PM Ranil Wickremesinghe’s advocacy towards revival and resuscitation of GSP

Prime Minister Ranil Wickremesinghe

The new European Union (EU) Ambassador in Sri Lanka, Tung-Lai Margue, today said that European countries were amazed at the rapid progress made by Sri Lanka in a very short period under the new Government.

Origin

In the early 1960s, the main dialogue within the international trade arena was directed at removing trade barriers and opening avenues of opportunity for developing and least developed countries for entry into trade with developed countries. The offer of tariff preferences by developed nations to developing countries and least developed countries as the best gateway to have a trade relationship with developed countries was proposed by the United Nations Conference on Trade and Development (UNCTAD). 

The Generalized System of Preferences or GSP System was introduced in 1968 through the General Agreement on Tariffs and Trade (GATT) on its initiative to encourage industrialised countries or developed countries to grant Autonomous Trade Preferences to all developing countries in accordance with the recommendation of UNCTAD.

From the early 1970s developed countries or industrialised countries, such as those within the European Union (EU) (1971), Japan (1971), Norway (1971), Switzerland (1971), New Zealand (1972), Australia (1972), the United States (1974), Belarus (1992), the Russian Federation (1992) and Iceland (2002) implemented their GSP System by offering trade preferences to developing and least developed countries. Developing countries and least developed countries, recognised as beneficiary countries, are offered preferential tariff reductions for their export products to developed countries under the GSP System. It is a removal of partial or entire tariff charges for goods exported by beneficiary countries. Since the early 1970s Sri Lanka has been enjoying the benefits of GSP.

Introduction of GSP Plus 

In 2005 the EU introduced special incentive arrangements under the EU GSP scheme called GSP Plus and Everything But Arms (EBA). Under the Everything But Arms (EBA) initiative of the EU GSP, 49 least developed countries receive duty-free quota-free access for all their products except arms and ammunition.

GSP Plus was introduced by the EU in 2005 under the EU GSP Scheme as a special incentive arrangement. The special feature of this scheme was that all the eligible products under it could be exported by select countries to the EU totally duty free. 

These countries are able to expand their export to the EU better than the scenario they enjoyed under the standard GSP scheme since 1971. Under standard GSP the products from beneficiary countries imported into the EU are not totally duty free but there is a reduction on normal import duty rates. 

The beneficiary countries should mainly confirm and effectively implement 27 core international conventions on human and labour rights, sustainable development, the environment and good governance to be entitled to GSP plus benefits. 

GSP Plus currently covers 13 beneficiaries: Armenia, Bolivia, Cape Verde, Costa Rica, El Salvador, Georgia, Guatemala, Mongolia, Pakistan, Panama, Paraguay, Peru and the Philippines. Sri Lanka was a beneficiary country from 2005-2010. It is mentioned in some quarters that the EU offered the GSP plus facility to Sri Lanka in consideration of the tsunami which wreaked havoc on its shores in 2004. 

GSP Plus withdrawal

It was in December 2009 that the EU decided to temporarily withdraw GSP Plus benefits to Sri Lanka. This decision was based on the findings of an exhaustive Commission of Investigations launched in October 2008 and completed in October 2009. In the view of the report, no satisfactory progress was shown by Sri Lanka in the implementation of the three UN human rights conventions, namely pertaining to Civil and Political Rights, the Convention against Torture and the Rights of the Child, which were related to the granting of the benefits.

Initially this withdrawal was only for period of six months. As this period was not sufficient, it was further extended to enable Sri Lanka to identify and address the issues faced. The EU has opened dialogue with the Government of Sri Lanka hoping that necessary measures will be taken to resolve human rights issues, the progress of which is being monitored and re-evaluated by the EU. Unfortunately, there was no significant interest displayed by Sri Lanka since 2010. The new Government has immediately continued dialogue in a positive manner with the high hopes of getting GSP Plus restored.

However from 2009, Sri Lankan exports have been offered to revert to standard GSP preferences as provided for in the current GSP Regulation. 

Policymakers within the Sri Lankan Government have also realised that this decision has dealt a heavy blow to the export trade with the closure of several garment factories, resulting in a loss of $ 782 million of exports. This is an invisible challenge for the growth of the Sri Lankan economy. As such, it is essential to consider why GSP Plus is deeply beneficial to Sri Lanka.

