Table of ContentsIntroductionDiscussionTradeForeign Direct Investment (FDI)Government ExpenditureGovernment RevenueConclusionIntroductionFree Trade Agreements Trade exchange agreements (FTAs) are treaties between two or more economies to reduce or remove trade barriers and achieve economic integration. As a country with an open economy, Sri Lanka has also concluded FTAs ​​aligned with economic developments, particularly in international trade. More recently, Sri Lanka Singapore signed a bilateral FTA, “Sri Lanka-Singapore Free Trade Agreement (SLSFTA)”, which enables seamless trade between two nations. Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”?Get an original essayIn the case of the SLSFTA, it demonstrates that Sri Lanka is now open for business, including investment, while complementing the Sri Lanka as the hub of South Asia and Singapore as the hub of Southeast Asia. Although Sri Lanka has FTAs ​​with some South Asian and European countries, the ALESLSFTA is Sri Lanka's first FTA with a South East Asian country. Regionally, the agreement serves Sri Lanka's broader engagement with one of the world's fastest growing regions, the Association of Southeast Asian Nations (ASEAN). If we look at the features of the SLSFTA, it has a comprehensive scope including goods, direct foreign trade. Investment (FDI) telecommunications, services, e-commerce, intellectual property and public procurement etc. ; it facilitates tariff liberalization with a relatively long adjustment period; it determines the product originating in Singapore; these are limited liberalization of services, wider coverage of Singapore's offerings and a clear dispute resolution process; it ensures that public procurement is open to international competition, it provides a platform to further strengthen commercial relations between the parties and, in terms of the amendments article. Generally, FTAs ​​play a vital role in an economy's international trade and they can have a positive or negative impact. negatively or interactively on the economic conditions of the country. In the sense of the SLSFTA, its impact on international trade and the economy at the macro level can be discussed from several aspects. Sri Lanka's seventh largest trading partner, with total merchandise trade amounting to $1.14 billion, accounting for 4% of Sri Lanka's total trade. According to Figure 2.1, the value of exports to Singapore increased gradually from 2013 to 2017 and a significant growth of 66% was recorded in 2017 compared to 2016. If we consider imports from Singapore, we see a moderate decline in the period 2013-2015, while a slight positive trend was noted over the last two years. This increase is not very significant compared to exports to Singapore reported during the corresponding period. Therefore, reducing trade barriers helps industries access new markets, thereby strengthening their presence and customer base. From Sri Lanka's point of view, since the rate of growth of exports is higher than the rate of growth of imports, this will have a positive impact on trade. Additionally, the SLSFTA provides market diversification benefits, eliminating overreliance on European and US markets. Diversification in terms of export markets and basketof exports is therefore vital to position the Sri Lankan economy on a more sustainable basis. Foreign Direct Investment (FDI) According to Central Bank statistics, Singapore was one of the top five source countries. of FDI in 2017. Furthermore, as shown in Figure 2.3, the improvement in FDI flows from Singapore in 2017 compared to FDI flows in 2016 is significant and as a percentage growth, it is by 402%. Considering the balance of payments (BOP), FDI inflows have a positive influence on the external sector and especially to reduce the balance of payments deficit of a country. With the SLSFTA, FDI is mainly expected to flow into sectors such as manufacturing, tourism, technology and healthcare. According to the Board of Investment (BOI) of Sri Lanka, the projects with a total investment value of over $16 billion in the manufacturing sector, mainly for export, are the first projects completed since the implementation implementation of the SLSFTA on May 1, 2018. The largest of these is an export-oriented oil refinery worth $14.8 billion in Hambanthota. The second is a $1 billion investment in a steel manufacturing plant in Trincomalee. The other two projects will both be located in Hambanthota in the form of a $200 million sugar refinery and a $50 million flour bill, aimed at local and export markets. Therefore, with the SLSFTA, FDI flows will improve and strengthen the external sector of Sri Lanka's economy. Expertise and technology transfer Global companies have more experience than local companies in terms of technical know-how accompanied by sophisticated technology. FTAs allow global companies to access these business opportunities. This develops local businesses on best practices. Additionally, local companies have access to the latest technologies from their multinational partners. Government spending Generally, governments subsidize local industries. The SLSFTA will strengthen bilateral trade, improve economic and investment relations, and provide safer and more open goods, services and investments. Thus, local export-oriented industries aim to grow, which will ease the burden of public expenditure. Furthermore, because the SLSFTA allows for more competitive public procurement, bargaining power in terms of low prices is another source of reducing public spending. Ultimately, stronger relations with Singapore can improve Sri Lanka's position in Southeast Asia and its participation in global value chains. The biggest criticism of the SLSFTA is that it incentivizes the outsourcing of jobs. Reducing tariffs on imports allows businesses to expand into other countries. Without tariffs, imports from countries with a low cost of living cost less. This makes it difficult for companies in these same sectors to compete, and so they may downsize. On the other hand, multinational companies may outsource jobs to emerging countries without adequate labor protections. As a result, women and children are often subjected to grueling factory work in substandard conditions. Intellectual property theft is also a problem with FTAs. Many developing countries do not have laws to protect patents, inventions and new processes. The laws they have are not always strictly enforced. As a result, businesses are often robbedtheir ideas. They then have to compete with lower-priced domestic counterfeits. The degradation of natural resources and the destruction of indigenous cultures are also two important factors that could impact economic and political sustainability at the macro level. Emerging countries often do not have environmental protection. Free trade leads to the depletion of timber, minerals and other natural resources. Deforestation and strip mining are reducing their jungles and fields to wasteland. As development moves to isolated areas, indigenous cultures may be destroyed. Local populations are uprooted. Many suffer illness and death when their resources are polluted.Government RevenueMany small countries struggle to replace revenue lost due to tariffs and import fees. Given that 50% of tariff lines (3,719 items) are already duty-free, the immediate listing will have little or no impact. Import data for imported products from Singapore will show that out of a total of $1,293 million in imports in 2017, $750 million was petroleum and related products (actually 60% of imports from Singapore). Singapore) and $228 million was gold. Although gold is on the duty-free list, the imposition of excise duty will protect the revenue. Since customs duties on petroleum products, tobacco, spirits and alcohol, being a source of import revenue for the government, these products have been kept in the negative list (products which will not be subject to the liberalization), thus protecting incomes. It should be noted that since the liberalization of customs duties will take place over a period of 12 to 15 years, revenue losses, if any, should be calculated on an annual basis and not as if customs duties on all items were reduced immediately. According to the Ministry of Finance, the total customs revenue collected on imports from Singapore in 2017 stood at Rs. 4,000,000.35 billion and the loss of revenue following tariff liberalization under the agreement of Singapore over the entire 15-year period amounts to Rs 733 million. Therefore, the average annual revenue loss is 49 million. The best solutions are regulations within agreements that protect against disadvantages. For example, environmental safeguards can prevent the destruction of natural resources and crops, while labor laws prevent poor working conditions. Furthermore, the success of such an agreement would also depend on sustained political will for institutional and economic reforms at the national level to facilitate better growth in the export and investment sector. For example, Sri Lanka's complex para-tariff structures and the existence of other non-tariff barriers could seriously undermine the success of the ALESLSF. Economic liberalization efforts often create pockets of sub-industries that are losers. Therefore, the government should also create adequate safeguards through trade adjustment assistance programs and ensure that the economy as a whole does not lose potential benefits due to interest resistance. individuals. In fact, Sri Lanka could learn from Singapore's previous experiences by complementing a network of strategically located FTAs ​​with domestic economic reforms. Therefore, the ALSSFTA must be considered not only in isolation, but as part of a broader strategy aimed at.