Financial Times

US$150 mln rescue package to tackle loss of GSP+ benefit

The Sri Lankan government this week rejected an EU investigation as a precursor to continuing GSP+ concessions to local industry including garments and instead said a rescue package of $150 million would be given to industries that would be affected if the duty free concessions are not approved.
International Trade Minister Prof. G.L. Peiris told reporters the modalities of the rescue package will be finalized after holding discussions with garment and other exporters next Tuesday. He said the government will not allow the EU to conduct an investigation on several matters including the recruitment of child soldiers and human rights in order to review the granting of this facility.

Prof Peiris said the cabinet last week decided that it will oppose the EU’s action to infringe on Sri Lanka’s sovereignty, self respect and dignity. This message was conveyed to Brussels through the Sri Lankan envoy there, he said. However Mr Peiris said that the government has already sent an application to the EU seeking an extension of the facility and was awaiting a reply soon. He added that this is the first time that EU has insisted on an investigation of this nature and it is unrealistic.
He said the EU had taken a decision to conduct an investigation on September 29 even before Sri Lanka’s written request for the extension of the GSP+ facility was submitted. The EU has not clarified the investigation process and there is no precedence of such a probe in any other country which enjoys similar concessions, he said.

Central Bank Governor Ajith Nivard Cabraal noted that they have devised several rescue packages for the garment industry to overcome the initial shock if the EU withdraws the GSP + facility and the support would be available for a year. He expressed the belief that the industry will be able to tackle the situation on their own as it has managed its business for three decades and the GSP + facility was provided only for the past three years. He added that the total tax concessions granted to buyers in EU countries was around US$150 million and their rescue package will be equivalent to that amount. He said that it will help to maintain price stability .

The EU has said it wants to ascertain whether Colombo has fulfilled labour and human rights conventions as prescribed in the rules governing trade concessions. Some 65% of total exports to the EU under the GSP+ scheme are made up of garments with the balance 35% coming from emerging sectors like agriculture, fisheries and footwear.

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