On November 6, the Sri Lankan government sent its reply to the European Commission (EC) regarding its report of October 19 on the continuation of Sri Lanka’s GSP+ import tariff concessions.
The primary objective of the EU’s Generalized System of Preferences (GSP) is to contribute to the promotion of sustainable development and good governance. The additional preferences available under the GSP+ arrangement act as an incentive to vulnerable developing countries to implement a set of key international conventions in the fields of human rights, core labor standards, sustainable development, and good governance.
The GSP+ tariff preferences – which take the form of duty-free access – cover roughly 6,400 tariff lines. Sri Lanka’s GSP+ preferences were renewed, late in 2008, for a further three-year period from January 1, 2009 to December 31, 2011.
However, there has been continuing concern about the situation in Sri Lanka since the latest internal conflict. After a period of investigation, the EC has now produced a final report "on the findings of the investigation with respect to the effective implementation of certain human rights conventions in Sri Lanka."
As that report’s conclusion was negative for Sri Lanka, it had been reported that the EC would decide shortly on whether the country should, in fact, be withdrawn from the special incentive scheme.
In response, the Sri Lankan government has produced its own document containing observations on the EC’s report. Amongst other things, it reinforces the importance to Sri Lanka of the GSP+ preferences.
The GSP+ tariff benefits, it said, resulted in Sri Lankan exports to the EU increasing by 42% in the period since 2004, to over EUR2bn (USD3bn) in 2008, thereby accounting for 36% of Sri Lanka’s total exports. Bilateral trade turnover also expanded, from EUR2.4bn in 2004 to EUR3.3bn in 2008.
Particular assistance is provided to the clothing industry, which accounts for 53% of Sri Lanka’s total exports to the EU. Other sectors, such as fish products, ceramic products, rubber and rubber-based products and jewellery, also increased their exports to the EU under GSP+.
The document also noted that the clothing sector provides direct employment for more than 270,000 people, as well as through the indirect employment of at least a million people. In addition, it accounts for around 8% of GDP.
“The continuation of the GSP+ Scheme,” the document concludes, “would without doubt bring further benefit to the people of Sri Lanka and strengthen the efforts of the government to meet the challenge of the Millennium Development Goals. By contrast, any withdrawal of the GSP+ Scheme from Sri Lanka will lead to disruption and loss of market share. [It] would significantly affect both Sri Lanka’s trade and development, as well as the pace of her post-conflict recovery.”
It has been reported that the EC is likely to make its recommendation to the EU member states and a decision taken by the end of this year.
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