Abstract:
Sri Lanka has experienced a series of changes in its trade policy regime. The objective
of this paper is to examine the changes of the Sri Lanka’s trade policy regime since the
independence in 1948. At independence, Sri Lanka had relatively low import duties
which were imposed mainly for revenue reasons and applied to a wide range of goods.
However, from 1960 onwards, along with the inward-oriented development strategy
based on the import substitution policy, both tariff and non-tariff barriers were extensively
used to control imports for balance of payment reasons, as well as to protect domestic
economic activities and industrial enterprises. These trade policies had adverse
implications on overall economic growth of the country. The first break through towards
trade liberalization in Sri Lanka began in 1977, when the country embarked on a series
of economic reforms with the aim of switching from inward-oriented policies to outwardoriented
policies. Trade policy reform was the key element of this policy package. Since
then Sri Lanka’s external trade policy continued to focus on achieving a liberalized trade
regime by rationalizing and simplifying the tariff structure, while progressively reducing
quantitative restrictions. At the same time, measures were taken to liberalize the
rigidities related to the exchange rate, finance and banking to provide the
macroeconomic background for the success of trade liberalization.
