpose, other South
Asian countries have been considered as
competitor for Sri Lanka. Accordingly, the same
calculation has been made for three other major
South Asian farm exporters, namely India,
Pakistan and Bangladesh.
The before-after approach is based on a strict
ceteris paribus assumption that factors such as
exchange rate, GDP agriculture and market
structure, etc., remain constant over the pre and
post-AoA periods.
7
To deal with some of these
deficiencies, linear regression between value of
farm exports and its various determinants is
performed. Furthermore, to capture the impact of
AoA liberalisation effect, we introduce a dummy
variable,whichtakesavalueofzeroforpre-WTO
years (1985-94) and a value of unity for years
thereafter (1995-2005). To study the impact of
changein tradeenvironment, i.e.,Indo-SriLanka
Free Trade Agreement (ISFTA) the major posi-
tionof bilateral farmtrade between SriLankaand
India is also analysed using tabular analysis. A
brief discussion of the analytical techni-
ques/methods used is in order.
3.1 Determinants of Sri Lanka’s Farm Exports
The model used is as follows:
Y = f (W, R, G, D) ... (1)
Y : Dependent variable (Sri Lanka’s farm
exports, in US$),
W : World agricultural exports (market size, in
US$),
R : Sri Lanka’s exchange rate in terms of US$,
G : GDP agriculture (size of Sri Lankan agri-
culture sector, in US$),
D : DummyvariableforWTOregime(itsvalue
is equal to zero before 1995 and one there-
after).
To estimate the determinants of farm exports
multiple linear regression model is used:
... (2)
where
α : Intercept term,
e
t
: Random residual with zero mean and
constant variance; , while the
other expressions are the same as discussed
for Equation (Eq.) 1.
All the data series are transformed to the
natural logarithm (ln) form to achieve sta-
tionarityinvariance.Accordingly,Eq.2has
been transformed as:
... (3)
Prior to performing econometric analysis, all
variables in natural logarithmic form were sub-
jectedtoAugmentedDickey-Fuller(ADF)[1981,
Pp. 1057-1072] unit root test to verify their time
series properties. The ADF test results were
confirmed by Philips-Perron (PP) [1988, Pp.
335-346] test. The E-Views 7 was used for the
purpose.Allserieswerefound(I(1))orintegrated
of order one. Therefore, first difference (Δ)of
natural logarithm was used in estimating the
relationship. The model (Eq. 3) is transformed to
a first-difference logarithmic model as given
below:
Y
t
=α+β
1
W
t
+β
2
R
t
+β
3
G
t
+β
4
D+ e
t
e
t
~N(0,σ
2
)
lnY
t
=α+β
1
lnW
t
+β
2
lnR
t
+β
3
lnG
t
+β
4
D+ e
t

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 57
... (4)
where
Since we want to estimate the relationship
between Y
t
and W
t
,G
t
,R
t
, D, we are going to
check whether
The assumptionsof correct functionalform of
the model, no autocorrelation, no multicolli-
nearity and homoscedasticity are tested by
Ramsey’s REST test, Breusch-Godfrey Serial
Correlation LM test, Variance Inflation Factor
(VIF) and Breusch-Pagan-Godfrey’s (BPG) test,
respectively.To test the statistical significance of
theparametersto be estimated(i.e.,β
1
,β
2
,β
3
,and
β
4
)student’st-statistichasbeenused.Thevalidity
of the model as a whole has been tested applying
F-test. The R
2
is also computed to ascertain
goodness of fit of the model.
3.2 Annual Compound Growth Rate (ACGR)
ToestimateACGRfollowingequationisused:
Y=AB
T
Logarithmicformof theexponentialequation:
log Y = log A + T log B
where
Y: Dependent variable,
B: 1+g; g = compound growth rate,
T: Time.
The parameters A and B in the model are esti-
mated using Ordinary Least Square (OLS)
method.
The ACGR is computed applying following for-
mula:
ACGR = [ Antilog (log B)-1 ]100 ...(5)
Further,toestimatetheimpactofWTOregime
onthegrowthrateofvariableunderinvestigation,
we use the following specification:
logY
t
= log A + r
1
t+r
2
D
t
+r
3
D
t
t+u
t
, ...(6)
where
Y
t
= dependent variable in period t, t = 1
(=1985), t = 2(=1986).
D
t
is a dummy variable such that
D
t
= 0 if t < 1995
= 1 if t 1995
r
1
is instantaneous growth rate before WTO
regime, r
2
is the intercept dummy, r
3
is the slope
dummy, u
t
is the error term assumed to satisfy all
the basic assumptions of the classical linear
regression model. In this model a change from 0
to state 1, i.e., a change in the value of D from 0
to 1 signifies a policy change, namely the intro-
duction of WTO. Hence r
3
is a measure of the
impactof the WTO onthe growth rateof variable
under consideration. The sum of r
1
and r
3
is used
to estimate the ACGR for post-WTO phase. The
student’s ‘t’ test statistic has been used to test the
statistical significance of the various parameters
of the model.
3.3 Instability Index (II)
The instability in Sri Lanka’s farm trade has
been estimated measuring the standard deviation
of its annual growth rates. This is a unit free and
robust measure of instability [Ramphul, 2012].
The index is specified as:
... (7)
ΔlnY
t
=α+β
1
ΔlnW
t
+β
2
ΔlnR
t
+β
3
ΔlnG
t
+β
4
D+ e
t
ΔlnY
t
= lnY
t
− lnY
t-1,
etc.
Null hypothesis (H
0
):β
1
=β
2
=β
3
=β
4
= 0, against the
Alternative hypothesis (H
1
):β
1
≠β
2
≠β
3
≠β
4
≠ 0
≥
I
i
=σΔlnX
t
× 100

58 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
where
I
i
= instability index, σ = standard deviation,
Δ = first differenceoperator, ΔlnX
t
=lnX
t
- lnX
t-1
,
t = time, X = variable under investigation, and ln
= natural logarithm.
3.4 Nominal Growth Rate (NGR)
Let us define:
f
1
=W
1
/W
0
;
W
1
= World agricultural imports in the current
year [i.e., the last year of the sub-period consid-
ered],
W
0
=Worldagriculturalimportsintheinitialyear,
f
2
=(T
1
/T
0
)/(W
1
/W
0
);
T
1
= Country’sagricultural exports in thecurrent
year,
T
0
= Country’s agricultural exports in the initial
year,
f
3
=(T
0
/X
0
)/(T
1
/X
1
);
X
1
= Country’s total exports in the current year,
X
0
= Country’s total exports in the initial year.
Now,the nominal growth rate is computed as per
the following formula:
G = (R-1)100; R = f
1
f
2
f
3
= ...(8)
where
G: Nominal growth rate
Note that f
1
measures the growth in overall
exports due to a general expansion (or contrac-
tion) of world market for country’s agricultural
exports,f
2
measuresthegrowthinexportsthrough
an increase (or decrease) in market share for its
agricultural exports and f
3
captures the growth in
exportduetodiversification intonon-agricultural
exports [for details, see GATT 1966, Pp. 23-32;
World Bank, 1997, p. 259].
3.5 Net Terms of Trade (NTT)
The net terms of trade indicates the net
gain/lossthroughforeigntrade.Thismeasuresthe
numberofunits of animportable good obtainable
by a unit of an exportable good. It is defined as
the ratio of the price received for traded goods
(export price index) to the price paid for traded
goods (import price index). Accordingly,
...(9)
where
N
TT
: Net terms of trade,
P
x
: Farm export price index,
P
m
: Farm import price index.
If N
TT
> 100, then it indicates that terms of
trade is favourable and vice-versa.
3.6 Income Terms of Trade (ITT)
The income terms of trade is an improvement
upon the net terms of trade to the extent that it
takes into consideration the quantity exported as
well.Itmeasuresthepurchasingpowerofexports.
The income terms of trade is defined as the ratio
between the value of exports to imports prices.
Accordingly,
ITT = Net Terms of Trade Volume Index of
Exports
More specifically,
(10)
N
TT
=
P
x
P
m
100
X
1
X
0
x
ITT =
P
x
P
m
xQ
x
100

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 59
where
ITT: Income terms of trade
Qx: Volume index of exports
While the others expressions are same as dis-
cussed for NTT.
ITTshows the capacity of the economy to import
because determines the volume of imports
(Qm) that a country obtain with the exports
earnings.
3.7 Gross Terms of Trade (GTT)
The gross terms of trade is the ratio of the
quantity index of imports to the quantity index of
exports of a nation in physical terms, thus the
quantity that it receives in exchange for quantity
that it sells. Symbolically,
...(11)
where
GTT = Gross terms of trade,
Q
m
= Quantity index of imports,
Q
x
= Quantity index of exports.
In case, when trade is in balance the GTT will
equal to NTT. The GTT is allowing for total
amounts paid even when they differ from prices
due to trade imbalances that might arise from say
reparation payments.
3.8 Normalised Trade Balance (NB)
The normalised trade balance is a net trade
indicator. It is defined as:
Net Farm Trade
NB =
Total Farm Trade
More specifically,
E-I
NB = ...(12)
E+I
where
E : Value of agricultural exports,
I : Value of agricultural imports.
The value of this index varies in range
Negative values mean that the
country/industry is a net importer, to the extreme
value of -1, which signals that only import takes
placeinthecountry/industryconsidered.Positive
values have the opposite meanings (net export
positions). Trade balances give a synthetic mea-
sure of the degree of disequilibrium of trade
flows,whiletheir normalisation ismeantto make
them suitable for comparisons. The improve-
ment, over time, of the NB suggests improved
trade performance of the sector even when the
trade balance worsens. This can happen, for
example, when we start from a sizeable trade
deficit, and the export growth is higher, in per-
centage terms, than that of imports. Inthis sense,
NBs can show more accurately than simple trade
balances the changes that occurred in trade per-
formance. Moreover, in disaggregated analysis,
the normalised trade balance is often interpreted
as an indicator of trade specialisation. High and
positive NBs are recorded for commodities in
which either market or policy determinants, or
both, make national production competitive in
bothforeignanddomesticmarkets.Therefore,the
NB may be considered an ex post synthetic
indicator of the competitive success of national
products.
8
3.9 Export Performance Ratio (EPR)
The export performance ratio (EPR), as sug-
gested by Balassa [1965, Pp. 99-124], identifies
comparativeadvantage ordisadvantageacountry
has for a commodity with respect to another
countryorgroupofcountries.TheEPRisdefined
astheratio of the shareofa particularcommodity
in the country’s total exports to the share of that
P
x
P
m
Q
x
−1 ≤ NB ≤ 1.
GTT =
Q
m
Q
x
× 100

60 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
commodity in the world’s total exports. The
original index of EPR of ith commodity as for-
mulated by Balassa (1965) may be expressed as:
...(13)
where
EPR
i
:ExportPerformanceRatiomeasure of the
ith commodity,
E
i
: Export of ith commodity from the country,
C
e
: Total exports of the country in reference
year,
W
i
: World total exports of the ith commodity,
W
e
: World total exports in the referenceyear.
If the value of EPR is greater than unity
(EPR>1), it indicates that country has compara-
tive advantage in the export of the commodity
under investigation and vice-versa.
9
However,
EPRsuffer fromproblem of asymmetryas ‘pure’
EPR is not comparable on both sides of unity, as
if the index ranges between zero and one then
countryissaid nottohavecomparativeadvantage
in a given commodity, while if the value of the
indexranges fromoneto infinity then the country
is said to have a comparative advantage. The
index is made symmetric, following the meth-
odology suggested by Dalum et al. [1998, Pp.
447-467],andthenewindexisknownasrevealed
symmetric comparative advantage (RSCA).
Algebraically it can be expressed as follows:
...(14)
The value of this measure ranges between -1
and 1 and is free from the problem of skewness.
A commodity is said to have comparative
advantage in its exports if the corresponding
RSCA value is positive and vice-versa.
3.10 Nominal Protection Coefficient (NPC)
The NPC is a simple and most widely used
device for measuring competitiveness of a com-
modity in the world market. It is the ratio of
domestic price to world reference price of the
commodity under investigation. NPC helps in
measuringdivergence of domestic pricefrom the
world reference price and thus determines the
degree of domestic protection/un-protection of
the commodity in question [Adriaan, 1987, Pp.
20-31]. It is defined as:
(15)
where
NPC
i
: Nominal protection coefficient of the
commodity i,
: Domestic price of the commodity i,
adjustedfortransportation,handlingand
marketing expenses,
: World reference price of the commodity
i, adjusted for transportation, handling
and marketing expenses.
Ifthe valueof Nominal Protection Coefficient
(NPC) is greater (smaller) than unity, then the
commodityisprotected (un-protected)compared
tofree trade scenario. The value ofNPC less than
unityindicates thatdomestic priceis lessthan the
world market price and vice-versa.
3.11 Exportable and Importable Hypotheses
The Nominal Protection Coefficient (NPC) of
competitivenessisdrawnfromneo-classicaltrade
theory that primarily relies on comparison of
domestic prices with world prices duly adjusted
for freight and other marketingcosts and trader’s
margins.The valueof NPC has been estimated in
context of both exportable and importable
hypotheses: (a) importable hypothesis: the for-
eign product is an actual or potential substitute
for the domestic crop in domestic markets, and
EPR
i
=
E
i
/C
e
W
i
/W
e
NPC
i
=
P
i
d
P
i
w
P
i
d
P
i
w
RSCA =
EPR − 1
EPR + 1

