WORLD TRADE
ORGANIZATIONWT/COMTD/N/16
27 June 2002
(02-3597)
Committee on Trade and Development
FREE TRADE AGREEMENT BETWEEN INDIA AND SRI LANKA
The following communication, dated 17 June 2002, has been received from the delegations of
India and Sri Lanka.  It contains a letter to the Director-General, the text of the Free Trade Agreement
between India and Sri Lanka, and its annexes1.
_______________
The Permanent Representatives of India and Sri Lanka to the World Trade Organization
(WTO) wish to notify that the Free Trade Agreement (FTA) between the Democratic SocialistRepublic of Sri Lanka and the Republic of India, was signed on 28 December 1998 and entered into
force on 15 December 2001.
The Permanent Representatives of India and Sri Lanka hereby notify the FTA to the WTO
pursuant to the Decision of 28 November 1979, under the General Agreement on Tariffs and Trade(GATT) on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of
Developing Countries, known as the "Enabling Clause".
Article 1 paragraph 2 of the Agreement specifies the objectives of the Agreement, as follows:
(i) To promote through the expansion of trade the harmonious development of
the economic relations between India and Sri Lanka;
(ii) To provide fair conditions of competition for trade between India and
Sri Lanka;
(iii) In the implementation of this Agreement the Contracting Parties shall pay
due regard to the principle of reciprocity;
(iv) To contribute in this way, by the removal of barriers to trade, to the
harmonious development and expansion of world trade.
The FTA recognizes that the progressive reduction and elimination of obstacles to bilateral
trade through a Bilateral Free Trade Agreement would contribute to the expansion of world trade.
The Governments of India and Sri Lanka believe that the establishment and promotion of free tradearrangements would help the development of their respective national economies and also strengthen
intra-regional economic cooperation.
A copy of the FTA is submitted herewith to the WTO, together with all relevant annexes
thereto.
                                                     
1 The Annexes thereto have been submitted to the Secretariat for consultation by interested Members
(Office 2028).WT/COMTD/N/16
Page 2
FREE TRADE AGREEMENT BETWEEN THE REPUBLIC OF INDIA
AND THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA
PREAMBLE
The Government of the Republic of India and the Government of the Democratic Socialist
Republic of Sri Lanka, (hereinafter referred to as the "Contracting Parties"),
Considering that the expansion of their domestic markets, through economic integration, is a
vital prerequisite for accelerating their processes of economic development.
Bearing  in mind the desire to promote mutually beneficial bilateral trade.
Convinced  of the need to establish and promote free trade arrangements for strengthening
intra-regional economic cooperation and the development of national economies.
Further recognising  that progressive reductions and elimination of obstacles to bilateral trade
through a bilateral free trade agreement (hereinafter referred to as "The Agreement") would contribute
to the expansion of world trade.
Have agreed as follows:
Article I
Objectives
1. The Contracting Parties shall establish a Free-Trade Area in accordance with the provisions of
this Agreement and in conformity with relevant provisions of the General Agreement on Tariffs and
Trade, 1994.
2. The objectives of this Agreement are:
(i) To promote through the expansion of trade the harmonious development of
the economic relations between India and Sri Lanka;
(ii) To provide fair conditions of competition for trade between India and
Sri Lanka;
(iii) In the implementation of this Agreement the Contracting Parties shall pay
due regard to the principle of reciprocity;
(iv) To contribute in this way, by the removal of barriers to trade, to the
harmonious development and expansion of world trade.
Article II
Definitions
For the purpose of this agreement:
1. " Tariffs " means basic customs duties included in the national schedules of the Contracting
Parties.WT/COMTD/N/16
Page 3
2. " Products " means all products including manufactures and commodities in their raw,
semi-processed and processed forms.
3. " Preferential Treatment " means any concession or privilege granted under this Agreement
by a Contracting Party through the elimination of tariffs on the movement of goods.
4. " The Committee " means the Joint Committee referred to in Article XI.
