Home / Other Sectors/ Sri Lanka exports to rise after regaining GSP+ status: Oxford Biz Group

Sri Lanka exports to rise after regaining GSP+ status: Oxford Biz Group

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 12 July 2017 09:50



The recent decision by the EU to once again cover Sri Lanka under its tariff exemption scheme, designed to assist developing countries in achieving upper middle‐income status, should serve to boost exports and generate renewed private sector investment, according to the Oxford Business Group.

It said on 19 May the EU would formally restore Sri Lanka to the ranks of countries that benefit from the enhanced Generalised System of Preferences Plus (GSP+), which provides additional tariff preferences.

The move was an acknowledgement that the country had committed to ratifying and implementing

27 international conventions covering issues such as human rights, labour conditions, environmental protection and good governance.

Breaking trade barriers

The restoration of Sri Lanka’s GSP+ status means tariffs on more than 6,000 products have been removed, with the complete lifting of duties on some two‐thirds of all tariff lines.

Sri Lanka’s GSP+ status was revoked in 2010, five years after first being granted. The cancellation came as a result of a ruling by the European Commission following the adverse findings of an investigation into allegations of human rights abuses at the end of the country’s civil war. While Sri Lankan exports retained some concessions under the standard GSP scheme, it was the ‘Plus’ that conferred many of the advantages that allowed its goods and services to be successfully exported to the bloc.

Though noting that Sri Lanka still had much to do in the way of strengthening rights and eliminating discrimination, the EU Commissioner for Trade Cecilia Malmström said the reinstitution of GSP+ was recognition of the advances made in reinforcing human and labour rights.

“It is also a vote of confidence from the EU that the Sri Lankan Government will maintain the progress it has made in implementing the international conventions,” she said on 16 May ahead of the announcement.

Opening EU doors

The European bloc is already Sri Lanka’s largest export market, with more than 30% of all outbound shipments going to the EU.

The easing of the tariff barriers will likely serve to increase trade flows even further for Sri Lanka’s benefit. Of the nearly € 4 billion in bilateral trade recorded last year, Sri Lankan exports to EU member states accounted for € 2.6 billion, giving it a strong trade surplus.

With some estimates putting the immediate boost in revenue from the lifting of many of the tariffs at € 300 million, and the opening up of European markets to Sri Lankan products set to increase this further, prospects for local exporters are on the rise.

Potential for trade growth

If Sri Lanka’s exports to the EU resume their pre‐2010 levels, there could be a surge in growth in a number of key primary and secondary industries.

In the five years prior to the revocation of Sri Lanka’s GSP+ privileges, the country’s exports to the bloc rose at an average annual rate of 16.4%. While exports have continued to increase in the years since, this rate of growth has been less than half the 2005‐09 level, albeit at a still robust 7.4% per annum.

The expected boost in shipments to the EU is timely for Sri Lanka, which has seen its overall exports ease in recent years.

Outbound shipments fell by 2.2% in value terms in 2016, dipping to $ 10.3 billion. This was down from the $ 10.5 billion posted the previous year, a result which itself represented a 5.6% decline from 2014. This easing of exports contributed to a widening trade deficit, which reached 11.2% of GDP in 2016, up from 10.4% the previous year, according to Central Bank data. By end‐ 2016, the trade shortfall had risen from $ 8.4 billion to $ 9.1 billion.

In addition to reviving its trade metrics, Sri Lanka’s return to the GSP+ fold should also spur investment in some key sectors – particularly textiles and agriculture, which account for the bulk of current shipments to the EU.

Private sector investment is already on the rise as confidence in the economy gains pace. With the added incentives of an open door to EU markets, there could be a further increase in spending on export‐focused production.

Double‐edge sword

However, as was demonstrated in 2010, GSP+ concessions are not fixed, and remain subject to constant monitoring and revision. Should Sri Lanka’s progress towards meeting international and EU criteria wane, it could put its status at risk again. 

Furthermore, under EU trade regulations, any country benefitting from the GSP+ scheme that achieves and maintains upper‐middle‐income country status for three years is deemed to be economically advanced enough to not need the additional support, and is therefore removed from the scheme.

Even with some estimates suggesting Sri Lanka could achieve this status in the next few years, the country’s economy is likely to enjoy, at a minimum, half a decade or more of privileged access to the EU market, allowing producers and exporters to further build capacity and cement trade links with Europe.

Share This Article


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

Women’s bodies, masculinities and economic insecurities

Thursday, 22 March 2018

Cat’s Eye was deeply saddened to witness another wave of anti-Muslim violence, yet again, under a Government which promised to protect them from such violence. It was reported that the first round of violence in Ampara was sparked by a claim that

Strong brands can sustain shocks!

Thursday, 22 March 2018

The recent media highlighted the impact of communal violence on the tourism industry. The press conference earlier this week threw out a number as high as 10% whilst the actual cancellation was around 500 room nights around the Kandy vicinity was rep

Racism, riots, and the Sri Lankan State

Thursday, 22 March 2018

“One’s life has value so long as one attributes value to the life of others, by means of love, friendship, indignation and compassion” – Simone de Beauvoir

Why Ranil is still needed

Thursday, 22 March 2018

The Joint Opposition move to pass a vote of no-confidence in Prime Minister Ranil Wickremesinghe will come a cropper. Ranil knows that best as he has tersely told a group of opposition pollies (Australia slang for ‘politicians’), “Come on! Pres

Columnists More