Advantages And Disadvantages Of Regional Trade Agreements

Regional Trade Agreements can be define as reciprocal trade agreements between states, with the aim of increasing economic integration as well as to reduce barriers to trade. In order to sign the agreement it needs the approval of the legislators of the partner countries. The ministry of commerce and consumer affairs is responsible to conduct and handle Sri Lankas foreign trade relations. Under the world trade organization, RTA covers more than half of the international trade and it also operates alongside global multilateral agreements. In a latest survey on regionalism done by Caroline Freund and Emanuel Ornelas has mentioned that the RTA’s generally seem to amplify trade creation and limit trade diversion.

Sri Lankas first trade agreement

Some of the advantages can be as follows;

 RTA’s are willing to reduce the tariffs among the partner countries. According to Harvard University it also has mentioned that the World Trade Organization needs regional trade agreements in order to reduce tariffs between countries and it does not allow these countries to increase tariffs on nun participated countries. Therefore Sri Lanka could able to purchase goods at lower prices.

 RTA’s also build competition within the region countries and includes a comprehensive coverage of investment. According to Harvard University, such trade agreements also encourage non-participated countries to reduce their trade barriers. Therefore as an example Sri Lankan manufacturer can purchase cheap raw materials from a country of the regional trading agreement and sell the products everywhere at a lower cost.

 RTA’s also can be used to introduce new instruments that can promote greater transparency and predictability under international trade policy. And through these trading agreements allies can receive rewards. Plus as it settles trade disputes it helps to maintain a trustworthy and peaceful trading environment within Sri Lanka and other neighbor

Therefore Sri Lankan traders are not aware of specific information’s such as tariff rates; quotas etc which can cause several legal issues.

 Absence of responsible personnel in order to address the arising issues while trading under an agreement is also a disadvantage faced by the county.

 Dumping products at lower prices can discourage local products.

 Cultural dilution ( Ex- western culture affecting non-western culture).

 Currency manipulation.

 Agriculture subsidies.

By considering the above factors we can conclude that, as a developing country being in Regional Trade Agreements Sri Lankan economy can affect in a positive manner. Those agreements are capable of maintaining positive and strong relationships among the states which are engaged in such agreements. Finally we can say that even though it has some negative effects, as a developing country RTA’s helps to strengthen the economy and the inter dependency among the countries reduces the rate of conflicts and it will be helpful in maintaining a sustainable development of Sri