By Sarath Wijesinghe President’s Counsel (LL.M (UCL)), former Ambassador to UAE and Israel, President of the Lanka Ambassador’s Forum – United Kingdom, Solicitor in England and Wales, and Suchithra Withanage (LL.M (UK) (LL.M (UK) MBA (UK | Reading) LL.B (Hons) (UK)) Diploma in Law (UK) MCIArb (UK) MBCS (UK) MCMI (UK) ACIPR (UK) ASIArb (Singapore)

Historically, Sri Lanka has been a significant player in international trade, with its strategic location making it a key hub in the ancient maritime Silk Road. The country’s history is marked by the export of spices, gems, and other valuable commodities, which have been sought after by traders from around the world for centuries.
In the contemporary era, Sri Lanka has continued to play an important role in global trade, albeit with a diversified trade portfolio. The country has focused on sectors such as apparel, tea, rubber, and information technology. As of recent data, Sri Lanka’s top exports include black tea (fermented and partly fermented), solid tires, and gloves impregnated with plastics or rubber, amongst others. The country’s trade partners are widespread, with the United States, United Kingdom, India, Germany, and Italy being the top destinations for Sri Lankan exports. Sri Lanka’s import profile is also diverse, with petroleum oils, transmission apparatus for radiotelephony, semi-finished iron or non-alloy steel products, and knitted or crocheted fabrics being among the top imports. The country primarily imports from China, India, the United Arab Emirates, Malaysia, and Singapore.
In an effort to revive its economy and facilitate growth, Sri Lanka has been actively seeking to enhance its trade relationships. A recent example is the signing of a Free Trade Agreement (FTA) with Thailand in February 2024. This agreement aims to enhance market opportunities and covers various aspects such as trade in goods, investment, customs procedures, and intellectual property rights. The bilateral trade between Sri Lanka and Thailand was worth about $460 million in 2021,
with Sri Lanka exporting mainly tea and precious stones to Thailand and importing electronic equipment, food, rubber, plastics, and pharmaceuticals.
Sri Lankan trade missions are designed to promote the country’s exports, including key sectors such as apparel and textiles, spices, essential oils, oleoresins, food, beverages, diamonds, gems, jewellery, boat and shipbuilding, ICT, wellness tourism, logistics, electrical and electronics. These missions seek to identify and penetrate new markets for Sri Lankan products and services, thereby diversifying the country’s export destinations and reducing dependency on traditional markets. Trade missions are crucial in creating stronger economic ties with other countries, facilitating mutual trade, and encouraging foreign investment. They provide a platform for Sri Lankan businesses to display their products and services to potential buyers and investors in target markets. Moreover, they enable direct interaction with potential buyers, investors, and business partners, facilitating networking and the establishment of new business relationships. Participating in them helps Sri Lankan businesses understand market trends, consumer preferences, and competitive dynamics in foreign markets.
An example of a specific trade mission is the RAK – Sri Lanka Business Forum & Trade Fair 2024, organized to strengthen economic relations between Sri Lanka and the United Arab Emirates (UAE). The objectives of this event include exploring new opportunities for Sri Lankan businesses in the UAE, Gulf, and Middle East, promoting Sri Lankan exports in these regions, and enhancing bilateral trade, investments, employment opportunities, tourism, and financial cooperation between Sri Lanka and the UAE. Furthermore, the role of Sri Lankan missions overseas extends beyond trade promotion to include investment promotion, tourism promotion, and enhancing the image of Sri Lanka. These missions work towards strengthening relations with host nations, creating employment opportunities, and facilitating aid availability.
Sri Lanka has strategically targeted key regions such as Asia, Europe, the Middle East, and North America for its trade missions. These missions aim to improve export opportunities, explore new markets, and strengthen bilateral trade relations.
In Asia, Sri Lanka has a longstanding relationship with India. The India-Sri Lanka Free Trade Agreement (ISFTA), in operation since March 2000, has facilitated trade between the two countries. Additionally, Sri Lanka and India are in discussions to further economic ties, including connecting to India’s oil and power grids, which could provide Sri Lanka with cheaper fuel and reliable electricity. There are also talks about integrating Sri Lanka into India’s emerging supply chain framework and promoting bilateral foreign direct investment flows. China is another significant partner for Sri Lanka in Asia. The two countries are negotiating a free trade agreement, which aims to provide Sri Lankan goods with greater access to the Chinese market. The discussions, which began in 2014, are focused on an “asymmetric” trade deal that considers the size difference between the two economies. This agreement could open up a market of 22 million people to Chinese exports and further strengthen China’s influence in Sri Lanka.
In Europe, the European Union (EU) is Sri Lanka’s second-largest trading partner and a major export destination, absorbing 22.4% of Sri Lankan exports in 2020. Textiles and clothing dominate Sri Lanka’s exports to the EU, accounting for over half of the total exports to the region. Since
2017, Sri Lanka has benefited from enhanced market access to the EU under the Generalised System of Preferences Plus (GSP+) scheme, which allows for the full removal of duties on a significant portion of tariff lines. In North America, the United States and Sri Lanka have a Trade and Investment Framework Agreement (TIFA) in place. The 14th U.S.-Sri Lanka TIFA Council Meeting, held in September 2023, discussed a wide range of bilateral trade and investment-related issues, including investment climate policies, labor reforms, intellectual property protection, and market access for various products. The two countries also explored collaboration and technical assistance in sectors such as the digital economy, gem and jewelry industry, and floriculture.
