Will Sri Lanka lose GSP+ again?
(Opinion by Ajith Perakum Jayasinghe, Editor) European Union (EU) indicated today that the special Generalised System of Preferences (GSP+) offered by the EU to Sri Lanka hung in the balance.
GSP+ is the system of preferential trading arrangements through which the European Union extends preferential access to its markets to developing countries. GSP+ provides Sri Lanka competitive, predominantly duty and quota-free access to the EU market. The countries not receiving the benefit question the integrity of the agreement.
GSP+ is based on the continued implementation of 27 international conventions on human rights, labour, environment, climate change and good governance, the joint statement issued by the Delegation of the European Union (EU) and the Embassies of France, Germany, Italy, Netherlands and Romania declared.
"Not least due to these unilateral trade preferences, the EU is the second-biggest export market for Sri Lanka worldwide, with a positive trade balance of more than 1 billion EUR (about 220 billion LKR) in 2018 and 2019," the statement said.
The statement further said, "Trade, however, is not a one-way street. The current import restrictions are having a negative impact on Sri Lankan and European businesses, and on Foreign Direct Investment. Such measures impair Sri Lanka’s efforts to become a regional hub and negatively impact Sri Lankan exports by constraining the import of raw material and machinery. We recall that a prolonged import ban is not in line with World Trade Organisation regulations. Sri Lanka’s withdrawal of support for the United Nations Human Rights Council Resolution 30/1 remains a source of concern. The Government has stated its continuing commitment, including to the EU, to fostering reconciliation, justice and peaceful coexistence among Sri Lanka’s diverse communities. The EU stands ready to support the Government’s efforts in this area. The rule of law and a vibrant civil society are essential in this regard. We are looking forward to continuing our deep engagement with Sri Lanka, in line with our shared international commitments and obligations."
Sri Lanka lost EU's GSP+ concession in August 2010 due to allegations of human rights including evidence of police violence, torture and breach of labour laws, notably the use of underage children. As a result, the country incurred a massive reduction in export revenue.
Then an EU investigation identified significant shortcomings in respect of three UN human rights conventions. They were the International Covenant on Civil and Political Rights (ICCPR), the Convention against Torture (CAT) and the Convention on the Rights of the Child (CRC). The investigation relied heavily on reports and statements by UN Special Rapporteurs and Representatives, other UN bodies and reputable human rights NGOs.
However, the United National Party-led coalition government that came to power in 2015 successfully negotiated to reinstate GSP+ in May 2017.
The current GSP+ scheme is in place until the end of 2023. Early in the year, EU reassured that it would continue GSP+ concessions to Sri Lanka till 2023. However, the EU did not forget to highlight that there would be ‘no changes’ in the rigorous monitoring of the country’s progress in implementing the relevant conventions.
Sri Lanka's apparel industry accounts for 43% of the country's total exports and generates over $ 5 billion foreign exchange. Daily FT reported in January that over 60% of exports to the EU had benefited the most through the GSP+ concession. "As of 2018 as much as 58% of all Sri Lankan exports benefit from some form of preferential access due to GSP+ and the EU remains the country’s largest export market. Since the resumption of GSP+ concessions in 2017, the value of Sri Lanka’s total exports to the EU market in 2018 recorded a growth of 5% when compared to 2017. As a result, Sri Lanka’s GSP+ utilised exports recorded a year-on-year recorded a growth of 1% in 2018."