GSP Plus

A review of Sri Lankan exports indicates that nearly 57% of exports are exported to the EU and the US. It shows that 27% of exports are shared by the US and the majority 30% are shared by the EU. Out of all products exported during the last 25 years, the apparel sector has taken the lead in 45% of total products exported. The most significant feature is that the US and the EU equally share 43% of exports, making the total 86% of all Sri Lanka apparel exports.

The EU is the leading business dealer of international trade with nearly Euro 4,000 billion in trade. The EU consists of 28 powerful Western nations with a population of 500 million and high purchasing power. The EU has achieved a strong position by acting together with one voice on the global stage, rather than with 28 separate trade strategies. As members of one Union GSP Plus is offered to encourage a wider range of products to be purchased by the EU. Even if Sri Lanka enjoys the GSP facility with other developed counties, the EU is recognised as the major player which provides more benefits.

Most leading Sri Lankan export products are included among the 7,500 products eligible for EU GSP. It should be noted that all apparel categorised under HS tariff Code 61 and 62 and textile code 63 except a few items are permitted for export under EU GSP facilities. Footwear, tuna, other seafood, ornamental fish, some varieties of cut flowers and foliage, black tea, gherkin, rubber items, activated carbon, tableware and wooden products are among the Sri Lankan export products of supply capability on the EU GSP eligibility list. 

Voyage of GSP

The European Union Charge d’Affaires and Head Political, Trade and Communications, Paul Godfrey, said that the EU supported the UN Human Rights Chief Prince Zeid Al Hussein’s opinion that the proposed judicial mechanism should have an element of foreign representation but the EU’s principle focus was on the credibility of the process.

The EU will consider the application. It is a very formal and regulated procedure, where Sri Lanka’s compliance with international conventions will be evaluated.  There is a clear set criteria that the European Commission applies across the board for countries that are interested in applying for the GSP plus concessions.

The only basic condition is that the country should be a lower middle income country as constituted by the World Bank. There is a well-defined band of countries that are able to apply. This criteria signifies that the EU places priority on human rights and labour rights. Those who comply will be granted concessional access to the biggest market, the biggest economy in the world.

There is a clear set criteria that the European Commission applies across the board for countries that are interested in applying for the GSP plus concessions. These are not standards the EU has set but are conventions that each country has already signed up to.

That is not an accurate reflection of the things that are happening. GSP trade concessions are based on a very clear set of 27 conventions which applies to all countries.

In 2010, the EC conveyed to the Sri Lankan Government that they were concerned about 15 specific human rights violations. The Sri Lankan authorities at the time said that they had no interest in having discussions to address these concerns because they saw this as an imposition from the international community. That was obviously their decision. Due to that the EU withdrew GSP plus. If you want to be a member then you have to abide by the rules. Nobody is forcing Sri Lanka or any other country to apply for GSP concessions.

The EU is an early proponent of free trade. The EU certainly is a proponent of the Free Trade Agreement. What people need to understand is that the EU is not under any obligation to give access to anybody outside the European Union to its market, which is the biggest market, even larger than the US, China and India. If you want free access to that market then you need to abide by the conditions.

These conditions have not been arbitrarily set by the EU. They are commitments the countries themselves have made. All the EU is doing is supporting the international system. They choose to put an emphasis on human rights because for them those are fundamental values.

Prevention of Terrorism Act

Assuming that it has been one of the conditions, how justifiable is it to ask for the repeal of the Prevention of Terrorism Act (PTA)? There are indications such as the Eluga Tamil procession and the incitement of communal hatred in the North by Tamil politicians with vested interests.

It is not one of the GSP plus conditions. The EU is separately pushing the Government to comply with its own commitments at the UN Human Rights Council. In the resolution co-sponsored by Sri Lanka, it has made a number of commitments and one of those is to repeal the PTA and replace it with an alternative national security legislature.

The EU is in discussion with the Government about how to replace the PTA but it is not a condition for GSP plus.

Prime Minister Ranil Wickremesinghe is a proponent of the GSP plus facility and is actively championing the need to reengage the international community to get these concessions. Clearly the Government has made a decision that international isolation is no longer a sustainable way to move forward. It is perusing free trade and other trade agreements with a number of partners like India and China and not just the EU.

