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calculated the value of imports of exports in 2008 of products subject to MFN tariff rates of 25 percent and more. The value of imports of these products was US$853 million or 6 percent of total imports, whereas the value of exports of these products was US$2.3 billion or 28 percent. Needless to add, given the structure of protection favoring the agriculture sector, agricultural products accounted for 40 percent of these imports and 73 percent of exports.

Another insight about the impact of Sri Lanka’s high levels of nominal protection on suppressing competition from imports can be gained from an examination of the extent to which products subject to high tariff rates are still imported. If they are, this indicates that domestic demand for these products can only be met by imports. As such, one can infer that the main purpose of a high tariff on these products is raising revenue. Of course, some of them may find their way to domestic users thanks to obtained tariff exemptions. But even if no duties are paid, imports statistics juxtaposed against the tariff schedule will capture them, as the latter takes no account of collected duties. If a simple average tariff rate for a group of products exceeds an average weighted by imports, this means that flows of imports subject to higher tariff are relatively smaller; the reverse means that high tariffs do not stop imports as there are probably no domestic substitutes.

Sri Lanka’s tariff schedule appears to be effective in protecting domestic producers as it successfully keeps imports subject to higher applied tariff rates at bay. As can be seen from the data tabulated in Table 6, simple average MFN tariff rates calculated for different aggregates exceeded in 2009 their corresponding weighted average MFN tariff rates except for capital good, albeit the difference was small and nominal protection was low. Capital goods were the only group where importers paid less attention to tariff rates than in other sectors: a possible reason was that they were successful in obtaining exemptions.

**Table 6: Average MFN tariff rates, simple and weighted, in sectoral breakdowns and imports in 2010 (in percent and millions of US dollars)**

|Product|Average<br>Simple|MFN Rate<br>Weighted|Difference|Import Value<br>($millions)|percent|
|---|---|---|---|---|---|
|All goods|9.3|6.8|2.5|12,351|100|
|Agricultural goods|22.2|19.0|3.2|1,801|15|
|Industrialgoods|8.6|5.4|3.2|10,550|85|
|Of which: Petroleumproducts|7.7|5.0|2.7|1,880|15|
|Byend-use||||||
|Raw materials|13.2|5.0|8.2|1,610|13|
|Intermediate goods|5.3|4.4|0.9|4,557|37|
|Consumer goods|16.3|13.1|3.2|3,618|29|
|Capital goods|4.4|5.1|-0.7|2,083|17|
|Textiles and clothing|4.9|0.6|4.3|1,833|15|
|Of which: Textiles|1.4|0.3|1.1|1,739|14|
|Clothing|12.5|7.1|5.4|95|1|

Source: Estimates based on data from the UNCTAD TRAINS database, WTO IDB database and UN COMTRADE database.

The weighted average tariff rates on both agricultural and industrial goods as well as on other products grouped by their end-use are significantly lower than respective simple average rates indicating that imports of products subject to high tariff rate are low relative to other imports. It comes as no surprise that the difference between the two is particularly high for raw materials: Sri Lanka is a producer as well as an exporter of raw materials: these are subject to high tariffs whereas those that are not available domestically are not accorded high tariff protection. Note also that the weighted MFN tariff rate on textiles of 0.3 percent was almost zero below a very low simple average rate of 1.4 percent indicating