Trade unionists have asked the government to ensure that workers in the apparel industry do not suffer in the GSP Plus fallout. They warn that factory owners may take advantage of the situation by scaling down on incentives and other employee benefits in order to maintain their profit margins.
The European Union (EU) has extended the GSP Plus trade concession to Sri Lanka by another six months. The extension is based on government action taken so far to ensure that welfare and development processes for the people of the North and East continue. The trade concession that covers 3,200 export items from Sri Lanka, including apparel, was to end on August 15 this year. With the latest extension, Sri Lanka can enjoy the GSP Plus benefits up to February 2011.
Palitha Athukorale, president of the Sri Lanka Progressive Union, says that if the EU stood firm on its decision, the future looks bleak for the apparel industry workers saying that the factory owners would take undue advantage of the situation to deprive the employees of various incentives they enjoy at present.
“GSP Plus tax concessions or not, factory owners will continue to operate, and to keep their profit margin they will resort to cost-cutting on labour,” he said. “This is the only way they can stay in business and enjoy healthy profits. The authorities working with the apparel industry must be alert and keep a close watch on developments.”
Large shipment orders from foreign buyers extend well into summer next year, and industry players will be in business till then, Mr. Athukorale said.
“To ensure their profits, they are sure to tax the workers and put it on the GSP Plus issue,” Mr. Athukorale pointed out.
Some 40 garment factories have closed in the past 12 to 14 months, and an estimated 40,000 garment workers are out of work, he said. “The numbers are likely to double once the GSP Plus issue starts to bite into the industry.”
Anton Marcus of the Free Trade Zone (FTZ) Apparel Union says the government cannot afford to take an over-confident, “gung-ho”, attitude on the issue, as 60 per cent of the export trade covered by the GSP Plus tax concession flows from the apparel sector.In the past, some 55 per cent of Sri Lanka garment exports were sent to the US market, but when Sri Lanka received the GSP Plus facility in 2005, trade with European countries accordingly went up. “The EU is therefore important, and the sooner the authorities realise our position the better for the garment industry workers,” he said.
Mr. Marcus added the tax advantages enjoyed by the factory owners have never actually filtered down to the workers, and things could get even worse for factory employees.
The EU’s Generalised System of Preferences is a trade arrangement through which the EU provides preferential access to the EU market to 176 developing countries and territories in the form of reduced tariffs for their goods when entering the EU market.