Sri Lanka’s economy which followed an inward-looking policy regime in the 1960s and the 1970’s witnessed a marked shift towards the liberalization of the economy since 1977. This was followed by structural transformations, with the economy changing its course from being primarily an agricultural economy to one driven by the services and industrial sectors. Furthermore, with the liberalization of the economy, Sri Lanka became increasingly dependent on trade, with the trade to GDP ratio being 41 per cent as of 2008. In the early stages of trade reform the country’s strategy to improve outward orientation was through unilateral tariff reforms, and Sri Lanka was slow in pursuing reciprocal preferential trade initiatives1 . Nevertheless, from the mid-1990s preferential trade policy initiatives were pursued, especially to strengthen bilateral trade and investment linkages with the selected partners in the region. As a result, Sri Lanka is now party to two bilateral agreements, IndoLanka Free Trade Agreement (ISFTA) and the Pakistan-Sri Lanka Free Trade Agreement (PSFTA) and two regional agreements, Asia Pacific Trade Agreement (APTA) and South Asia Free Trade Agreement (SAFTA).