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 61
(b)exportablehypothesis: thedomestic cropis or
potentially could be exported to compete in for-
eign markets.
Under importable hypothesis, domestic com-
modity competes in the domestic market and we
assume that domestic commodity is an efficient
importsubstitute. We first takethecost insurance
and freight (CIF) price of commodity, i.e., price
thatimporting country has paidfor importsof the
commodity under consideration and add to it
transportation and handling charges up to the
main consumption centre (import parity price),
and then compare it with the wholesale price of
that commodity at domestic consumption centre.
If the domestic whole sale price is smaller
(greater) than import parity price, then the
domestic commodity is competitive (un-
competitive).
Conversely, under exportable hypothesis,
domestic commodity competes in the foreign
market and we assume that allocation of more
resources for increase in its production for
enhancing its exports is socially desirable and
beneficial proposition. We first take the whole-
sale price of the commodity at the domestic
production centre and add transportation and
handling charges up to the nearest port of
embarkation including charges for loading onto
theship,andthencompareitwithitsfreeonboard
(FOB) price, i.e., price that country has charged
for the export of that commodity/export parity
price.Ifthedomesticwholesalepricesislessthan
the export parity price, then the domestic com-
modity is competitive and vice-versa [Ramphul
2010a, Pp. 1-267].
3.12 Sources of Data
The data on world and Sri Lanka’s total mer-
chandise and farm trade, values and quantities of
agricultural commodities traded by Sri Lanka,
exchange rate of Sri Lankan Rupee (Rs) in terms
of US$, exports values of selected agricultural
commodities of Sri Lanka and other South Asian
countries are obtained from various issues (1988
to 2003) of FAO Trade Yearbook, Food and
Agriculture Organisation, Rome, Italy, and
Monthly Bulletin, Central Bank of Sri Lanka, Sri
Lanka. The official website of FAO (www.faos-
tat.fao.org) is also used for the purpose.
The value and quantity indices of agricultural
exports and imports are obtained from official
websiteofFAO.Theexternalanddomesticprices
of Sri Lankan farm commodities are taken from
Monthly Bulletin and Annual Report, Central
Bank of Sri Lanka, Sri Lanka. The GDP agri-
culture in US$ has been obtained from World
DevelopmentReport,anannualpublicationof the
World Bank.
ForestimatingthevalueofNominalProtection
Coefficient (NPC), Sri Lanka’s actual FOB/CIF
prices have been used as world reference prices.
Forinstance, in caseofexportablehypothesis, we
have used both the domestic and international
prices of Sri Lanka’s farm commodity. In other
words, we compare the domestic price of Sri
Lanka’s farm commodity with its actual inter-
national price (the price paid by the importer). If
the domestic whole sale price is smaller (greater)
than export unit value adjusted for expenses of
transportation, insurance and loading onto ship
, then the domestic producer is competitive
(un-competitive).Thealternativeworldreference
price might be hypothetical one, i.e., price of any
other producer’s commodity traded by other
traders which may have quality difference.
These prices are computed from the various
issues of Monthly Bulletin, Central Bank of Sri
Lanka, Sri Lanka. Domestic prices referred to
here are the average wholesale prices obtained
from relevant issues of Annual Report, Central
Bank of Sri Lanka, Sri Lanka. The data on
bilateral farm trade between Sri Lanka and India
are obtained from Department of Commerce,
Government of India, official website

62 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
(htpp://commerce.nic.in). In the present study,
the terms "agricultural exports", "agricultural
imports" and "agricultural trade" relate to the
definitionofagriculturalproductsundertheAoA,
i.e., it excludes forestry and fisheries products.
The exports values are taken at FOB prices and
imports values are based on CIF prices. Data on
these variables are presented in Appendix 1.
4. RESULTS AND INTERPRETATIONS
The analysis of Sri Lanka’s agricultural trade
performance,duringpre and post-AoA phases,in
the light of information generated by various
mathematical, statistical and econometric mea-
sures is as follows.
4.1 Time Profile of Sri Lanka’s Agricultural
Trade
We begin analysing the growth in value of Sri
Lankan agricultural trade and examine its place
in the world’s farm trade. A general idea about
the impact of AoA on Sri Lanka’s agricultural
trade can be obtained by comparing its trade
performance indicators before and after 1995
whentheAoAcameintoeffect.Basicinformation
on Sri Lanka’s farm trade for about a decade
before and after AoA in terms of annual trade
series, net farm trade, annual percentage change,
and share of agricultural trade in the country’s
overall exports/imports and in the world’s total
farmexports/imports is presented inTable 1.The
table depicts that value of Sri Lanka’s farm
exports which was shrinking in pre-WTO phase,
hasgrownrapidlyinpost-WTOera.Itplummeted
from US$ 715.6 millionin 1985-86 to US$375.5
million in 1994-95. This situation has turned
favourable with the implementation of AoA
exportssurgedsharply.Theagriculturalexports
haveleaptsubstantially increasedfromUS$672
million in 1995-96 to US$ 1381.7 million in
2005-06. Sri Lanka’s share in the world’s total
farm exports has increased from 0.10 per cent in
1994-95 to 0.21 per cent in 2005-06.
Incontrast to exports,thevalue ofagricultural
imports increased from US$ 354.5 million in
1985-86 to US$ 409.5 million in 1994-95. As a
result,agricultural trade surplusturned from US$
361.1 million in 1985-86 to trade deficit of US$
34 million in 1994-95. After the coming into
effect of the AoA, the agricultural imports have
grown at a slower pace than agricultural exports
and more slowly than during pre-AoA phase.
Within one year of the implementation of
AoA, its trade balance has moved from a deficit
to surplus. It expanded from US$ 13.4 million in
1995-96 to its peak of US$ 371.6 million in
2005-06 which has helped in narrowing Sri
Lanka’s overall trade deficit.
Figure 1 displays that the share of Sri Lanka’s
total agricultural trade (i.e., exports + imports) in
theworld’stotalagriculturaltradewhichdropped
inpre-AoAphase, haswitnessedanupwardtrend
during post-AoA period. It has increased from
0.10 per cent in 1994-95 to 0.18 per cent in
2005-06. And this increase has mainly come
throughfarm exports.Onan average, Sri Lanka’s
shareinglobalfarmtradehasimprovedfrom0.17
per cent during per-WTO period to 0.18 per cent
during post-WTO period. It indicates the
increasing importance of the country in the
world’s total farm trade.
Figure 1 also shows that the share of Sri
Lanka’s agricultural trade in its overall mer-
chandise trade has increased from 10.35 per cent
in 1994-95 to 15.67 per cent in 2005-06 which
showedadownwardtrendduringpre-AoAphase.
It can be seen from Figure 1 that during 1998-99
to2004-05SriLanka’soverallmerchandisetrade
has grown faster than farm trade. As a result,
average share of farm trade during post-WTO
period is still below pre-WTO level. Table 1
exhibits that the share of agricultural exports and
imports, in the overall merchandise trade of the
country, has climbed up from 11.90 per cent for

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 63
Table 1. Time Profile of Sri Lanka’s Agricultural Trade
Year Sri Annual Share in Share in Sri Annual Share in Share in Agri. net
Lanka’s percentage Sri world’s Lanka’s percentage Sri world’s trade*
agri. change Lanka’s agri. agri. change Lanka’s agri. (million $)
exports total exports imports total imports
(million $)
10
exports (per cent) (million $) imports (per cent)
(per cent) (million $)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1985-86 715.6 -20.24 55.2 0.34 354.5 23.89 19.53 0.17 361.1
1986-87 575.7 -19.55 46.91 0.25 338.5 -4.51 18.34 0.16 237.2
1987-88 601.3 4.45 44.37 0.24 303.7 -10.28 14.95 0.12 297.6
1988-89 637.2 5.97 43.65 0.22 426.8 40.53 19.58 0.15 210.4
1989-90 645.7 1.33 41.54 0.21 525.1 23.03 24.89 0.17 120.6
1990-91 745.3 15.43 38.91 0.23 493.7 -5.98 18.33 0.14 251.6
1991-92 661.6 -11.23 33.53 0.2 524.2 6.18 17.25 0.15 137.4
1992-93 634.5 -4.1 25.58 0.18 587.7 12.11 17.06 0.15 46.8
1993-94 441.6 -30.4 15.32 0.13 477.1 -18.82 12.53 0.13 -35.5
1994-95 375.5 -14.97 11.9 0.1 409.5 -14.17 9.24 0.1 -34
1995-96 672 78.96 17.29 0.15 658.6 60.83 13.48 0.14 13.4
1996-97 875.5 30.28 21.55 0.19 767.6 16.55 15.35 0.16 107.9
1997-98 1079.2 23.27 23.75 0.24 856.9 11.63 14.95 0.18 222.3
1998-99 1063.9 -1.42 22.49 0.24 832.5 -2.85 14.15 0.18 231.4
1999-2k 948.7 -10.83 20.65 0.23 771.9 -7.28 12.95 0.17 176.8
2000-01 1002.1 5.63 18.5 0.24 767 -0.63 10.64 0.18 235.1
2001-02 952.4 -4.96 19.77 0.22 718.7 -6.3 12.13 0.16 233.7
2002-03 971.1 1.96 20.67 0.21 807.1 12.3 13.22 0.17 164
2003-04 1012 4.21 19.75 0.19 831 2.96 12.46 0.15 181
2004-05 1143 12.94 19.85 0.18 926 11.43 11.61 0.14 217
2005-06 1381.7 20.88 22.02 0.21 1010.1 9.08 11.24 0.15 371.6
Pre-1995 603.4 -7.33 35.69 0.21 444.08 5.2 17.17 0.14 159.32
Ave.
Post-1995 1042.96 8.2 20.9 0.22 828.88 4.69 12.87 0.16 214.08
Ave.
Note: * net trade = export - import.
Source: Computed on the basis of data available in FAO Trade Yearbook (1986-2003) and official website of FAO
(www.faostat.fao.org).
agricultural exports and 9.24 per cent for imports
in1994-95to22.02percentforexportsand11.24
per cent for imports in 2005-06.
A comparison of respective averages before
andafter1995broughtoutthattheaverageannual
percentage change in Sri Lanka’s farm exports
has turned from being sizeably negative to being
sizeably positive and the average annual per-
centage change in Sri Lanka’s farm imports has
somewhat declined after 1995. Sri Lanka has,
however, not fully recovered the share of farm
exports in its total merchandise exports.

