Sri Lanka granted Pakistan, duty-free, a tariff quota of 6,000 m/t of Basmati rice and 1,000 m/t of potatoes per calendar year (January-December). However, the importation of potatoes is only permitted during the low season of Sri Lankan lands. (2/3, which will be introduced in June – July and 1/3 in October – November each year). Sri Lanka has identified a total of 102 six-digit shS tariff lines, on which Pakistan will have 100% duty-free access. The agreement contains articles on objectives, definitions, the elimination of tariffs, paratarifs and non-tariff barriers, rules of origin, safeguards, dispute resolution, amendments, annexes, etc. Following the signing of the agreement, the two countries were able, after several rounds of bilateral negotiations, to finalize the annexes of the agreement in December 2004 and February 2005 and exchange diplomatic notes confirming the completion of the annexes. All fully preserved products, such as tea, fish, spices, etc., can easily benefit from tariffs on each other`s markets, provided they can benefit from tariff concessions. Tariff quotas (TRQs) are specific quantities of products for which the importing country would be agreed to grant either duty-free access or preferential duty if imported by the other contracting party to the agreement. Products that go beyond the agreed TRQ are subject to the normal tariffs applied by the importing country to these products. The Pakistan-Sri Lanka Free Trade Agreement (PSFTA) was signed between the two governments in August 2002 and came into force in July 2005. Sri Lanka gained immediate duty-free access for 206 products, while Pakistan gained duty-free access to 102 products. The psFTA conditions granted an immediate concession to Pakistan and Sri Lanka for important export products. Pakistan`s exports to Sri Lanka increased from $97 million in 2004 to $355 million in 2018, nearly 3.6 times more than over the 14-year period, due to the positive impact of the FTSP on trade.

Similarly, Sri Lanka`s exports to Pakistan increased from $47 million in 2004 to US$105 million in 2018, almost doubling over the same period. The study, which examines trade between Pakistan and Sri Lanka as part of their free trade agreement (FTA), concludes that the FTAS has provided a significant market share to Sri Lanka and Pakistan. The study shows that the emerging trade relationship between Pakistan and Sri Lanka offers many opportunities and opportunities to increase current bilateral trade to more than $2.7 billion. Currently, the volume of trade is only $460 million. The second part of the study covers the terms of the structure of the free trade agreement between Pakistan and Sri Lanka and briefly examines the perspectives and mutual benefits of the FTSP. The third part of the study covers a detailed comparative analysis of the benefits of the FTSP and compares them to trade under bilateral agreements. The study uses the Trade Complementarity Index instrument to determine whether Sri Lankan exports meet Pakistan`s import demand and find a degree of sectoral convergence or imbalance between Sri Lanka and Pakistan. In addition, the study examines that trade expansion has occurred significantly for both countries, but Sri Lanka`s trade deficits have remained high with Pakistan.