The EC and the government are looking at developing a Road Map to retain the EU’s GSP+ duty free export scheme. “We will, after consulting with the Sri Lankan authorities, issue what we call a Road Map, which will address the concerns raised in the final report (of the investigation),” said the Ambassador for the EC in Sri Lanka, Bernard Savage, speaking at the AGM of the Sri Lanka Apparel Exporters Association this week.
The government, said Mr Savage, is even now prepared to start this process. The Road Map, which is a commitment by the government to address concerns raised by the investigation, could retain the GSP+ scheme, even if the EC recommends the EU member states to suspend the GSP+.
The Ambassador said the government’s response to the EC investigation report will be “examined extremely thoroughly and seriously.”
However, the EC will make a recommendation to the European Council, on whether or not to suspend the GSP+ scheme, based on its investigation findings.
“The next step will be a recommendation by the Commission to the Council, our member states. The recommendation must be based on the conclusions of the final report. That is a legal obligation,” said Mr Savage.
So at this point, the EC may recommend suspending the GSP+. “The recommendation at this stage, could well be for suspension,” said Mr Savage. After the EC recommendation, the Council will have two months to arrive at its own decision. However, if the Council decides to suspend the GSP+ scheme, the GSP+ will be suspended only six months after the decision is taken.
Meanwhile, a ‘Road Map’ is to be developed by the government and the EC, to address the concerns raised by the investigation. The Road Map can convince the EU to allow Sri Lanka to retain the GSP+.
“We will engage in a dialogue on the Road Map and on specific actions, to address concerns,” said Mr Savage.
“Our engagement with the Sri Lankan authorities before the suspension of the GSP+, would allow us to review the recommendations, so that there is no break in the concession,” said Mr Savage.
Apparel exporters say the GSP+ has helped grow exports to the EU even at times of global downturn. This growth, say exporters, may not happen without the GSP+ behind Sri Lankan exports.
“Our exports to the EU have seen steady growth over the last several years, not least due to the GSP and GSP+. If we are to lose this concession, which I sincerely hope not, I fear for that growth,” said the Chairman of the Sri Lanka Apparel Exporters Association, Kumar Mirchandani, speaking at the AGM.
The latest export data from the Joint Apparel Association Forum (JAAF), the apparel industry representative body, shows that total apparel exports in September, dropped by 4.7% in value, compared with September 2008. Exports to the US fell by 19.2% but exports to EU increased by 8.5% in September 2009.
Total apparel exports during the nine month period of January to end-September 2009, reduced by 3.6% over the corresponding period last year. The largest losses were in the US, where export incomes dropped by 13.2% in the first nine months of this year. Export earnings from the EU increased by 4.3% up to September this year, despite the recession.
GSP+ not working for workers
Meanwhile, workers rights groups are calling for mechanisms to be introduced into the GSP+ trade scheme, to allow trickle down of benefits to workers.
At a press conference on Thursday, ALaRM, a trade union and non-governmental organisation coalition, pointed out that although the EU’s GSP+ preferential trade scheme is expected to help reduce poverty, the scheme has no inbuilt provision to ensure distribution of benefits to workers.
ALaRM maintains that the EU’s GSP+ trade scheme has overwhelmingly benefited the corporate and employer category, and that the working masses have not enjoyed comparable benefits.
While corporate incomes and profits have grown because of the GSP+, worker wages and work related benefits have not kept pace.
In fact, in Sri Lanka, workers in garment factories, the biggest users of the GSP+, have seen job losses and cuts in welfare measures. Employers attribute these adverse developments to recession impacts.
However, trade unions note that exports to the EU have increased and not decreased, while worker benefits have decreased, indicating that trade growth benefits are not accruing to workers.
“Our main concern with the GSP+ is that the benefits from the GSP+ are going only to employers and company owners. The workers do not get any benefits from it,” said the spokesperson for the Stand Up Movement, Ashila Mapalagama. The Stand Up Movement is a non-governmental organisation involved in apparel sector worker welfare and is a member of ALaRM.
“So if the GSP+ is going to be available in future, we say it should have some mechanism to allow benefits to reach down to workers, as well as employers,” said Ms Mapalagama.
ALaRM is also calling on local authorities to ensure that GSP+ withdrawal, will not adversely impact the working masses. The garment industry alone is estimated to employ around 230,000 people.
The government has so far maintained that exports to the EU will not be drastically affected by the loss of the GSP+, if it is withdrawn. The Central Bank for instance, said that domestic cost reductions, coupled with rupee depreciation against the euro and the sterling pound, would give exporters a competitive edge even without the price advantage provided by the GSP+.
Economic impacts are also expected to be limited, as only a portion of Sri Lankan exports ( even in the apparel sector) actually use the GSP+ to export to the EU. At this point the apparel export sector is the most dependent on the EU’s GSP+ trade scheme.