This article is particularly relevant at a time when the global trading environment is undergoing significant change and regional economic partnerships are playing an increasingly important role in shaping international trade and investment flows. It draws on the discussions and insights generated at Pathfinder Foundation’s Ambassadors’ Roundtable on “Sri Lanka, RCEP and the Emerging Global Trading Order,” which brought together ambassadors from RCEP member countries, senior diplomats, academics, policymakers, and think tank representatives.
Sri Lanka faces a strategic choice amid a shifting global trade landscape: deepen integration with emerging regional blocs such as the Regional Comprehensive Economic Partnership (RCEP) or risk remaining peripheral to growing regional value chains and market opportunities. Recent diplomatic engagement — including encouraging signals from Australia and New Zealand following Foreign Minister Vijitha Herath’s visits — has revived debate about the costs and benefits of accession to the world’s largest regional trade arrangement.
Sri Lanka formally signalled its intent to join RCEP in June 2023 and obtained Cabinet approval to proceed with accession documentation. It was the first country to submit a Letter of Intent; others, including Hong Kong, Chile and Bangladesh, have since expressed interest. These developments reflect a renewed policy push to accelerate accession, and they prompted the Pathfinder Foundation to convene an Ambassadors’ Roundtable in Colombo titled “Sri Lanka’s Pathway to RCEP and the Emerging Global Trading Order.” The meeting brought together senior government officials, foreign envoys, trade chambers, think-tank experts and other stakeholders to consider Sri Lanka’s options within an evolving regional trading environment.
Understanding RCEP
RCEP is the world’s largest regional economic agreement by combined GDP, trade and population, accounting for roughly 30% of global GDP and population and nearly 29% of global trade. It unites ten ASEAN members with five dialogue partners: Australia, China, Japan, the Republic of Korea and New Zealand. Negotiations concluded in 2020, and the Agreement entered into force in January 2022. RCEP’s 20 chapters span goods, services, investment, intellectual property, competition, dispute settlement, e-commerce, SMEs, and technical cooperation, making it a comprehensive framework for regional integration rather than a narrow trade pact.
A key rationale for RCEP is to reduce the “noodle bowl” of overlapping bilateral FTAs in the region by offering a more coherent set of rules, streamlined tariff schedules and harmonised rules of origin. The agreement also accommodates economic heterogeneity — high-income economies sit alongside middle-income countries and least-developed countries — under a common framework with differentiated responsibilities.
Why Sri Lanka Should Consider RCEP
There are several compelling arguments for Sri Lanka’s accession. First, RCEP offers strategic export diversification. Sri Lanka’s merchandise exports remain concentrated: roughly 60% currently go to the US, EU, UK and India, while RCEP economies account for only about 10% of its exports. Greater engagement with RCEP could expand market access and broaden the product mix, reducing vulnerability to demand shocks in a handful of traditional markets.
Second, the RCEP market is large and growing. With 2.3 billion people and major economies such as China, Japan and South Korea, intra-RCEP trade surpassed US$6 trillion in 2025, a substantial increase since 2019. Preferential access to that market could offer Sri Lankan exporters new opportunities for scale and diversification.
Third, accession can facilitate deeper integration into regional supply chains. RCEP economies are highly integrated into global value chains; intra-RCEP GVC trade has grown markedly over the past decade. Intra-regional trade among RCEP countries reached US$ 6.039 trillion in 2025 compared to that of US$ 2.3 trillion in 2019. At the aggregate level, the share of intra-RCEP trade in members’ total global trade remained close to 59 percent throughout 2019–2025. Joining RCEP could help Sri Lanka participate in higher-value-added activities through industrial upgrading and export-oriented investment.
Fourth, RCEP economies represent one of the most dynamic centers of global growth and a major destination for foreign direct investment. The region accounted for a significant share of global FDI inflows in recent years and contributed roughly USD 7.8 billion of FDI into Sri Lanka over the last two decades. Closer ties could attract new investment and strengthen capital linkages.
Finally, RCEP could create a structured platform to advance domestic reforms — in customs and trade facilitation, services regulation, investment policy and governance — that improve Sri Lanka’s business environment. Such reforms, while politically and administratively demanding, could yield long-term productivity and competitiveness benefits.
Accession Process and Sri Lanka’s Progress
Accession to RCEP follows a formal legal and institutional process established by the Agreement and detailed procedures adopted in 2024. Article 20.9 provides the legal basis. The process typically proceeds in three stages: an initial written request and RCEP Joint Committee consideration; ministerial approval to establish an Accession Working Group and conduct multilateral and bilateral negotiations; and, upon successful talks, ministerial consensus approval of accession terms.
Although Sri Lanka submitted its Letter of Intent in June 2023 and has responded to successive accession questionnaires, it remains at an early stage and has not commenced formal negotiations. Officials report participation in both physical and virtual engagements and completion of preliminary technical assessments and impact studies. The next steps require completing accession requirements and demonstrating readiness to align domestic laws and deliver commercially meaningful market access outcomes.
Challenges and Institutional Readiness
Accession brings significant policy and implementation challenges. Sri Lanka’s average Most-Favoured-Nation tariff of 8.4% remains higher than the RCEP average of about 6.26%, reflecting a relatively more protectionist stance. With plethora of para-tariff in Sri Lanka, level tariff liberalization among RCEP countries is significantly deeper. Several ASEAN members have reduced intra-regional tariffs to near-zero levels, illustrating the depth of integration that Sri Lanka would need to consider. Beyond tariffs, commitments on services and investment could require regulatory adjustments and greater predictability in market governance.
Institutional capacity is central. Effective negotiations demand coordinated engagement across ministries, regulatory agencies and the private sector, technical expertise that spans tariffs, services, intellectual property and competition policy, and a sustained negotiating team with continuity. Preparing a clear, prioritized negotiation strategy that aligns accession with national development goals and identifies adjustment needs is essential. Importantly, readiness must extend past accession: implementation, monitoring and ongoing policy calibration are long-term national responsibilities.
The Way Forward
Sri Lanka’s renewed engagement with RCEP occurs as regional frameworks increasingly shape trade and investment flows. RCEP presents tangible opportunities — expanded market access, integration into regional value chains and strengthened investment links — but accession is a gradual, technically demanding process. At this early stage, the focus should be on building institutional capacity, crafting a strategic negotiation agenda, and sequencing domestic reforms to maximise benefits while managing adjustment costs. A firm government commitment and a clear timeline — as signalled by the objective to complete accession within two RCEP Ministerial cycles starting in 2026 — will be critical to translate diplomatic goodwill into negotiated outcomes that support Sri Lanka’s long-term competitiveness and economic resilience.