64 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Figure 1. Sri Lanka’s Agricultural Trade as Share of its Total Merchandise Trade and Global Agricultural Trade
The annual compound growth rates (Eq. 5) of
values of Sri Lanka’s agricultural exports,
imports and net trade are presented in Table 2.
The ACGR of value of Sri Lanka’s agricultural
exports has increased from -4.28 per cent during
1985-94 to 3.99 per cent during 1995-05. For
imports,ithasdeclined from 4.71 per centto 2.57
percentduring the same period.As aresult,value
of agricultural net trade has expanded at a robust
annual average pace of 18.03 per cent during
post-AoA phase which was declining at a rate of
19.46 per cent per annum during pre-AoA phase.
The results presented in fifth column of Table 2
(Eq. 6) suggest that under the WTO regime
growthratesofSriLanka’sfarmexportsandtrade
surplus have increased statistically significantly.
It can be seen from Table 2 that the growth
rates of Sri Lanka’s farm import are statistically
significant during both sub-periods under the
study. It indicates a statistically significant rising
trend on Sri Lanka’s farm imports. The intercept
shiftdummyisalsofoundstatisticallysignificant.
However, the decline in growth pace of farm
import is insignificant. It may be added here that
theupwardshiftingrowthrateofSriLanka’sfarm
export is statistically significant which results
intostatisticallysignificantincreaseinitsnetfarm
exports.
Table 2. Annual Average Compound Growth Rates: Sri Lanka’s Agricultural Exports, Imports and Net Trade
(Percentage)
Item Overall period Pre-WTO phase Post-WTO phase t-statistic for the impact
(1985-2005) (1985-94) (1995-2005) of WTO regime on
growth rate
(1) (2) (3) (4) (5)
Exports 3.88 (119.45)* -4.28 (50.48)* 3.99 (82.45)* 3.66* (0.00)
Imports 5.40 (182.69)* 4.71 (51.36)* 2.57 (117.25)* -1.07(0.29)
Trade surplus 0.77 (30.10)* -19.46#(15.50)* 18.03 (14.67)* 3.43* (0.00)
Note: # = 1985-86 to 1992-93. * indicates statistical significance of ‘t’ value at 1 per cent level. Figures in parentheses in columns
2-4 are ‘t’ values. Figures in parentheses in fifth column are probability values
Source: Computed on the basis of data available in FAO Trade Yearbook, (1986-2003) and official website of FAO (www.faos-
tat.fao.org).

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 65
Table 3 presents the instabilityindices (Eq. 7)
for Sri Lanka’s farm exports and imports for
pooled years, before and after WTO periods, and
percentage change in two time periods. The
uncertainty indices for Sri Lanka’s farm exports
and imports values have declined from 15.84 per
cent for exports and 17.95 per cent for imports
during pre-WTO period to 12.18 per cent for
exports and 8.28 per cent for imports during
post-WTO phase, respectively. Under WTO
regime, Sri Lanka’s agricultural imports have
become more stable than exports.
Table 3. Instability in Sri Lanka’s Farm Trade (In per cent)
Percentage change in
Instability in export value Instability in import value two periods
1985-2005 1985-94 1995-2005 1985-2005 1985-94 1995-2005 Export Import
a b c d e f g=100(c-b)/b h=100(f-e)/e
19.86 15.84 12.18 16.40 17.95 8.28 -23.11 -53.87
Source: Computed on the basis of data available in FAO Trade Yearbook, (1986-2003) and official website of FAO
(www.faostat.fao.org).
4.2 Sri Lanka’s Agricultural Trade Performance
The performance of Sri Lankan agricultural
trade in terms of normalised trade balance,
exports required for financing import bill and
agriculture trade relative to GDP agriculture is
given in Table 4 and Figure 2. A look at Column
3 of Table 4 shows that normalised trade balance
Table 4. Indicators of Sri Lanka’s Agricultural Trade Performance
Year Normalised trade Exports required Agri. exports as per- Agri. imports as Net farm trade as
balance in financing imports centage of GDP percentage of GDP percentage of GDP
Agriculture (per cent) agri. agri. agri.
(1) (2) (3) (4) (5) (6)
1985-86 0.34 49.54 48.19 23.87 24.32
1986-87 0.26 58.8 37.66 22.14 15.52
1987-88 0.33 50.51 36.87 18.62 18.25
1988-89 0.2 66.98 37.82 25.33 12.49
1989-90 0.1 81.32 39.17 31.86 7.32
1990-91 0.2 66.24 39.54 26.19 13.35
1991-92 0.12 79.23 29.9 23.69 6.21
1992-93 0.04 92.62 27.83 25.78 2.05
1993-94 -0.04 108.04 18.84 20.35 -1.51
1994-95 -0.04 109.05 13.36 14.57 -1.21
1995-96 0.01 98.01 22.62 22.17 0.45
1996-97 0.07 87.68 28.61 25.08 3.53
1997-98 0.11 79.4 32.5 25.81 6.69
1998-99 0.12 78.25 32.25 25.24 7.02
1999-2k 0.1 81.36 28.31 23.03 5.28
2000-01 0.13 76.54 30.73 23.52 7.21
2001-02 0.14 75.46 31.5 23.77 7.73
2002-03 0.09 83.11 29.31 24.36 4.95
2003-04 0.1 82.11 27.33 22.44 4.89
2004-05 0.1 81.01 31.66 25.65 6.01
2005-06 0.16 73.11 34.62 25.31 9.31
Source:Computed on thebasisofdata availablein FAO Trade Yearbook (1986-2003),World DevelopmentReport andofficialwebsite
of FAO (www.faostat.fao.org).

66 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
(Eq. 12) in agricultural trade has improved dra-
matically from -0.04 in 1994-95 to 0.16 in
2005-06. The share of agricultural exports
required to finance agricultural imports bill has
come down under AoA regime. It has declined
from109.05per cent in1994-95to 73.11 per cent
in2005-06.Itisclearlyandstronglyevident from
Figure 2 that Sri Lanka’s agricultural trade as
share of GDP agriculture has increased substan-
tiallyafter theimplementation of AoA which was
declining in pre-AoA phase increased from
27.93 per cent in 1994-95 to 59.9 per cent in
2005-06. It indicates that Sri Lankan agriculture
has opened. It can be seen from Table 4 that this
increase has mainly come through expansion of
agriculturalexports.Asaresult,agriculturaltrade
surplusasshare of GDP agriculture has increased
from -1.21 per cent in 1994-95 to9.31 per cent in
2005-06. All these evidences here support the
hypothesisthatundertheWTOregime,SriLanka
has increased its share in the world’s total agri-
cultural trade. Next we examine the trends on
terms of trade for Sri Lanka’s farm sector.
Figure 2. Sri Lanka’s Farm Trade as Share of GDP Agriculture and Specialisation in Farm Trade
4.3 Terms of Sri Lanka’s Agricultural Trade
ThetermsofSri Lanka’sfarmtradebeforeand
after AoA are given in Table 5. The table shows
that the net terms of trade (Eq. 9) for Sri Lanka’s
farm trade, which was deteriorating drastically
during the pre-AoA phase, has improved notably
from 50.73 in 1994-95 to 122.27 in 1998-99.
From 1999-2000 it started to deteriorate and
slipped back to 76.33 in 2005-06.
Consistent with net terms of trade, income
terms of trade (Eq. 10) has also improved sub-
stantially from 43.63 in 1994-95 to 108 in
1997-98before takinga dipto98.8in 1999-2000.
Thereafteritshowedanupwardtrendandreached
to its peak of 114.49 in 2005-06. It indicates that
during post-AoA period Sri Lankan import
capacity has improved. The gross terms of trade
(Eq. 11) have shown an erratic trend. On an
average, quantity exported has grown faster than
imports.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 67
Table 5. Terms of Sri Lanka’s Farm Trade Pre and Post-AoA Phases
Year Price index Volume index Terms of trade
Exports Imports Exports Imports Net Income Gross
Px Pm Qx Qm (Px/Pm)100 Qx(Px/Pm)100 Qm/Qx
(1) (2) (3) (4) (5) (6) (7) (8)
1985-86 57 74 139 62 76.60 106.48 44.60
1986-87 43 69 144 62 62.08 89.40 43.06
1987-88 59 83 111 46 70.89 78.68 41.44
1988-89 65 89 105 61 73.16 76.81 58.10
1989-90 58 97 117 70 59.83 70.00 59.83
1990-91 65 107 121 60 61.21 74.06 49.59
1991-92 63 105 109 65 60.51 65.96 59.63
1992-93 60 103 109 74 58.06 63.29 67.89
1993-94 57 88 79 72 65.10 51.43 91.14
1994-95 44 87 86 62 50.73 43.63 72.09
1995-96 61 114 114 77 53.73 61.25 67.54
1996-97 118 112 79 91 105.03 82.97 115.19
1997-98 125 106 91 108 118.68 108.00 118.68
1998-99 132 108 85 103 122.27 103.93 121.18
1999-2k 108 97 89 106 111.01 98.80 119.10
2000-01 106 99 98 102 107.17 105.03 104.08
2001-02 88 104 111 91 84.57 93.87 81.98
2002-03 76 91 127 117 84.30 107.07 92.13
2003-04 79 100 132 110 78.79 104.00 83.33
2004-05 82 107 141 115 76.92 108.46 81.56
2005-06 85 111 150 119 76.33 114.49 79.33
Source: Computed on the basis of data available in official website of FAO (www.faostat.fao.org).
The ACGR (Eq. 5) of value and quantity
indices for Sri Lanka’s farm exports and imports
are presented in Table 6. The table shows that
during both sub-periods value index for Sri
Lanka’s farm imports exhibits a statistically sig-
nificant rise in trend. However, the ACGR of
value index of Sri Lankan farm imports has
declinedfrom5.2percentduring1985-94to 2.33
percentduring 1995-05,while annual compound
growth rate of quantity index of its imports has
increased from 2.09 per cent to 3.04 per cent
duringthe sameperiod. It indicatesthat under the
AoA regime farm imports in physical terms have
grown faster than in the pre-AoA period but the
growth rate of their monetary burden has come
down. This is because the growth rate of world
prices of agricultural commodities imported by
Sri Lanka has dropped after AoA. In case of
indices for Sri Lanka’s farm imports value and
quantity,the intercept shift dummiesare found to
be statistically significant. However, the slope
shift dummies are statistically insignificant.
Table 6. Annual Compound Growth Rates: Indices for Value and Quantity of Sri Lanka’s Farm Exports and Imports
Item Overall period Pre-WTO phase Post-WTO phase t-statistic for the
(1985-2005) (per (1985-94) (per cent) (1995-2005) (per impact of WTO
cent) cent) regime on growth rate
(1) (2) (3) (4) (5)
Value index of exports 3.42 (114.36)* -5.16 (49.77)* 3.04 (82.84)* 3.64 * (0.00)
Value index of import 5.62 (176.16)* 5.20 (50.64)* 2.33 (116.84)* -1.33 (0.19)
Quantity index of exports 0.07 (135.69)* -4.94 (83.20)* 5.16 (75.96)* 5.71* (0.00)
Quantity index of imports 4.24 (235.79)* 2.09 (73.37)* 3.04 (115.07)* 0.55 (0.58)
Note: * indicates statistical significance of ‘t’ value at 1 per cent level. Figures in parentheses in columns 2-4 are ‘t’ values.
Figures in parentheses in fifth column are probability values.
Source: Computed on the basis of data available in official website of FAO (www.faostat.fao.org).

