Trade Impacts of South Asian Free Trade Agreements in Sri Lanka Hiroyuki Taguchi 1 Don Chalani Imasha Rubasinghe 2 Abstract This article aims to examine the trade effects of the South Asian Free Trade Agreement (SAFTA) with a focus on Sri Lanka, by applying a gravity trade model. The study targets the following three FTAs: the SAFTA, the India–Sri Lanka Free Trade Agreement (ISFTA), and the Pakistan–Sri Lanka Free Trade Agreement (PSFTA). The outcomes of the gravity trade model estimation sug- gested that the trade creation effects were identified in the ISFTA, while those were not verified in the SAFTA and that the PSFTA had the trade creation effects only on the Sri Lankan imports. Those results seem to reflect the dif- ferentials in the preferential tariff rates. In particular, ISFTA could have the predominant positive effects on Sri Lankan trade flows due to its lowest pref- erential tariff rates, and thus the SAFTA effect might be crowded out at the current stage of Sri Lankan trade. JEL: F13, F14, O53 Keywords South Asia, South Asian Free Trade Agreement (SAFTA), India-Sri Lanka Free Trade Agreement (ISFTA), Pakistan-Sri Lanka Free Trade Agreement (PSFTA), South Asian Association for Regional Cooperation (SAARC), gravity trade model Research Article Corresponding author: Hiroyuki Taguchi, Professor, Graduate School of Humanities and Social Sciences, Saitama University, 255 Shim o-Okubo, Sakura-ku, Saitama, Saitama Prefecture 338-8570, Japan. E-mail: tagusaya0710@s3.wh.qit.ne.jp 1 Professor, Graduate School of Humanities and Social Sciences, Saitama University, Saitama, Saitama Prefecture, Japan. 2 Research Scholar, Graduate School of Humanities and Social Sciences, Saitama University, Saitama, Saitama Prefecture, Japan. South Asia Economic Journal 20(1) 1–18, 2019 © 2019 Research and Information System for Developing Countries & Institute of Policy Studies of Sri Lanka Reprints and permissions: in.sagepub.com/journals-permissions-india DOI: 10.1177/1391561418822203 journals.sagepub.com/home/sae