A simple analytical method using trade and tariff data for identifying an offensive list when negotiating a free trade agreement: An example of Sri Lanka-China free trade agreement negotiations

Working paper1 Dec 2018

This paper presents a step-by-step discussion on the methodology of developing an “offensive list” – a priority list of products for which to insist on obtaining concessions during trade negotiations, using free trade agreement negotiations between Sri Lanka and China as an example. In developing the offensive list of products for Sri Lanka, it is proposed that the products on the list must be a) products which China already imports; b) products which Sri Lanka exports and could potentially export more to China; c) products on which China imposes non-zero tariffs, and d) products for which Sri Lanka has demonstrated a comparative advantage in (unless facing prohibitive tariffs). The methodology used in this study relies primarily on trade and tariff data and is applicable to potential trade agreements between other economies, noting that value thresholds used for the Sri Lanka/China case would most certainly need to be adjusted to reflect relative economic sizes of trade partners and their individual trade patterns. This paper further examines the trade effect of removing tariffs for the offensive list using partial equilibrium analysis, which itself is a parsimonious yet widely used technique in early stages of trade negotiations.