68 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
During the post-AoA phase quantity index of
farmexportshasgrownatahigherpacethanvalue
index of farm exports. It implies that on an
average the growth rate of prices of agricultural
commodities exported by Sri Lanka haveslowed
during post-WTO phase. For value and quantity
indicesof SriLanka’s farmexports,theestimated
values of dummy variable for impact of WTO
regime on growth rate (r
3
in Eq. 6) are found
statistically significant at 1 per cent level. This
result suggests that under WTO regime growth
rates of these variables have increased signifi-
cantly. We now turn to decompose the growth in
Sri Lanka’s total merchandise trade.
4.4 Decomposition of Sri Lanka’s Total
Merchandise Exports Growth
The nominal growth rates (Eq. 8) of Sri Lan-
ka’s total merchandise exports during pre and
post-AoAperiodsalongwith theirdecomposition
by sources are presented in Table 7.
Table 7. Decomposition of Sri Lanka’s Overall Export Growth
Factor Overall period Pre-AoA phase Post-AoA phase
(1985-2005)* (1985-94)* (1995-2005)*
(1) (2) (3) (4)
f
1
= W
1
/W
0
2.872 1.832 1.376
f
2
= (T
1
/T
0
)/(W
1
/W
0
) 0.581 0.345 1.495
f
3
= (T
0
/X
0
)/(T
1
/X
1
) 2.584 3.782 0.751
R = f
1
f
2
f
3
=X
1
/X
0
4.312 2.393 1.545
Note: * = two years’ averages are used as initial and current points to reduce the influence of a single year outlier.
Source: Computed on the basis of data available in FAO Trade Yearbook (1986-2003) and official website of FAO
(www.faostat.fao.org).
Forreadyreference,wereproduceherethemodel:
f
1
=W
1
/W
0
,f
2
=(T
1
/T
0
)/(W
1
/W
0
);
f
3
=(T
0
/X
0
)/(T
1
/X
1
);
where
G = Nominal growth
W
1
= World agricultural imports in the current
year [i.e., the last year of the sub-period consid-
ered],
W
0
=Worldagriculturalimportsintheinitialyear,
T
1
= Country’sagricultural exports in thecurrent
year,
T
0
= Country’s agricultural exports in the initial
year,
X
1
= Country’s total exports in the current year,
X
0
= Country’s total exports in the initial year.
The table displays that Sri Lanka’s total mer-
chandise exports during the pre-WTO period
(1985-94) have grown by 139 per cent [(R-1)
100] and during the post-WTO period
(1995-2005) by 54 per cent [(1.54-1) 100].
The decomposition of growth in Sri Lanka’s
overall exports suggests that during the pre-AoA
phasethebulkoftotalmerchandiseexportgrowth
is mainly supported by diversification into non-
agricultural exports (f
3
). Under the AoA regime,
growth in overall exports through an increase in
market share for its agricultural exports (f
2
) has
dominated the other two sources of nominal
growth rate, although the latter two, namely a
general expansion of world agricultural market
(f
1
) as well as increased share of Sri Lanka’s
×
G =(R-1)100;R = f
1
f
2
f
3
=
X
1
X
0
×

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 69
agricultural exports in Sri Lanka’s total exports
(f
3
) have also been significant. It can be inferred
from the results presented in third row of Table 7
that under WTO regime the growth rate of world
farm imports has declined. It may partially be
attributable to: (a) use of sanitary and phyto-
sanitarymeasures(health andsafetyregulations),
technical barriers to trade (the TBT Agreement)
and trade-related aspects of intellectual property
rights (the TRIPS Agreement) as trade barriers,
(b)slowdown in growthrateofworldagricultural
GDP, (c) decline in prices of farm commodities,
(d) tariff peaks, i.e., maintaining average levels
of tariffs but imposing high tariff on key sectors,
(e) continuation of domestic policy distortions
and high support in many OECD countries, and
(f) tariff escalation on agricultural and agro
industrial products [Ramphul, 2010a Pp. 1-267].
Furthermore,aspointedout by Josling[2009, Pp.
245-282] that agricultural trade accounted for a
small and declining share of global merchandise
trade.But itsshare in totaltradedisputes hasbeen
large.Since theestablishmentofthe WTOalarge
number of disputes have dealt with agricultural
and food trade issues. Agricultural exports now
make up to 8 per cent of global exports. Of 367
requests for consultations made to the Dispute
Settlement Board (DSB) of the WTO, 100 have
primarilybeenaboutagricultural trade,ashare of
27 per cent.
An analysis of data (available on WTO’s
official website) on total disputesettlement cases
with WTO’s DSB brings out that Sri Lanka, on
February 23, 1996, has put only one request
consultation with Brazil concerning Brazil’s
imposition of countervailing duties on Sri Lan-
ka’s export of desiccated coconut, coconut and
milkpowder.Itmaybenotedherethatdesiccated
coconut, coconut and milk powder don’t consti-
tuteamajorshareinSriLanka’stotalfarmexports
as shown in Table 8. From our forgoing analysis
it may be concluded that, perhaps due to better
quality, Sri Lanka’s farm exports have not suf-
fered from trading partners disguised protec-
tionist policies like other countries. This may be
one of the plausible casual factors for increase in
Sri Lanka’sshare inglobal total farm trade under
WTOregime. Further, during the later periodthe
pattern of the world farm trade (relative shares of
different countries) changed which may have
benefited Sri Lanka’s agricultural trade. For
example, the share of developing countries (in-
cluding Sri Lanka) in the world’s total farm
exports has increased from 31.63 per cent in
1994-95 to 33.56 per cent in 2004-05. The mar-
ketsofdeveloping countries have beenbecoming
increasingly important for their own agricultural
exports. During 2002-05, developing countries
have become net agricultural exporters [Ram-
phul, 2010a].
A further scrutiny of data presented in Table
8 reveals that Sri Lanka’s farm exports are
dominated by tea. Its major tea import partners
are developing countries which have liberalized
their trade policies under WTO regime. It has
benefitedSriLanka’s farm exports.Furthermore,
world prices of tea have exhibited a rising trend
globaltea’sexportunitvaluehasincreasedfrom
$1.95 per kg in 1994-95 to $2.08 per kg in
2005-06. It may partially be due to the increased
demandforteaarisingfromincreasingpopulation
and per capita incomes.It may beadded here that
Sri Lanka’s share in the world’s total tea exports
has increased from 10.04 per cent in 1994-95 to
22.45 per cent in 2005-06. The openness (mea-
sured as the ratio of quantity exported to the
quantity produced) of world tea market has
increased from 40.7 per cent to 46.95 per cent
during the same period.
4.5 Composition of Sri Lanka’s Farm Trade
The share of different commodities in Sri
Lanka’s agricultural exports and imports, and
their quantities and unit values are presented in
Tables 8 and 9. Table 8 exhibits that under the

70 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
AoAregime,theimportanceofsomecommercial
crops,namelytea,copra, pepperand pineapple in
Sri Lanka’s agricultural exports basket has shot
up.
Table 8. List of Sri Lanka’s Major Agricultural Exports Items
Commodity Pre-AoA phase (1993-95) Post-AoA phase (2002-04)
Value Quantity Unit value Share in value Value Quantity Unit value Share in value
(000, $) (Metric (000, of total agri- (000, $) (Metric (000, of total agri-
tonne) $/tonne) cultural tonne) $/tonne) cultural
exports exports
(percentage) (percentage)
a b c = a/b d e f = d/e
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Rice 3544 15835 0.224 0.87 1157 2465 0.469 0.12
Coconut 2864.5 13934.5 0.206 0.70 6719.5 22241 0.302 0.68
Coconut dry 18844.5 22746.5 0.828 4.61 23740 26405.5 0.899 2.39
Pineapple 291.5 521.5 0.559 0.07 1728 2159.5 0.800 0.17
Pepper 4346 3441 1.263 1.06 12770 7295.5 1.750 1.29
Tea 234223 124919.5 1.875 57.33 635205 295070 2.153 64.06
Copra 2138 3186.5 0.671 0.52 10057.5 13711.5 0.734 1.01
Natural rub- 39058 39622 0.986 9.56 29484.5 33585.5 0.878 2.97
ber
Bran and mill- 9700 168500 0.058 2.37 14304 172813.5 0.083 1.44
ing product
Tobacco 22312 2724.5 8.189 5.71 31375.5 2116.5 14.824 3.16
Share of these commodities in total value of
agricultural exports (percentage) 82.81 77.31
Source: Computed on the basis of data available
in FAO Trade Yearbook (1986-2003), official
website of FAO (www.faostat.fao.org) and
Annual Report, Central Bank of Sri Lanka, Sri
Lanka.
In absolute terms, export value of all com-
modities (except rice and natural rubber) has
increased.The highest growthisobserved fortea.
Its export value has increased more than twofold
with the beginning of AoA. In percentage terms,
highest growth isrecorded forpineapple 492.8
percentincrease.In contrast,the shareofselected
traditional exportable items like natural rubber,
tobacco, bran and milling products has declined.
Export of natural rubber has declined both in
absolute and relative terms over the years there-
fore, its total export earnings has declined sig-
nificantly. This decline may partially be
attributable to increase in domestic prices of
natural rubber and domestic demand because of
improvementsin rubber based product industries
(e.g., tyres, tubes, hot water bottles, auto parts,
gloves, balloons, boots, shoe soles, jar seals,
carpets, mattresses, etc.).
The decline in export of rice came through
declineinitsquantityratherthanunitvalue,while
the export of natural rubber came down through
fall in both unit value and quantity exported.
However, Sri Lanka is a net exporter of natural
rubber with an export surplus of $ 22.88 million
during 2002-04.
A comparison of unit values of Sri Lanka’s
major exports during 1993-95 and 2002-04
indicates that the unit values of all items (except
natural rubber) have jumped up. The highest

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 71
growth is recorded for rice, i.e., 109.38 per cent.
Theincreaseinvalue of tobacco exportis derived
from rise in its unit value while its quantity
exportedhas dropped.Itsunitvaluehasincreased
by 81 per cent while export quantity declined by
22.32 per cent. As a result its export value has
increased by 40 per cent. In case of tea, quantity
exported has grown faster than unit value. The
post AoA increases in the unit export values may
be either due to AoA or due to the increased
demand for these commodities arising from
increasing population and per capita incomes, or
both AoA and theexogenous increase in demand
forthese commodities.One is not able to cometo
such an unequivocal conclusion without further
analysis.
Table 9. List of Sri Lanka’s Major Agricultural Imports Items
Commodity Pre-AoA phase (1993-95) Post-AoA phase (2002-04)
Value Quantity Unit value Share in value Value Quantity Unit value Share in value
(000, $) (Metric (00, $/tonne) of total agri- (000, $) (Metric (00, of total agri-
tonne) cultural tonne) $/tonne) cultural
imports imports
(percentage) (percentage)
a b c = (a/b)10 d e f = (d/e)10
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Milk 43031.5 n.a. n.a. 9.71 113247 n.a. n.a. 13.90
Wheat 12742.5 887600 0.14 28.74 134640 972800 1.38 16.53
Rice 25919 106870 2.43 5.85 12778.5 63520 2.01 1.57
Potatoes 3557.5 6175.5 5.76 0.80 9194.5 42178.5 2.18 1.13
Pulses 22087.5 56787 3.89 4.98 43807 124695 10.31 5.38
Onion 5697.5 23476 2.43 1.29 21481 127060 1.69 2.64
Apple 1296.5 2046.5 6.34 0.29 8082 21065.5 3.84 0.99
Sugar 8599 259875 0.33 19.40 116120 537570 2.16 14.25
Tea 2585 2144.5 12.05 0.58 9582 5025.5 19.07 1.18
Pimento 2103 2647 7.94 0.47 19570.5 24975 7.84 2.40
Tobacco 17816 1363 130.71 4.02 39209.5 3358 116.76 4.81
Natural rubber 5 1 50.00 0.00 6595 6701.5 9.83 0.81
Cotton lint 15504.5 10162.5 15.26 3.50 7402.5 6258.5 11.83 0.91
Palm oil 11412 25733.5 4.43 2.57 37834 87139.5 4.34 4.64
Palm kernel oil 2678.5 4604.5 5.82 0.60 21901.5 48936.5 4.47 2.69
Share of these commodities in total value of agricul-
tural imports (percentage) 82.81 73.82
Source: Computed on the basis of data available in FAO Trade Yearbook (1986-2003), official website of FAO
(www.faostat.fao.org) and Annual Report, Central Bank of Sri Lanka, Sri Lanka.
Sri Lanka’s agricultural export has been
poweredbyasinglecommercialcrop,namelytea
which represented 64.06 per cent of total agri-
cultural exports during 2002-04.
11
In 2008-09,
the major markets for Sri Lankan tea were: UAE
(15.9 per cent), Russia (14.8 per cent), Iran (10.5
per cent), Syria (8.8 per cent), Turkey (5.2 per
cent),Jordan(4.5percent),Iraq(3.9percent)and
Japan (3.2 per cent) [Sri Lanka Tea Board, 2008,
Pp. 1-8]. In case of natural rubber major buyers
were: USA, Belgium, UK, Germany and France.
Asisclearlyevident fromTable9, SriLanka’s
chief agricultural import items are: wheat, milk,
sugar,andpulses.Duringthepost-AoAphase,the
sharesofwheat,rice,sugarandcottonlintinvalue
of total agricultural imports have declined while
the shares of milk, onion, pimento, tobacco,