In the foreseeable future – the next two to three years – the UK will remain a member of the EU. As and when the UK does exit, then it will depend on what the agreement is for the UK to abide by certain EU trade agreements. At the moment we don’t know that, those negotiations are yet to begin. If Sri Lanka receives the GSP plus concessions in the foreseeable future, Sri Lanka will have access to the UK market.

The UK’s actual exit from the EU will take some time. The formal element is that when the UK triggers Article 50 under the Treaty Agreement that initiates a process which can last up to two years. That can be extended, subject to the agreement of member states. This is something which has not been done before so there is a bit of uncertainty as to what will happen. It will be the decision of the new Prime Minister of the UK when to trigger Article 50.

After the Brexit vote, there are voices in France, the Netherlands and Italy demanding a similar referendum. In such a backdrop, some wonder how viable it is for Sri Lanka to get into the GSP trade deal and commit to a set of EU conditions. Even without the UK, the EU remains the largest market in the world. Regardless of all this, it will still be the largest export destination for Sri Lanka. There is a clear economic value. The EU is not asking Sri Lanka to do anything that it has not committed itself to doing. The EU is not imposing conditions; we are pushing for the implementation of already set commitments. The EU doesn’t perceive these as a kind of trade-off. The EU is providing an incentive to do what the country has already committed itself to doing.

The Wickremesinghe Government has made some important steps to reengage with the wider international community. The previous Government had very limited relationships and suspected any international link as a threat. PM Ranil Wickremesinghe is openly working with the international community, not only with the West but with a number of Asian countries – China, Japan and even countries within the ASEAN region.

The EU supports High Commissioner Prince Zeid’s assessment in the original resolution that there will be a need to involve Commonwealth and foreign personnel in the judicial mechanism. There has been impressive progress in taking forward national reconciliation.

Sri Lanka lost the concession in 2010 precisely because it had failed on multiple fronts to adhere to conditions inherently attached to the GSP Plus. The EU examined implementation of three key conventions: 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 EU concluded that, “Neither the ICCPR, the CAT, nor the CRC, nor the legislation incorporating the obligations under these conventions have been effectively implemented in Sri Lanka during the period covered by the investigation.” The Government was given time to act; it failed and the trade concession was withdrawn. Much has changed since that report came out: the regime has changed and the Prime Minister has revived and resuscitated the country’s international relations through his leadership.

EU has strict monitoring mechanisms

If and when the GSP Plus concession is granted to Sri Lanka, the EU will, in two yearly cycles, monitor the implementation of 27 international conventions.

The monitoring mechanism involves two interrelated tools, EU literature states. The first is the ‘scorecard’, an annual exchange of information on beneficiaries’ shortcomings on each of the 27 conventions, as identified in particular by the international monitoring bodies. Beneficiaries are encouraged to provide information on their progress against the shortcomings and details of future plans. Responses to this GSP Plus report will be welcomed through their replies to the next scorecards.

The second tool is the ‘GSP+ dialogue’. This is a close engagement between the EU and the beneficiary countries to support them to tackle their shortcomings, discuss difficulties and recognise the progress made. The GSP+ dialogue seeks to build a relationship based on trust and cooperation, and makes use of existing bilateral fora e.g. on trade, human rights and labour rights.

“The exact objectives of GSP+ monitoring vary between beneficiaries,” a factsheet explains. “It is essential that beneficiaries’ challenges and achievements are seen in their own national contexts.”

The Sirisena-Wickremesinghe Government has engaged the EU constructively unlike the previous administration which had adopted a confrontationist attitude resulting in a large number of Sri Lankan exporters, especially in the garment sector and other small- and medium-scale industrialists, being left in the lurch.

The EU and Sri Lanka have begun the formal process that may lead to Sri Lanka regaining GSP+ status under the European Union’s new GSP regulation.

Sri Lanka and the EU discussed issues related to promoting bilateral trade and investment. In particular they started the process which may lead to Sri Lanka reclaiming GSP+ under the European Union’s new GSP regulation. They also discussed bilateral matters related to investment facilities, import duties and fishery exports from Sri Lanka to the EU.

The EU and Sri Lanka also reviewed progress on WTO Doha Development Agenda negotiations and expressed their hope that the Trade Facilitation Agreement would enter into force at the 10th WTO Ministerial Conference in December 2015.

PM Ranil Wickremesinghe’s expertise in international relations, international trade and economic affairs will pave the way for GSP+.

(The writer can be reached at 

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