Trade Consequences of the Farm Production Regulation: The Glyphosate Ban in the Sri Lankan Tea Industry

Tea manufacturing is an important industry for the Sri Lankan economy because it generates foreign income, which adds to gross domestic product of the country and creates employment opportunities. Tea has been exported to several countries from Sri Lanka for over a century, and Sri Lanka remains a leading tea exporter to date. Recently, the Sri Lankan government issues a policy which disadvantages the tea industry in the country. The government banned the use of glyphosate in the agricultural sector from 2015 to 2018 which directly or indirectly affects the tea industry. The policy brought a consequence where the farmers used illegal substances and other weedicides to control the weed. These consequences placed the Sri Lankan tea industry at risk since their final product is contains high amount of residual weedicide which exceeds the Maximum Residue Limit (MRL). In this paper, we use The Equilibrium Displacement Model to study the economic impact of rejections of tea consignments by Japan due to the excess use of 2-methyl-4-chlorophenoxyacetic acid (MCPA) in 2018. The demand of Sri Lankan bulk black tea by Japan has declined by 6.5% between 2017 and 2018. The estimated of the Sri Lankan tea industry from reduced demand for bulk black tea was Rs339 million.