72 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
natural rubber, potato and palm oil have increa-
sed.
12
Imports of rice and cotton lint have declined
in both absolute and relative terms and these
reductions have come through fall in both unit
value of imports and quantities imported. In
absolute terms imports of all others commodities
increasedbothinquantityandvalueterms.Under
the AoA regime, the unit values of imports of
wheat,pulses,tea and sugarhave increased while
these have declined for potato, rice, palm oil,
cotton lint, natural rubber, onion, apple and palm
kernel oil. Among Sri Lanka’s major imports
items,showninTable9,exceptforriceandcotton
lint where the values of imports have declined,
increases in the amounts of imports are derived
from increases in quantities imported. Import of
milk has shot up suddenly. The imports of food
products are substantial and have increased
steeply.ItindicatesSriLanka’sincreasingimport
dependency for food grains. It has serious con-
sequences for food security. For instance, a crop
failurein major producingcountries,diversion of
major agricultural produce such as sugar, maize,
wheat, corn and edible oil to bio-fuel production
due to high oil prices and increase in demand for
food grains, generated from rapid economic
growth in emerging economies, etc., can create
food inflation in Sri Lanka.
Sri Lanka is a net food importing country. In
2005-06,foodexportsrepresented only30.51per
cent of food imports. Its main food import items
are wheat, milk, sugar and pulses which together
accounted for 50.06 per cent of total agricultural
importsduring2002-04.SriLankaspentUS$364
million on the imports of sugar, milk and wheat
during 2002-04. Increase in the imports of milk,
palm oil, wheat and pulses may be because of
increase in their demand on account of higher
growth rates of population and per capita
incomes. Increase in imports of sugar and potato
may partially be due to decline in their domestic
production.
An examination of imports and exports
structure suggests that Sri Lanka’s agricultural
imports are widely diversified. In contrast to
imports, agricultural exports are concentrated on
a few items. It suggests the need for more diver-
sificationoffarmexportsinordertoobtainfurther
benefitsof farmtrade liberalisation.Let usassess
the competitiveness of Sri Lankan agriculture.
4.6 Competitiveness of Sri Lankan Agriculture
InSriLanka,the majorexportedcropsare: tea,
rubber,copraandcoconut.During2002-04,these
commodities together accounted for 71.11 per
cent of Sri Lankan total farm exports. The com-
petitiveness of these chief exportable commodi-
ties is assessed in the context of an exportable
hypothesis by using Nominal Protection
Coefficient (Eq. 15) and results are presented in
Table 10. It can be seen from Table 10 that Sri
Lanka has competitiveness in export of coconut
but it loses competitiveness in case of coconuts
oil. It indicates the inefficiency in oil processing
industry. It suggests the need to generate greater
value added within the country.
The value of NPC less than unity for tea
indicates that Sri Lanka is an efficient producer
of tea. These results, indicating Sri Lanka’s
competitiveness in tea, are consistent with an
earlier study [i.e., World Bank, 1996]. In case of
copra, competitiveness is rather poor. Sri Lanka
has lost its competitiveness, in recent years, in
rubber with the value of NPC greater than unity.
Itmay partially be attributableto faster growth in
domestic prices of rubber than world prices.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 73
Table 10. Sri Lanka’s Farm Commodities NPC under Exportable Hypothesis
Year Tea Coconuts oil Desiccated coconuts Rubber Copra
(1) (2) (3) (4) (5) (6)
1995 0.713 0.845 0.922 0.844 0.924
1996 0.752 1.116 0.965 0.838 1.084
1997 0.761 1.080 0.924 0.725 1.065
1998 0.736 0.920 0.939 0.689 0.957
1999 0.717 0.981 0.936 0.816 0.985
2000 0.742 0.911 0.825 0.784 0.862
2001 0.696 1.101 0.931 0.805 1.025
2002 0.697 0.978 0.934 0.969 0.929
2003 0.681 0.836 0.929 0.875 0.920
2004 0.733 0.980 0.996 1.000 0.919
2005 0.713 1.045 0.951 1.008 0.935
2006 0.717 0.998 0.922 1.078 0.913
2007 0.774 1.090 0.950 1.009 1.059
Source: Computed on the basis of data available in Annual Reports and Monthly Bulletin, Central Bank of Sri Lanka, Sri
Lanka (2004-08).
In order to assess the implications of free
importregime as envisioned under currentglobal
farm trade talks in WTO negotiations, competi-
tiveness of Sri Lankan major imported farm
commodities, namely rice and sugar, has been
measured for most recent years in the context of
an importable hypothesis using Nominal Pro-
tection Coefficient (Eq. 15).
13
The results are
presentedinTable11.Thetableshowsthatduring
most of period under investigation both rice and
sugar are found price uncompetitive with the
values of NPC generally greater than unity. It
means that Sri Lankan food crops cannot survive
in a free import regime. As we have already
noticedthat SriLanka haslack ofself-sufficiency
in food grains.This situation can be improved by
providing incentives to farmers for food grains
production. Increase in world prices of food
grains resulting from withdrawal of domestic
support by developed countries, in due course,
[Fabiosa et al., 2005, Pp. 317-335] can enhance
the competitiveness of Sri Lanka’s food crops on
one hand and can discourage the cheap food
imports on the other. In this way establishment
of a fair and market oriented agricultural trading
system can strengthen Sri Lanka’s food security
base by increasing food production capacity and
farmers incomes. Increase in domestic food
grains production may also control the domestic
food inflation.
Table 11. Sri Lanka’s Farm Commodities NPC at Importable Hypothesis
Commodity 2000 2001 2002 2003 2004 2005 2006 2007
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Rice 1.078 1.362 1.020 1.034 0.875 1.038 0.978 1.165
Sugar 0.976 0.986 0.991 0.986 1.000 0.984 0.988 1.001
Source: Computed on the basis of data available in Annual Reports and Monthly Bulletin, Central Bank of Sri Lanka, Sri
Lanka (2004-08).

74 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
4.7 Comparative Advantage of Sri Lanka in
Agricultural Exports vis-à-vis South Asia
The estimated revealed symmetric compara-
tive advantage (RSCA) indices (Eq. 14) for tea
for Sri Lanka and other major South Asian
exporters, namely India, Bangladesh and Paki-
stan, have been presented in Figure 3.
Figure 3. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Tea Exports from Sri
Lanka and other South-Asian Countries
The figure shows that Sri Lanka has main-
tained its prime status as the world’s largest
exporter of tea through the study period, mainly
through its comparative advantage in the inter-
national markets. Throughout the study period,
SriLanka has revealedits comparativeadvantage
inthissectorwithnotablyhighervaluesofRSCA.
Sri Lanka did not suffer any setbacks in this
commodity. The RSCA for Sri Lanka tea exports
was 0.994 in 1989-90, 0.984 in 1994-95 and was
more and less stable in the succeeding years and
stood at 0.989 in 2003-04.
14
India and Bangladesh are immediate compet-
itorsforSriLankaforteaexports.ButBangladesh
has not maintained a consistent level of
comparative advantage as is evident from occa-
sional dipping of its RSCA estimates. However,
theRSCAestimatesofPakistani teaexportswere
not only negative in most of years but also faced
high inter-year fluctuations. Even though the
present trend is in favour of Sri Lanka, it should
not be forgotten that the competitors were con-
stantly trying to improve their positions and Sri
Lanka should aggressively pursue efforts to
maintain the pace. These results, indicating that
Sri Lanka’s comparative advantage in export of
tea is much better than other players, are consis-
tentwith anearlier study [i.e.,ShinojandMathur,
2008, Pp. 60-66].
A brief perusal of the RSCA estimates pres-
entedin Figure4revealsSri Lanka’scomparative
advantage in tobacco exports.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 75
Figure 4. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Tobacco Exports from Sri
Lanka and other South-Asian Countries
Sri Lankan tobacco exports showed varying
levels of comparative advantage during different
years of the study period. In 1989-90, estimated
value of RSCA was -0.003 which improved to
0.822 in 1992-93 but dropped to lowest value of
0.122 in 1994-95. It further increased to 0.454 in
2002-03. Until 1991-92, India out performed Sri
Lanka, however, from 1992-93 onward, Sri
Lanka’s status remained better than its major
South Asian competitors. For India, the index
ranged from 0.638 to -0.240 during the period
1989-90 to 2003-04 while, for Bangladesh it
varied between 0.055 to -0.847 during the same
period. For Pakistan, it was in much lower range
of -0.574 to -0.941 during the same period.
TheresultspresentedinFigure5 clearlydepict
that Sri Lanka experiences a comparative disad-
vantage in export of rice in all years under con-
sideration and has negative RSCA values.
TheRSCAestimatefor1989was-0.862which
points towards a quite unfavourable status of Sri
Lankan rice exports in the global market. This
situationhas hardly improved overthe years,and
RSCA value was below zero (-0.621) even in
2003-04. Rice exports from Pakistan exhibited a
distinct advantage over all other South Asian
countries.
16
Indianricewasimmediatecompetitor
for Pakistan. Bangladesh was found to have
significantly improved its status with an increase
inthevalue ofRSCAfrom -1 in 1989-90 to 0.715
in2003-04.Giventhecurrentstatus,considerable
efforts are needed to make Sri Lanka a competi-
tive exporter of rice in the years to come. It may
beaddedherethatovertheperiodSriLanka’srice
consumptionhasincreasedconsiderablybutithas
been out-paced by growth in its production.

76 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Figure 5. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Rice Exports from Sri
Lanka and other South-Asian Countries
Sri Lanka’s status as a leading exporter of
coconuts has remained unabated throughout the
period under study and it can be attributed to the
high comparative advantage enjoyed by Sri
Lanka in relation of other players as shown in
Figure 6. The RSCA estimates of Sri Lankan
coconuts exports are as high as 0.989 in 1989-90,
and till 2003-04, Sri Lanka has not face any
notableexternal challenges.TheRSCAestimates
of other South Asian coconuts exporters like
India,Pakistan andBangladeshweremuchlower,
underlining Sri Lanka’s supremacy. Since 2002,
Indiahas also acquired comparativeadvantage in
coconuts exports.
Figure 6. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Coconuts Exports from Sri
Lanka and other South-Asian Countries

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 77
For the period 1989-90 to 2003-04, Sri Lanka
is found to have a comparative advantage in
pepper exports in all years under investigation as
is obvious from positive value of RSCA. In
1989-90,thevalueof RSCAwas0.886whichfell
to 0.821 in 1994-95 as shown in Figure 7. After
the implementation of AoA, it started to improve
and increased from 0.857 in 1995-96 to 0.930 in
2003-04. In pepper exports, India is the major
competitor to Sri Lanka. India also followed a
similar trajectory with gradual erosion in its
comparative advantage. However, Pakistan and
Bangladeshdidnot enjoy comparativeadvantage
throughout the study period.
Figure 7. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Pepper Exports from Sri Lanka
and other South-Asian Countries
It can be seen from Figure 8 that Sri Lanka’s
comparative advantage in export of bran and
milling products seems to have dwindled during
the initial period of implementation of the AoA.
Figure 8. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Bran and Milling Products Exports
from Sri Lanka and other South-Asian Countries

78 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
The period which followed witnessed Sri
Lanka losing its advantage with Pakistan
bypassing it. However, a reversal of role was
observedin2001-02,whenitsRSCAvalueturned
from -0.972 in 2000-01 to 0.918. From 2001-02
onward RSCA value has shown an upward trend.
An erratic trend was observed in India’s position
with occasional ups and downs. Bangladesh’s
position as an exporter of bran and milling
products was not one to be emulated, the con-
sistent negative RSCA estimates suggested
comparative disadvantage in its bran and milling
productsexports throughout the study period and
it did not show any significant sign of recovery.
Figure 9 displays Sri Lanka’s supremacy in
pineapple exports among South Asian countries.
Inalltheyearsunderstudy,theRSCAvalueswere
found positive but fluctuated over the years. Sri
Lanka has comparative advantage in exports of
pineapple.
Figure 9. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Pineapple Exports from Sri
Lanka and other South-Asian Countries
Note:Graph for Pakistan & Bangladesh areindistinguishable.Thedatafor Bangladesh &Pakistanis -1for all years exceptfor Pakistan
in year 1989, 1996 & 2002 is -0.992, -0.999, -0.969, respectively.
The RSCA values for other South Asian
countries, viz. Pakistan, India and Bangladesh
were found to be less than zero and suggested a
comparative disadvantage for their pineapple
abroad. Their RSCA estimates varied from -1 to
-0.73during 1989to 2003 andnever showed sign
of notable improvement.
Sri Lanka continues to maintain its prime
status as the world’s largest exporter of copra
throughout the study period, particularly through
its comparative advantage in the international
markets. This fact can be corroborated from the
results presented in Figure 10. In all the years
under study, the RSCA values for Sri Lanka are
in range of 0.972 to 0.995. After 2000, Bangla-
desh improved its comparative advantage
steadily, as a result of which copra exports from
Bangladeshshot up phenomenally. However, the
performance of India and Pakistan seemed to be
far off the mark.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 79
Figure 10. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Copra Exports from Sri
Lanka and other South-Asian Countries
Thecomputed RSCA values forSriLanka are
positive for all years and indicate its comparative
advantage in natural rubber exports as shown in
Figure 11.
Figure 11. Trends in Revealed Symmetric Comparative Advantage (RSCA) Estimates of Natural Rubber Exports
from Sri Lanka and other South-Asian Countries