5. " Serious Injury " means significant damage to domestic producers, of like or similar products
resulting from a substantial increase of preferential imports in situations which cause substantial
losses in terms of earnings, production or employment unsustainable in the short term.  Theexamination of the impact on the domestic industry concerned shall also include an evaluation of
other relevant economic factors and indices having a bearing on the state of the domestic industry of
that product.
6. " Threat of serious injury " means a situation in which a substantial increase of preferential
imports is of a nature so as to cause "Serious injury" to domestic producers, and that such injury,
although not yet existing is clearly imminent.  A de termination of threat of serious injury shall be
based on facts and not on mere allegation, conjecture, or remote or hypothetical possibility.
7. " Critical circumstances " means the emergence of an exceptional situation where massive
preferential imports are causing or threatening to cause "serious injury" difficult to repair and which
calls for immediate action.
Article III
Elimination of Tariffs
The Contracting Parties hereby agree to establish a Free-Trade Area for the purpose of free
movement of goods between their countries through elimination of tariffs on the movement of goods
in accordance with the provisions of Annexures A & B which shall form an integral of this
Agreement.
Article IV
General Exceptions
Nothing is this Agreement shall prevent any Contracting Party from taking action and
adopting measures, which it considers necessary for the protection of its national security, the
protection of public morals, the protection of human, animal or plant life and health, and the
protection of articles of artistic, historic and archaeological value, as is provided for in Articles  XX
and XXI of the General Agreement on Tariff and Trade, 1994.
Article V
National Treatment
The Contracting Parties affirm their commitment to the principles enshrined in Article III of
GATT 1994.WT/COMTD/N/16
Page 4
Article VI
State Trading Enterprises
1. Nothing in this Agreement shall be construed to prevent a Contracting Party from maintaining
or establishing a state trading enterprise as understood in Article XVII of General Agreement on
Tariff and Trade, 1994.
2. Each Contracting Party shall ensure that any state enterprise that it maintains or establishes
acts in a manner that is not inconsistent with the obligations of the Contracting Parties, under this
Agreement and accords non–discriminatory treatment in the import from and export to the other
Contracting Party.
Article VII
Rules of Origin
1. Products covered by the provisions of this Agreement shall be eligible for preferential
treatment provided they satisfy the Rules of Origin as set out in Annexure C to this Agreement which
shall form an integral part of this Agreement.
2. For the development of specific sectors of the industry of either Contracting Party, lower
value addition norms for the products manufactured or produced by those sectors may be considered
through mutual negotiations.
Article VIII
Safeguard Measures
1. If any product, which is the subject of preferential treatment under this Agreement, is
imported into the territory of a Contracting Party in such a manner or in such quantities as to cause or
threaten to cause, serious injury in the importing Contracting Party, the importing Contracting Party
may, with prior consultations except in critic al circumstances, suspend provisionally without
discriminations the preferential treatment accorded under the Agreement.
2. When action has been taken by either Contracting Party in terms of paragraph 1 of this
Article, it shall simultaneously notify the other Contracting Party and the Joint Committee established
in terms of Article XI.  The Committee shall enter into consultations with the concerned Contracting
Party and endeavour to reach mutually acceptable agreement to remedy the situation.  Should theconsultations in the Committee fail to resolve within sixty days, the party affected by such action shall
have the right to withdraw the preferential treatment.
Article IX
Domestic Legislation
The Contracting Parties shall be free to apply their domestic legislation to restrict imports, in
cases where prices are influenced by unfair trade practices like subsidies or dumping.  Subsidies and
dumping shall be understood to have the same meaning as in the General Agreement on Tariff andTrade, 1994 and the relevant WTO Agreements.WT/COMTD/N/16
Page 5
Article X
Balance-of-Payment Measures
1. Notwithstanding the provisions of this Agreement, any Contracting Party facing balance-of-
payments difficulties may suspend provisionally the preferential treatment as to the quantity and value
of merchandise permitted to be imported under the Agreement.  When such action has taken place, the
Contracting Party, which initiates such action shal l simultaneously notify the other Contracting Party.