The expansion of export-oriented industries, driven by trade missions, has led to the creation of numerous employment opportunities in sectors such as manufacturing, services, and agriculture. This has contributed to poverty reduction and improved living standards in various regions of the country. Trade missions have thus helped position Sri Lanka as a competitive player in the global market by showcasing the country’s strengths and capabilities. For instance, the “Ceylon Tea” brand has gained international recognition, and the country is now known for its high-quality apparel, IT services, and gemstones.
They have also been effective in attracting foreign direct investment (FDI) into Sri Lanka. By presenting investment opportunities and facilitating interactions between Sri Lankan businesses and foreign investors, these missions have contributed to the inflow of capital, technology, and expertise into the country.
It must be stated that Sri Lanka has experienced periods of political instability, which can deter foreign investors and trade partners. The recent economic crisis and political turmoil in 2022 have underscored the need for stable governance to maintain investor confidence and sustain trade relationships. Inadequate infrastructure, particularly in transportation and logistics, can hinder the efficiency of trade operations. Investing in infrastructure development, such as improving port facilities, road networks, and digital connectivity, is crucial to support trade and attract investment. As a small, open economy, Sri Lanka is vulnerable to global market fluctuations, including changes in commodity prices, trade policies, and economic downturns in key markets. Diversifying export markets and products can help mitigate these risks.
Tariff and non-tariff barriers in target markets can limit market access for Sri Lankan products. Negotiating trade agreements and addressing regulatory hurdles are essential to develop market access. Limited access to finance can restrict the ability of Sri Lankan businesses as well, especially small and medium-sized enterprises (SMEs), to expand their operations and engage in international trade. Improving access to credit and financial services is vital to support business growth.
Improving the skills and capacity of local businesses to meet international standards and compete in global markets is crucial. Initiatives for workforce development, technical assistance, and knowledge transfer can support this goal. As global trade increasingly emphasizes sustainability, Sri Lanka must ensure that its trade practices align with environmental and social standards to maintain market access and appeal to conscious consumers. To address these challenges and seize the opportunities presented by trade missions, Sri Lanka needs a comprehensive approach that
includes strategic planning, policy reforms, investment in infrastructure, and capacity building. Collaborating with international partners, leveraging technology, and giving rise to an enabling environment for business can further improve Sri Lanka’s trade prospects and contribute to its economic development.
Looking ahead, Sri Lanka is poised to capitalize on its strategic location at the crossroads of major shipping routes and leverage its trade missions to tap into emerging markets. The focus is on several key areas:
Technology: The country aims to position itself as a hub for information and communication technology (ICT) in the region. The country is already known for its IT and software services, and it plans to further develop its technology sector by nurturing innovation, attracting foreign investment, and enhancing its digital infrastructure.
Renewable Energy: With an abundance of natural resources, Sri Lanka is exploring opportunities in renewable energy, particularly in wind and solar power. The government has set ambitious targets to increase the share of renewable energy in its power mix, which presents opportunities for investment and collaboration in this sector.
Sustainable Tourism: Sri Lanka’s profound cultural heritage and natural beauty make it a popular tourist destination. The country is focusing on sustainable tourism development, promoting eco-friendly practices, and developing niche tourism products such as wellness and adventure tourism to attract more diverse and high-value tourists.
Value-Added Exports: The country is also working on enhancing its export portfolio by focusing on value-added products in sectors such as apparel, gem and jewelry, and agricultural products as discussed above. The long-term aim is to move up the value chain and increase the competitiveness of Sri Lankan exports in the global market.
Facilitating Innovation: To remain competitive in the global arena, Sri Lanka is emphasizing the importance of innovation across all sectors. This includes supporting research and development, encouraging startups, and creating an ecosystem that nurtures creativity and technological advancement.
Trade Agreements: Sri Lanka is actively pursuing trade agreements with key partners to improve market access and strengthen its trade relations. Negotiations with countries such as China and India are ongoing, and new agreements are being explored to expand Sri Lanka’s trade network.
It is important to recognize that trade missions can be a double-edged sword. They are necessary but can be dangerous and controversial, especially for a strategically placed country like Sri Lanka, which is significant for major powers. Concerns arise about trade agreements with major powers, as we may not be strong enough to safeguard ourselves like countries such as Hong Kong and Singapore. Self-criticism indicates that we are not, though educated. It’s the responsibility of academics to assist policymakers and the government in drafting holistic agreements to position Sri Lanka as a hub for trade and arbitration. There is a world to look at, and this area must be strongly dealt with, along with a word to the Sri Lanka Law College and judiciary to be more concerned about international law, arbitration, and international trade. The good news is that our
youth are intellectually advanced, sophisticated, and capable of assisting in these processes, and it is time for governors to go the extra mile on this to make Sri Lanka a hub in South Asia for trade relations by taking small developed nations such as Singapore, Hong Kong, and Malaysia as examples. Overall, Sri Lanka’s future prospects in trade and economic development are promising, with a focus on leveraging its strategic location, diversifying its economy, and embracing innovation amongst other facets of development. By capitalizing on these opportunities, it aims to achieve sustainable growth and enhance its position in the global market in the forthcoming decade.