Non-economic Gains of Sri Lanka's FTAs with Neighbours

Abstract

Purpose - The purpose of this paper is to answer the question: does a bilateral free trade agreement (FTA) lead to an improvement in the security of a member country and greater peace between two member countries in the developing world? Design/methodology/approach - This paper reviews existing literature and uses the idea of non-economic gains from regional trading agreements to explain how Sri Lanka managed to use FTAs to neutralise India and obtain military assistance from Pakistan using its FTAs with two countries during the recently concluded war. Findings - Even though political objectives were not explicitly outlined in Sri Lanka's two FTAs with its big rival neighbours (India and Pakistan), the FTAs helped Sri Lanka to successfully execute the war against the LTTE (the Tamil Tigers) by neutralising India on the one hand and gaining military assistance from Pakistan on the other. Research limitations/implications - The research approach is basically qualitative. However, there is need to develop a comprehensive theoretical model to capture non-economics gains from FTAs. Originality/value - Although there is a growing body of literature on the underlying political and strategic motivations of countries forming regional and bilateral trading arrangements, this paper adds to understanding of what motivates small developing countries to form trade agreements with big neighbours.