2. Any Contracting Party, which takes action according to paragraph 1 of this Article, shall
afford, upon request from the other Contracting Party, adequate opportunities for consultations with a
view to preserving the stability of the preferential treatment provided under this Agreement.
Article XI
Joint Committee
1. A Joint Committee shall be established at Ministerial level.  The Committee shall meet at
least once a year to review the progress made in the implementation of this Agreement and to ensure
that benefits of trade expansion emanating from th is Agreement accrue to both Contracting Parties
equitably.  The Committee may set up Sub-Committees and/or Working Groups as considered
necessary.
2. In order to facilitate cooperation in customs matters, the Contracting Parties agree to establish
a Working Group on Customs related issues including harmonisation of tariff headings.  The Working
Group shall meet as often as required and shall report to the Committee on its deliberations.
3. The Committee shall accord adequate opportunities for consultation on representations made
by any Contracting Party with respect to any matter affecting the implementation of the Agreement.
The Committee shall adopt appropriate measur es for settling any matter arising from such
representations within six months of the representation being made.  Each Contracting Party shall
implement such measures immediately.
4. The Committee shall nominate one apex chamber of trade and industry in each country as the
nodal chamber to represent the views of the trade and industry on matters relating to this Agreement.
Article XII
Consultations
1. Each Contracting Party shall accord sympathe tic consideration to and shall afford adequate
opportunity for, consultations regarding such represen tations as may be made by the other Contracting
Party with respect to any matter affecting the operation of this Agreement.
2. The Committee may meet at the request of a Contracting Party to consider any matter for
which it has not been possible to find a satisfactory solution through consultations under paragraph 1
above.WT/COMTD/N/16
Page 6
Article XIII
Settlement of Disputes
1. Any dispute that may arise between commercial entities of the Contracting Parties shall be
referred for amicable settlement to the nodal apex chambers.  Such references shall, as far as possible,
be settled through mutual consultations by the Chambers.  In the event of an amicable solution not
being found, the matter shall be referred to  an Arbitral Tribunal for a binding decision.  The Tribunal
shall be constituted by the Joint Committee in consultation with the relevant Arbitration Bodies in the
two countries.
2. Any dispute between the Contracting Parties regarding the interpretation and application of
the provisions of this Agreement or any instrument  adopted within its framework shall be amicably
settled through negotiations failing which a notification may be made to the Committee by any one of
the Contracting Parties.
Article XIV
Duration and Termination of Agreement
This Agreement shall remain in force until eith er Contracting Party terminates this Agreement
by giving six months written notice to the other of its intention to terminate the Agreement.
Article XV
Amendments
The Agreement may be modified or amended through mutual agreement of the Contracting
Parties.  Proposals for such modifications or amendments shall be submitted to the Joint Committee
and upon acceptance by the Joint Committee, shall be approved in accordance with the applicable
legal procedures of each Contracting Party.  Such modifications or amendments shall become
effective when confirmed through an exchange of diplomatic notes and shall constitute an integral
part of the Agreement.
Provided however that in emergency situ ations, proposals for modifications may be
considered by the Contracting Parties and if agreed, given effect to through an exchange of diplomatic
notes.
Article XVI
Annexures to be finalised
Annexures D(i) and D(ii) (Negative Lists of India and Sri Lanka respectively), E (Items on
which India has undertaken to give 100 per cent tariff concession on coming into force of the
Agreement) and F (items on which Sri Lanka has undertaken to give 100 per cent tariff concession on
the coming into force of the Agreement) shall be fina lised within a period of 60 days of the signing of
this Agreement.  All the Annexures  shall form an integral part of the Agreement.WT/COMTD/N/16
Page 7
Article XVII
Entry into Force
The Agreement shall enter Into force on the thirtieth day after the Contracting Parties hereto
have notified each other that their respective constitutional requirements and procedures have been
completed.
In witness whereof the undersigned, duly author ised thereto by their respective Governments,
have signed this Agreement.
Done in duplicate at New Delhi this 28th  day of December 1998 in two originals in the
English language.
For the Government of the For the Government of the Democratic
Republic of India Socialist Republic of Sri Lanka
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