80 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
But other South Asian countries did not enjoy
a comparative advantage throughout the study
period. Moreover, the comparative edge which
Sri Lanka exhibited during early 1990s slowly
deteriorated over the years, with the index grad-
ually eroding from 0.953 in 1989-90 to 0.769 in
2003-04. In 2003-04, Indian natural rubber
exports turned out to have a marginal advantage
among the South Asian countries other than Sri
Lanka.
The main conclusion to be drawn from our
foregoing analysis of Sri Lanka’s comparative
advantage is that its comparative advantage is
much better than other leading South Asian
exporters especially in the exports of tea, coco-
nuts,copra,pepper,naturalrubber,
15
andbranand
milling products with positive value of RSCA.
Under the AoA regime, values of RSCA for
selected traditional exportable items, namely
copra, tea, bran and milling, and pepper have
increased. While RSCA values for selected other
commodities,namelypineappleandtobaccohave
worsened.TheRSCA values forrice are negative
and have been fluctuating over the years. The
negative value of RSCA for Sri Lankan rice
suggests that it has not acquired comparative
advantagein exportsofrice.Wenowestimatethe
determinants of growth in Sri Lanka’s farm
exports.
4.8 Determinants of Sri Lanka’s Farm Exports
The results of Augmented Dickey-Fuller
(ADF) unit root test and Philips-Perron (PP) unit
roottestatlevel andfirstdifferenceformsforfour
variables, namely Sri Lanka’s farm exports,
exchangerate,GDPagriculture,andworld’sfarm
exports are given in Table 12. The table shows
that all variables (in natural log form) are non-
stationary at level. In first difference form all
series are stationary. Therefore, it is concluded
that all the series are I(1).
The regression estimates of the export growth
model (Eq. 4) are presented in Table 13.
Table 12. Results of Augmented Dickey-Fuller and Philips-Perron Unit Root Tests
Variable Level First difference
ADF test statis- PP test Inference ADF test statis- PP test statistic Inference
tic statistic tic
(1) (2) (3) (4) (5) (6) (7)
ln Y -0.760(0) -0.760(0) Non-Stationary -3.353(0)** -3.350(2)** Stationary
ln W -0.836(0) -0.912(2) Non-Stationary -2.791(0)** -2.778(1)** Stationary
ln R -0.698(0) -0.677(2) Non-Stationary -3.055(0)** -2.996(0)** Stationary
ln G -1.019(0) -1.072(6) Non-Stationary -4.037(0)*** -4.025(5)*** Stationary
Notes: (i) Figures in parenthesis in 2nd and 5th columns are the optimal lag length chosen by using the Schwarz
Information Criterion.
(ii) Figures in parenthesis in 3rd and 6th columns are the optimal Newey West Bandwidth chosen by using
the Bartlett Kernel Criterion.
(iii) ***and ** indicate rejection of nullhypothesis of unitroot at 1 per cent and 5per centconfidence levels,
respectively.
(iv) Tests statistics are computed using regressions with an intercept and no trend.
(v) Mackinnon (1996) critical values are used for the rejection of null hypothesis in both ADF and PP tests.
Source: Computed on the basis of data available in Annual Report, Central Bank of Sri Lanka, FAO Trade Yearbook,
(1986-2003), World Development Report and official website of FAO (www.faostat.fao.org).

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 81
Table 13 shows that all the selected variables
haveexpected (i.e., positive)sign. The computed
‘F’-test value for the regression model is statis-
tically significant at 5 per cent level. The results
presented in last three rows of the table suggest
thatourestimatesofparameters arefitforreliable
interpretation, i.e., correct functional form,
homoscedasticity and no autocorrelation. The
presence of multi-collinearity is detected by
estimating Variance Inflation Factor (VIF) val-
ues. The estimated values of VIF for all explan-
atory variables were less than ten. This result
suggests the absence of multi-collinearity
problem.
Table 13. Results of Export Growth Model for Sri Lankan Agriculture
Independent Variable Coefficient Standard error t-statistic Significance
(1) (2) (3) (4) (5)
Intercept -0.284 0.167 -1.697 0.110
Δln(W) 1.466 0.673 2.178 0.046
Δln(R) 1.091 1.403 0.778 0.449
Δln(G) 0.546 0.789 0.692 0.500
Dummy variable for WTO 0.242 0.083 2.910 0.017
Diagnostic
R
2
0.447
F-statistic 3.030 0.051
Functional form χ
2
0.902 0.358
Heteroscedasity χ
2
1.786 0.184
Autocorrelation χ
2
0.877 0.439
Notes: Functional form χ
2
is Ramsey’s REST test,Heteroscedasity χ
2
is BPG test andAutocorrelation χ
2
is Breusch-Godfrey
Serial Correlation LM test.
Source: Computed on the basis of data available in Annual Report, Central Bank of Sri Lanka, FAO Trade Yearbook,
(1986-2003), World Development Report and official website of FAO (www.faostat.fao.org).
The coefficient of dummy variable is statis-
tically significant at 1 per cent. It suggests that
AoA has induced Sri Lanka’s farm exports. The
coefficient for the value of the world’s farm
exports suggests that an increase in size of world
agricultural market leads to expansion in Sri
Lankan farm exports. The GDP agriculture (size
ofSriLankanagriculture)aswellas theexchange
rate coefficients have expected sign (i.e., posi-
tive). However, these turns out to be statistically
insignificant in explaining Sri Lanka’s
agricultural exports. Next we investigate the
bilateral farm trade betweenSri Lanka and India.
4.9 Sri Lanka-India Farm Trade
The other limitation of before and after
approach,usedabove,maybe thatit assumesthat
Sri Lanka’s trade environment remains
unchanged over the pre and post-AoA periods.
But under the AoA regime (December, 1998) Sri
Lanka has signed a major bilateral trade agree-
ment, i.e., Indo-SriLanka Free TradeAgreement
(ISFTA)which wasimplementedinMarch 2000.
The agreement provides for duty free as well as
duty preference access, as outlined below,for the
goods manufactured in two countries. Both
countries listed products for immediate duty free
entry into each other’s territories. India has
phased out its tariffs on a large number of items
withina period ofthreeyears. Sri Lankahas done
so in stagesover eight years [WTO, 2010, P. 22].
India has liberalised its trade policy for Sri
Lanka in following ways: (a) granting duty free
access for 1411 items by six-digit HS Code with
effectfrom March 31, 2000, (b) 25 per centtariff
reduction for 528 textile items, (c) other than the
429items in the negativelist of India, 50 per cent
reduction of tariffs for the balance 2799 items,
upon the agreement coming into force followed
byphasedoutremovaloftariffsupto100percent

82 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
in 2 stages within 3 year, (d) a 50 per cent fixed
tariffconcessionforimportsofteafromSriLanka
on a preferential basis subject to an annual max-
imum quota of up to 15 million kg, and (e) a 50
per cent fixed tariff concession for imports of
garments from Sri Lanka subject to a maximum
annual quota of 8 million pieces of which a
minimum of 6 million pieces should contain
Indian fabrics.
Sri Lanka has granted: (i) duty free access for
342 tariff lines (6.5 per cent of total tariff lines)
by six-digit HS Code (raw materials and
machinery for industries) upon the agreement
coming into force, (ii) 50 per cent reduction of
tariffs for 889 items by six-digit HS Code (raw
materials) upon the agreement coming into force
followedbyphased outremovaloftariffs,(iii)for
1180 items (22.5 per cent of total tariff lines at
the six-digit level) which are in Sri Lanka’s
negative list there is not any duty preference, for
remaining2822 items (54.2percentoftotal tariff
lines) by six-digit HS Code, upon the agreement
coming into force, the removal of tariffs has
phased out within 8 year.
The improvement in Sri Lankan farm trade
surplus may be due to ISFTA. In order to have a
general idea of impact of ISFTA on Sri Lankan
farmtrade,bilateralfarmtradebetweenSriLanka
and India hasbeen examined. Table 14 illustrates
themajorpositionof bilateral farm tradebetween
Sri Lanka and India. A glance at row 5 of Table
14 makes it clear that Sri Lanka has experienced
anunfavourablefarmtrade balanceagainstIndia.
After the coming into effect of ISFTA on March
1,2000,SriLanka’s farm tradedeficit washigher
than 1999-2000 level (except 2005-06). It indi-
cates that ISFTA has failed to boost the Sri
Lanka’s farm trade surplus.
Table 14. Sri Lanka-India Farm Trade
Item 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08*
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Export (a) 11.56 8.49 20.29 22.75 17.28 31.50 34.61 29.94 74.30 214.30 153.72 147.04
Import (b) 201.20 173.71 124.69 158.58 165 210.97 256.36 298.33 284.47 270.55 340.79 332.24
Net trade
(c = a-b) -189.64 -165.22 -104.40 -135.83 -147.72 -179.47 -221.75 -268.39 -210.17 -56.25 -187.07 -185.20
Import/export
ratio [d = (b/a)
100] 17.40 20.46 6.15 6.97 9.55 6.70 7.41 9.96 3.83 1.26 2.22 2.26
Note:* = April to December.
Source: Computed using data available in Department of Commerce, Government of India (GoI) official website
(htpp://commerce.nic.in).
However, the import coverage ratio, ratio of
the import value to the export value, which acts
as the barometer to measure the extent to which
export proceeds can cover the disbursement on
imports, improved from 9.55 percent in 2000-01
to2.26percentin 2007-08.SriLanka’stotalfarm
trade with India has shown an upward trend.
Agricultural exports and imports both appear to
have greatly increased and also increased at a
much more rapid pace after 2001-02. However,
this growth is dominated by Sri Lanka’s farm
imports rather thanfarmexports. It may be added
here that the bilateral farm trade between Sri
Lanka and India has grown at a faster pace than
farm trade between Sri Lanka and the rest of the
world after the coming into force of the Indo-Sri
Lanka Free Trade Agreement. It suggests
potentialkey opportunity to tapinto the largeand
dynamic Indian market.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 83
5. SUMMING UP
The pattern of Sri Lanka’s agricultural trade
during pre and post-Agreement on Agriculture
(AoA) phases (which may also be considered as
pre and post-WTO phases) is analysed using the
exponential and nominal growth models. The
competitivenessof SriLankan farmcommodities
has been assessed in the context of both import-
able and exportable hypotheses using Nominal
Protection Coefficient. The comparative
advantage of farm commodities of Sri Lankaand
other South Asian countries, namely India,
Pakistan and Bangladesh, has been worked out
applying modified version of Balassa’s index.
Determinants of Sri Lanka’s farm export growth
are estimated using the regression analysis. Sri
Lankaand India’s bilateralfarm trade is analysed
using tabular analysis. The development in the
Doha Round multilateral trade negotiations on
farm trade liberalisation is reviewed. It is noticed
that one focus of the Doha Development Agenda
of World Trade Organization negotiations is the
easing of agricultural commodity access into the
worldmarketbyreachinganagreementregarding
the three controversial agricultural themes: the
reduction of tariffs on imported agricultural
goods, and the reduction of agricultural produc-
tion and export subsidies.
ItisfoundthatvalueofSriLankanagricultural
exports, which was declining during pre-AoA
phase, has grown more than threefold after the
coming into effect of the AoA. And its agricul-
tural exports have grown faster than agricultural
imports.As aresult, agriculturaltrade surplushas
increased which helped in bringing down the
overall trade deficit. The results of nominal
growth model suggest that in the emerging lib-
eralised trade order and AoA, the growth in Sri
Lanka’s overall exports has been driven most of
all by an increase in market share for its agri-
cultural exports but also through an expansion of
theworld’sagriculturalexportsaswellasthrough
an increased share of Sri Lanka’s agricultural
exports in Sri Lanka’s total exports. While the
expansion of the world’s agricultural exports
might have been as much due to overall growth
of demand for agricultural commodities due to
growth of population and per capita incomes as
duetoAoA, thepost-AoAreversalofSriLanka’s
declining agricultural exports as well as the
post-AoA increased share of Sri Lanka’s agri-
cultural exports in Sri Lanka’s total exports are
most likely to have been mainly the result of the
favourable consequence of AoA on Sri Lanka’s
agricultural exports. During post-WTO period,
instability in Sri Lanka’s farm trade has also
declined.
As pointed out by Josling [2009, Pp. 245-282]
that agricultural trade accounted for a small and
declining share of global merchandise trade. But
its share in total trade disputes has been large.
Since the establishment of the WTO a large
number of disputes have dealt with agricultural
and food trade issues. Agricultural exports now
make up to 8 per cent of global exports. Of 367
requests for consultations made to the Dispute
Settlement Board (DSB) of the WTO, 100 have
primarilybeenaboutagricultural trade,ashare of
27 per cent.
An analysis of data (available on WTO’s
official website) on total disputesettlement cases
with WTO’s DSB brings out that Sri Lanka, on
February 23, 1996, has put only one request
consultation with Brazil concerning Brazil’s
imposition of countervailing duties on Sri Lan-
ka’s export of desiccated coconut, coconut and
milkpowder.Itmaybenotedherethatdesiccated
coconut, coconut and milk powder don’t consti-
tuteamajorshareinSriLanka’stotalfarmexports
as shown in Table 8 (p. 70). From our forgoing
analysis it may be concluded that, due to better
quality, Sri Lanka’s farm exports have not suf-
fered from trading partners’ disguised protec-
tionist policies like other countries. This may be
one of the plausible casual factors for increase in
Sri Lanka’sshare inglobal total farm trade under
WTOregime. Further, during the later periodthe

