ISSN: 1391 - 0531
Sunday February 17, 2008
Vol. 42 - No 38
Financial Times  

Keeping the GSP+ is up to Lankan government - EC

By Dilshani Samaraweera

The European Commission (EC) says it is up to the government of Sri Lanka to make sure the country continues to benefit from the European Union’s (EU) GSP+ trade scheme.

“The power to keep the GSP+ going is entirely in the hands of the Sri Lankan government,” said Julian Wilson, head of the EC delegation to Sri Lanka, speaking at a luncheon meeting organised by the Sri Lanka-Canada Business Council this week.
The GSP+ scheme allows duty free exports of almost all major Sri Lankan products, into the EU. This has helped increase Sri Lanka’s export earnings.

But this year the EU will review the GSP+ scheme. The review would decide whether Sri Lanka gets to enjoy GSP+ benefits of exporting duty free into the EU, for another three years, or not.

The EC says keeping the GSP+ depends on how well the Sri Lankan government is seen to implement 27 international conventions on human rights, labour rights and environmental standards.

“It is totally based on fulfilling these conventions. This (review) is a technical exercise on compliance with these conventions. This means not just having the laws, but also implementing them,” said Wilson

Wilson said the ongoing internal conflict will not affect the review.

“This is simply a matter of 27 conventions. It is not related to the issue of the conflict. It depends on the ratification and effective implementation of the conventions. The war and other internal matters are not an issue here,” said Wilson.

Wilson also said the EU is not using the GSP+ as a political tool. “We have a commercial relationship with Sri Lanka that spans 300 years. This is not to be thrown out on a whim. So the entire exercise will be undertaken with absolute professionalism. There will be no political games,” said Wilson.

Wilson said the GSP+, through its duty free export facility, is aimed at increasing Sri Lankan exports and developing local industries.

“The whole intention is to bring production into your country. For your country to see real, concrete development and backward integration of your industries,” said Wilson.

Big dividends

The GSP+ is a unilateral, preferential trade scheme from the EU to Sri Lanka that allows businesses in Sri Lanka to export 7,200 items to the EU, duty free. Since it was first given to Sri Lanka in mid-2005, the GSP+ has helped beat competition from lower cost producers and increase Sri Lankan exports into the EU. According to the EC, the GSP+ is now worth 900 million Euro to Sri Lanka in terms of export earnings and is growing. The 27 country EU, has already replaced the US as the biggest buyer of Sri Lankan goods.

“The GSP+ is worth 900 million Euro to your country and employment of over 100,000 people. In a climate where trade is stagnating or is stable, your trade with the EU has gone up. So the GSP+ ensures the growth of your industries,” said Wilson.

Rights issue

This year, the entire GSP scheme, including the GSP+, will be reviewed and Sri Lanka must apply to the EU to have the scheme extended for another three years starting from January 2009.

But at this point there are serious concerns that the EU may not extend the GSP+ for Sri Lanka.

To qualify for the GSP+, Sri Lanka had to show that it is a vulnerable economy and had to ratify 27 international conventions on human rights, labour rights and environmental standards.

Given that Sri Lanka is expected to not just ratify but also implement these international conventions, the worry is that the increasing publicity on allegations of human rights violations could disqualify Sri Lanka from the GSP+ scheme.
Local businesses, particularly the garment factories, are worried that GSP+ benefits could end by the end of this year, putting the entire industry at risk.

The ready made garment export sector is the biggest beneficiary of the GSP+. The duty free export facility of the GSP+ has helped increase market share of Sri Lankan garments in the EU, despite increased price competition from larger producers like China, India and Bangladesh.

The garment industry is the biggest employer in the manufacturing sector in Sri Lanka and provides direct employment to nearly 300,000 people, mostly rural women. Losing the GSP+ could directly impact on the price competitiveness of Sri Lankan garments and this in turn, could hurt employment and export incomes.

So the big question is whether claims of human rights and labour rights violations could be taken seriously enough by the EU, to disqualify Sri Lanka from the GSP+ scheme.

However, the head of the EC delegation did not comment on whether accusations of rights violations would be seen as violations of the international conventions that are the basis of the GSP+ scheme.


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