The position of Sri Lanka in the Indian Ocean places it astride the great sea-routes, past, and present, between Europe, India, and the Far East. Sri Lanka possesses in the port of Gokanna (Trincomalee) one of the largest and the safest natural harbors in the world, and numerous smaller bays, anchorages, and roadsteads afforded adequate shelter for the sailing ships of ancient times, which was a flourishing port at that time.

From the second century, Sri Lanka became familiar to Greek and Arab sailors it has been a port of call and emporium of the sea-borne trade between West and East, and the Silk Road also routed via Sri Lanka. In addition to that traders from India and China also had relations with Sri Lanka. Foreign trade become more important and played a significant role during the colonial period.

The most famous of the ancient harbors was Mahatitta on the mainland opposite Mannar, ships from various countries sold and exchanged merchandise and also took away pearls, precious stones, cinnamon, elephants, peacocks, spices, and other products from Sri Lanka. To pay for the commodities exported from Sri Lanka the foreign merchants brought gold and silver, copper, glass, coral, semi-precious stones of various types, earthenware of superior quality, wines, horses, high valued cloths, silk, rock crystal, diamonds, perfumes, camphor, and sandalwood, etc.

A major change has taken place in foreign trade over the past fifty years, especially after 1977 in terms of the composition of both exports and imports. The largest share of Sri Lanka’s exports is now accounted for by the industrial sector.

After economic liberalization in 1977, the Sri Lankan economy became more export-oriented.