84 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
pattern of the world farm trade (relative shares of
differentcountries) has changed which may have
also benefited Sri Lanka’s agricultural trade.
A further scrutiny of data presented in Table
8 reveals that Sri Lanka’s farm exports are
dominated by tea. Its major tea import partners
are developing countries which have liberalized
their trade policies under WTO regime. It has
benefitedSriLanka’sfarm exportsingeneral and
tea exports in particular. Furthermore, world
pricesof teahave exhibited a rising trend global
tea’s export unit value has increased from $1.95
per kg in 1994-95 to $2.08 per kg in 2005-06. It
may partially be due to the increased demand for
tea arising from increasing population and per
capita incomes. However, it may be pointed out
herethat Sri Lanka’s shareinthe world’stotal tea
exports has increased from 10.04 per cent in
1994-95 to 22.45 per cent in 2005-06, which is
mostlikelytohavebeenduetotradeliberalisation
under WTO regime as mentioned above. The
openness (measured as the ratio of quantity
exported to the quantity produced) of world tea
market has increased from 40.7 per cent to 46.95
per cent during the same period.
The terms of trade for agriculture and nor-
malised trade balance in agriculture, which had
worsened during pre-AoA phase, have improved
vigorously under new trading regime. The share
of Sri Lanka’s agricultural trade in the world’s
total agricultural trade has moved up sharply in
thenewinternational environment. Similarly,the
importance of agricultural trade in the country’s
overall foreign trade has improved. It is worth
noting that agricultural trade has grown faster
than GDP agriculture. It indicates the increasing
integrationof SriLankan agriculture withthe rest
of the world.
UnderISFTA,thebilateralfarmtradebetween
Sri Lanka and India grew at a faster pace than
farm trade between Sri Lanka and the rest of the
world. However, this growth is mainly driven by
Sri Lanka’s farm imports rather than exports. As
a result, Sri Lanka has experienced a worsening
unfavourabletrade balanceagainst India.Thus,it
is the AoA of the WTO which has boosted Sri
Lanka’s net agricultural exports and perhaps not
ISFTA as such. ISFTA probably stimulated the
growth of India’s farm exports to Sri Lanka.
As far as comparative advantage is concerned
it is established that Sri Lanka’s comparative
advantage is much better than other leading farm
producers especially in the exports of tea, coco-
nuts, copra, pepper, natural rubber and bran &
milling products. Sri Lanka is a net food
importing country. Under the WTO regime, its
dependence on imported food grains has
increased.
Sri Lanka is not self-sufficient in food grains.
This situation can be improved by providing
incentives to farmers for food grains production
(presumably through higher domestic prices of
food grains). Increase in world prices of food
grains resulting from withdrawal of domestic
support by developed countries, in due course,
can enhance the competitiveness of Sri Lanka’s
food crops on one hand and can discourage the
cheap food imports on the other. In this way,
establishment of a fair and market oriented agri-
culturaltradingsystemintheglobaleconomycan
strengthen Sri Lanka’s food security base by
increasingfoodproduction capacity andfarmers’
incomes. This suggests that in the WTO farm
trade negotiations, Sri Lanka should follow a
strategywhich persuades developedcountries for
an effective and substantial cut in their agricul-
tural subsidies and protective measures in order
to be able to take other necessary measures to
strengthen the food security base of the country.
NOTES
1.SSM is an instrumentto enabledeveloping countriesto
increasetheirtariffsabovetheboundtariffratescommitments
made in the Uruguay round in the event of a fall in price of
imported products or an increase in the volume of imports
beyondcertain levels.However,by using SSM, theadditional

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 85
tariffsimposedby developingcountriesshallnot go above the
commitments which they have made in the 1986-94 Uruguay
Round (the pre-Doha Round bound rates).
2. SPs, according to the July framework, consist of a
number of products or tariff lines that can be flexibly desig-
nated by developing countries guided by food security,
livelihoodsecurity andruraldevelopmentindicators. TheSPs
are those products: (a) which will be excluded from tariff
reduction formula, (b) which will not be subjected to expan-
sion of minimum market access (Tariff Rate Quota) or new
TRQ, and (c) which will have automatic access to SSM.
3,4,5. The author is grateful to an anonymous referee of
the Journal for bringing these papers to his attention.
6. It will be worthwhile in further research to assess the
impact of agricultural trade liberalisation on agricultural
productionandGDPin agriculture inSri Lanka.Our attention
was drawn to this by the editor of the Journal.
7. It may be noted that the annual average growth rates of
Sri Lankan GDP agriculture and devaluation of Sri Lankan
Rs.intermsof US$ havedroppedfrom7.1,7.9percentduring
pre-AoA phase to 2.2, 7.5 per cent during post-AoA phase,
respectively.
8.See Aquila,Conforti, Ford and Khaira [2007]for detail
discussion on advantage of normalised trade balance.
9. See Balassa [1965] for detail discussion on merits of
revealed comparative advantage index.
10. Inthestudy,figureindollar($)referstoU.S.currency.
11. FAO Trade Yearbook indicates that Sri Lanka is the
world’s largest exporterof tea andcopra witha share of 25.89
and 24.14 per cent in 2002-03, respectively. And it occupies
2nd position in export of coconut desiccated with a share of
12.84 per cent during the same period.
12. Annual report of the Central Bank of Sri Lanka
indicatesthatproduction ofrubberand potatofallfrom 113kg
Mn and 100.8 MT’000 in 1996-97 to 91kg Mn and 88.7
MT’000 in 2002-03, respectively.
13. It may be noted that wheat is also Sri Lanka’s chief
import item andstaple food.It is widely known thatall wheat
consumed in Sri Lanka is imported. A major side-effect,
however, of the availability of relatively cheap wheat flour
maybe to discouragerice cultivation.Nevertheless,SriLanka
adoptsan import substitutionpolicy forwheatbyencouraging
productionof rice (localmarket prices of ricein Sri Lanka are
largely determined by domestic supply and demand condi-
tions). In 2005-06, the share of domestic sources in total
supply of sugarwas 16.64 per cent while incase of riceit was
97.47 per cent [Food Balance Sheet, Dept. of Census &
Statistics, Sri Lanka, 2007]. Further, import duty on wheat
was raised from 10 per cent in 2008-09 to 15 per cent in
2009-10 and a cess of 5 per cent imposed on flour imports.
As a result of the above pricing and tariff policies, domestic
prices of wheat flour and related products have been higher
thanthe world marketprices thus penalisingconsumers and
undermining the Government of Sri Lanka’s designation of
wheat as an essential food item [Karunagoda et al., 2011].
14.Itmaybenotedthatexportsoftea,cashewnuts,natural
rubber, coconut products and raw hides are subject to export
tariff and levies [Government of Sri Lanka, 2007].
15. It is notable that domestic production of rubber
declined from 112.5 kg mn in 1996-97 to 86.2 kg mn in
2001-02 [Central Bank of Sri Lanka, 2008].
16 It may be noted that lack of comparative advantage in
rice export may partially be because rice is Sri Lanka’s and
India’smostimportantstaplefood.Indiaisthe world’ssecond
largest producer and consumer of rice after China [Ramphul,
2010a]. During the period under study Pakistan’s rice export
quantity has grown faster than that of export unit value.
Besides, export unit value of Indian rice was higher than that
of Pakistan [Ramphul, 2010b].
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APPENDIX 1
Table A. 1. Time Profile of Sri Lankan GDP Agriculture, Exchange Rate, Merchandise Exports, Imports, Trade
Deficit, and World Agricultural Exports
Year Sri Lanka’s World agricul- Exchange rate Sri Lanka’s Sri Lanka’s Sri Lanka’s
GDP agricul- tural exports ($ (Sri Lankan merchandise merchandise merchandise
ture ($ million) billion) Rs./US$) exports ($ mil- imports ($ mil- trade deficit ($
lion) lion) million)
(1) (2) (3) (4) (5) (6) (7)
1985-86 1485.00 209.04 27.18 12963 18155 5192
1986-87 1528.80 229.22 28.02 12273 18461 6188
1987-88 1630.80 252.76 29.44 13553 20315 6762
1988-89 1685.00 287.49 31.81 14599 21799 7200
1989-90 1648.40 302.48 36.05 15543 21099 5556
1990-91 1885.00 326.70 40.06 19156 26932 7776
1991-92 2212.65 329.40 41.37 19734 30394 10660
1992-93 2279.94 357.94 43.83 24807 34444 9637
1993-94 2344.25 339.03 48.25 28830 38090 9260
1994-95 2810.88 389.06 49.42 31558 44305 12747
1995-96 2970.45 443.65 51.25 38856 48865 10009
1996-97 3060.64 465.89 55.27 40619 50005 9386
1997-98 3320.46 457.95 58.99 45431 57336 11905
1998-99 3298.47 438.53 64.59 47306 58817 11511
1999-2k 3351.18 418.09 70.39 45940 59610 13670
2000-01 3261.00 421.83 75.78 54160 72090 17930
2001-02 3023.09 424.33 89.36 48170 59240 11070
2002-03 3313.40 454.00 95.66 46990 61050 14060
2003-04 3702.80 537.58 96.52 51250 66720 15470
2004-05 3609.90 620.56 101.19 57570 79730 22160
2005-06 3991.43 669.06 100.50 62750 89850 27100
Source: FAO Trade Yearbook, (various issues, 1990-2003).

88 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Table A. 2. Trends on World Exports of Farm Products
(US$ million)
Year Bran and Coconuts Pineapples Pepper Tea Tobacco Copra Rubber Rice
milling dry
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1989-90 5046.73 141.39 165.02 508.27 2442.59 13990.0 88772 4184.93 5046.73
1990-91 4141.79 131.62 178.01 381.65 2776.60 18300.0 62790 3429.59 4141.79
1991-92 4476.14 153.41 183.83 303.10 2471.57 19526.7 57331 3435.27 4476.14
1992-93 5269.27 210.91 177.47 269.86 2282.51 21600.7 84239 3661.21 5269.27
1993-94 5109.85 171.01 221.87 293.03 2313.39 19538.6 58292 3473.92 5109.85
1994-95 6174.88 172.09 260.99 454.83 2066.26 21503.9 76206 4687.51 6174.88
1995-96 7336.31 188.39 298.24 579.91 2249.45 22429.9 88403 7079.84 7336.31
1996-97 7605.50 254.34 346.07 569.32 2496.79 25945.6 90525 6976.31 7605.50
1997-98 6814.93 260.23 369.13 885.80 2943.81 26211.9 143591 4843.17 6814.93
1998-99 9562.24 199.02 377.11 1012.23 3351.23 24571.0 107167 3966.08 9562.24
1999-2k 7868.71 259.09 438.02 1141.46 2758.54 22127.4 98741 3317.69 7868.71
2000-01 6459.82 230.44 404.79 1014.73 2895.28 22357.2 102208 3875.79 6459.82
2001-02 7015.26 173.45 498.37 522.36 2832.85 20754.6 28995 3255.21 7015.26
2002-03 6785.58 226.99 620.67 538.80 2514.03 20373.3 28923 4281.29 6785.58
2003-04 7075.93 206.31 806.05 541.03 2578.16 21731.4 31216 6189.64 7075.93
Source: FAO Trade Yearbook (various issues, 1990-2003).
Table A. 3. Trends on Indices for Sri Lanka’s Value of Farm Exports and Imports
Year Export value index Import value index
(1) (2) (3)
1985-86 79 46
1986-87 62 43
1987-88 65 38
1988-89 68 54
1989-90 68 68
1990-91 79 64
1991-92 69 68
1992-93 65 76
1993-94 45 63
1994-95 38 54
1995-96 70 88
1996-97 93 102
1997-98 114 114
1998-99 112 111
1999-2k 96 103
2000-01 104 101
2001-02 98 95
2002-03 97 106
2003-04 104 110
2004-05 116 123
2005-06 127 132
Source: FAO Official Website: www.faostat.fao.org/.

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 89
Table A. 4. Trends on Sri Lanka’s Exports of Farm Products
(US$, 000)
Year Bran and Coconuts Pineapple Pepper Tea Tobacco Copra Rubber Rice
milling dry
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1989-90 10600 28772 342 4247 379697 4078 4140 88182 187
1990-91 13200 35679 342 2932 493902 6156 2995 76979 206
1991-92 9805 37100 515 3365 426085 12937 4473 63388 0
1992-93 12000 54544 511 2784 339175 42671 4322 68062 0
1993-94 9400 16081 297 5279 260996 26360 2281 41750 424
1994-95 10000 21608 286 3413 207450 20264 1995 36366 6664
1995-96 12300 21608 415 5742 369009 38140 4663 76920 11699
1996-97 0 45141 486 6224 544957 40407 5277 95130 772
1997-98 1 63457 886 13726 716630 40842 4663 78584 967
1998-99 5 72597 925 25771 747806 42615 6866 42121 1410
1999-2k 1 44591 1198 18280 605347 38377 8834 32255 859
2000-01 3 71333 1403 20647 683153 39132 7632 28393 1170
2001-02 6506 31710 1848 5954 679951 38040 6845 23733 1012
2002-03 13238 29159 1636 15345 650961 39701 9873 26402 1175
2003-04 14725 18321 2042 10195 316026 45547 10242 32567 1139
Source: FAO Trade Yearbook (various issues, 1990-2003).
Table A. 5. Trends on Whole Sale and CIF Prices of Farm Commodities in Sri Lanka
(Rs./tonnes)
Year Whole sale Whole sale Whole sale CIF price of CIF price of CIF price of
price of rice price of wheat price of sugar rice wheat sugar
(1) (2) (3) (4) (5) (6) (7)
2001-02 21118 10342 18914 19388 10443 19187
2002-03 25648 12847 24416 18647 12865 24511
2003-04 18757 12116 22833 18215 12512 22809
2004-05 24733 14109 21896 23677 14428 21982
2005-06 24662 18629 25482 27908 18668 25227
2006-07 31499 16513 31637 30035 16438 31825
Source: Annual Report, Central Bank of Sri Lanka (various issues).

90 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Table A. 6. Trends on Whole Sale Prices of Farm Commodities in Sri Lanka
(Rs. /Kg.)
Year Copra Coconut oil Coconut dry Rubber Tea
(1) (2) (3) (4) (5) (6)
1995-96 28.59 41.23 42.57 83.69 102.31
1996-97 41.63 50.98 65.78 79.78 139.56
1997-98 46.93 52.06 67.00 75.96 158.39
1998-99 50.28 74.57 65.77 67.72 184.37
1999-00 56.28 68.19 80.94 53.82 162.39
2000-01 40.29 53.44 59.84 66.95 184.37
2001-02 40.69 56.03 56.83 66.35 208.89
2002-03 75.55 85.86 97.55 69.53 216.26
2003-04 63.87 82.82 77.56 105.25 221.01
2004-05 69.76 89.55 86.85 128.51 248.92
2005-06 83.40 93.80 101.11 147.73 263.31
2006-07 72.44 98.63 95.66 189.86 279.97
2007-08 92.24 140.76 133.57 234.48 364.28
Source: Annual Report, Central Bank of Sri Lanka (various issues).
Table A. 7. Trends on Sri Lanka’s FOB Prices of Farm Products
(Rs./Kg.)
Year Copra Coconut oil Coconut dry Rubber Tea
(1) (2) (3) (4) (5) (6)
1995-96 26.15 34.49 38.87 69.95 72.21
1996-97 44.69 56.32 62.83 66.22 103.88
1997-98 49.50 55.69 61.30 54.54 119.40
1998-99 47.65 67.92 61.14 46.21 134.35
1999-00 54.89 66.23 75.00 43.47 115.31
2000-01 34.40 48.20 48.90 51.99 135.53
2001-02 41.31 61.08 52.41 52.88 143.96
2002-03 69.51 83.17 90.20 66.71 149.30
2003-04 58.19 68.55 71.36 91.21 149.05
2004-05 63.47 86.87 85.63 127.20 180.74
2005-06 77.18 97.06 95.25 147.41 185.84
2006-07 65.50 97.50 87.33 202.55 198.87
2007-08 96.74 151.89 125.70 234.22 279.10
Source: Annual Report, Central Bank of Sri Lanka (various issues).
Table A. 8. Trends on India’s Exports of Farm Products
(US$, 000)
Year Rice Coconuts dry Bran and mill- Pepper Tea Tobacco Rubber
ing
(1) (2) (3) (4) (5) (6) (7) (8)
1989-90 255900 0 0 98600 542760 91340 4000
1990-91 246400 0 0 87000 601890 117130 400
1991-92 309765 0 0 29672 490292 128786 1933
1992-93 370729 0 0 28543 360993 135117 3973
1993-94 411747 0 51 59154 331845 147587 3000
1994-95 385851 0 192 75074 308399 81520 2223
1995-96 1416104 138 3121 59909 359054 138515 4200
1996-97 888260 344 2094 114795 282579 211897 4806
1997-98 1000170 344 2094 135000 485000 105963 4806
1998-99 1507380 214 397 146020 518258 182828 844
1999-2k 726056 228 596 164402 406106 234341 1107
2000-01 655457 70 2028 70617 431596 193953 3222
2001-02 706828 125 8424 41589 367207 179862 3575
2002-03 1212481 309 861 35900 326629 211454 29229
2003-04 895283 147 3308 27422 333408 235521 55208
Source: FAO Trade Yearbook (various issues, 1990-2003).

VOL. 22 NOS.1-4 WTO AND SRI LANKA’S FARM TRADE 91
Table A. 9. Trends on Bangladesh’s Export of Farm Products
(US$, 000)
Year Bran and Coconuts Pepper Tea Tobacco Copra Rice
milling
(1) (2) (3) (4) (5) (6) (7) (8)
1989-90 0 0 0 37618 2115 0 0
1990-91 0 0 0 35000 1200 0 0
1991-92 0 0 43238 2317 0 0
1992-93 0 0 0 48620 3600 0 0
1993-94 0 0 0 40433 1681 0 0
1994-95 0 0 0 35000 860 0 0
1995-96 0 0 0 33000 920 180 0
1996-97 0 1 0 27507 1601 160 49
1997-98 0 0 0 30000 1601 180 12
1998-99 0 0 0 45155 5672 0 115
1999-2k 0 0 0 39585 3274 49 69
2000-01 0 0 0 16400 3274 49 130
2001-02 0 0 0 6500 2504 200 139
2002-03 0 0 2 4652 3125 200 400
2003-04 26 0 29 8223 8615 200 242
Source: FAO Trade Yearbook (various issues, 1990-2003).
Table A. 10. Trends on Pakistan’s Export of Farm Products
(US$, 000)
Year Coconuts dry Pepper Tea Rubber Rice
(1) (2) (3) (4) (5) (6)
1989-90 0 0 1092 24 310262
1990-91 0000241762
1991-92 0000345235
1992-93 0000412281
1993-94 0 0 171 0 320341
1994-95 0 0 2862 0 241523
1995-96 0 64 13926 0 462844
1996-97 0 0 26 3 514231
1997-98 0000479777
1998-99 0 84 3123 0 567684
1999-2k 14 84 3123 0 591118
2000-01 14 0 850 0 533314
2001-02 0 0 86 0 520828
2002-03 0 88 22 102 460447
2003-04 0 0 193 0 561737
Source: FAO Trade Yearbook (various issues, 1990-2003).

92 JOURNAL OF INDIAN SCHOOL OF POLITICAL ECONOMY JAN-DEC 2010
Table A. 11. Trends on World, India, Pakistan and Bangladesh Merchandise Exports and World Farm Imports
Year World merchan- India’s merchan- Pakistan’s mer- Bangladesh’s mer- World agri.
dise exports ($ bil- dise exports chandise exports chandise exports($ imports ($ billion)
lion) ($ million) ($ million) million)
(1) (2) (3) (4) (5) (6)
1985-86 1942.68 8963 2542 997 203.26
1986-87 2129.68 9291 3123 904 211.80
1987-88 2496.42 12069 3770 1112 256.20
1988-89 2859.42 13960 4523 1317 293.41
1989-90 3087.19 16609 4735 1323 317.34
1990-91 3497.76 18215 5061 1491 353.17
1991-92 3509.21 18057 6223 1699 354.63
1992-93 3752.22 20402 6869 1929 385.88
1993-94 3747.55 22320 6939 2254 356.11
1994-95 4275.60 26456 6893 2469 404.30
1995-96 5110.89 32969 7937 3407 462.23
1996-97 5342.30 32907 8311 3539 479.79
1997-98 5338.88 35831 8035 4018 468.58
1998-99 5468.37 33871 8395 5056 457.33
1999-2k 5669.29 37057 7956 5158 442.39
2000-01 6380.84 45298 9028 5476 435.20
2001-02 6130.01 44293 9238 6275 438.72
2002-03 6436.83 53579 9913 5218 464.06
2003-04 7465.84 63015 11930 5812 548.55
2004-05 8877.83 79866 13380 6600 643.50
2005-06 10245.90 103516 15942 9190 674.44
Source: FAO Official Website: www.faostat.fao.org/.
Table A. 12.Trends on India, Pakistan and Bangladesh Total Farm Exports
Year India’s farm exports Pakistan’s farm exports Bangladesh’s farm exports($
($ million) ($ million) million)
(1) (2) (3) (4)
1985-86 2264 701 229
1986-87 2376 1049 185
1987-88 2383 926 156
1988-89 2175 1240 160
1989-90 2657 1489 164
1990-91 3075 987 160
1991-92 2796 1033 146
1992-93 2948 1237 140
1993-94 3357 870 123
1994-95 3240 685 103
1995-96 4530 1018 129
1996-97 5850 1396 106
1997-98 5316 837 148
1998-99 5225 1154 158
1999-2k 4642 1189 127
2000-01 4950 1069 99
2001-02 5234 1020 94
2002-03 5522 1012 100
2003-04 6504 1284 103
2004-05 7058 1304 114
2005-06 9378 1785 204
Source: FAO Official Website: www.faostat.fao.org/.