Engaging the international community with dignity

  World leaders at the London Conference on Afghanistan – 28 January 2010

Following up on our Opinion page article in the 22 October edition of the Daily FT on ‘Engaging the international community with dignity,’ we reproduce below the article of 19 July 2010

The EU, GSP+ and Us

Over the last year and more, I have found the less than objective dialogue on what I term “The EU, GSP+ and Us” quite distasteful. While there have been some good independent and objective editorials in several papers, the print and electronic media gives considerable space and air time to the antics and theatrics of policymakers and planners.

Equally distasteful are the stylish and faddish conversations, which transpire in the luxury of clubs and social gatherings, where “experts” of all kinds take positions. But these are fuelled primarily by intoxicating spirits, rather than the substance of international trade and diplomacy. 

This is particularly so, since most of these opinion givers, sometimes with no knowledge of or connection to any of the affected industries or exempted from the need to feel the pains of kith or kin in the labour force, either want “to be” and “to be perceived to be” on the “right” side rather than being objective and balanced.  

This of course in a democratic country will remain their privilege. While it may enhance their social and commercial mobility, temporarily, to what extent it will impact their credibility, permanently, only time will tell. Meanwhile, regrettably, a country in which we are all equal stakeholders loses credibility.

Getting real and practical

Despite all this superficiality in debates and discussions, I must also say that I have been encouraged by the well-schooled and academically and professionally well-qualified and experienced young economist minds – a next generation which demonstrates independence, objectivity and balance.

There is depth, breadth, practicality and seriousness in their comments in person, and in articles and presentation at seminars. We must encourage them. The Government would do well in inviting and leveraging these minds, rather than going in to battle with the world with tools, techniques and minds which have past their best before dates.

This is necessary since it can be said without any fear of contradiction from those who are “up to date and aware” that our relationship with the European Union and our continued eligibility for GSP+ concessions are both important for our country and its people.

Throughout history – even recent history – of developed, developing, industrialised or emerging nations, the growth of economies, industries and exports and the upliftment of people have been driven by certain tariff or other concessions.

A nation which has the interests of its people – in particular people who are less than privileged – needs to understand this, rather than be intimidated or embarrassed by it. The EU has subsidised its dairy farmers, the US its cotton farmers and Japan its agriculturalists, to name a few.

Belittling the importance of GSP+ will not help anyone. Extolling the virtues of productivity enhancements as a counter strategy-enhancements much of the industry has already engaged in, or statements that we can play with an exchange rate to compensate the industry, are all reactive political comments. This is not the medicine for the ailment. The patient is not the industry.

Flashback 2006

Writing in the Thought Leadership Forum in January 2006, in the then Daily Mirror Financial Times, I said as follows, under two captions that may be relevant in the current context: 

“Credibility and Reputation Management – We are now a country with a credit rating. The very purpose of a rating is to attract investment or funds into the entity seeking a rating. In this instance, the nation. Beyond macro-economic management and fiscal discipline, progressive nations manage their credibility as a destination for investment inflows, tourist arrivals, and development assistance as well as, as a responsible source from which an overseas country will permit imports. Reputation management however is a challenging task. It is not about, ‘an after the fact’, or post-disaster type of management, unless it is an unexpected natural disaster such as the tsunami. It is about preventing, pre-empting and hedging against events. 

“Protecting what we have – Child labour; subpar working conditions at factories; environmentally inappropriate manufacturing practices; human rights violations; weak laws etc can result in Governments of major markets for the exports of a country, blacklisting that country. Up to now we in Sri Lanka, yet have a good record and can take pride in our reputation. However an uncontrolled or uncorrected breakdown in law and order can evolve into something serious. Over a period of time FDI and foreign portfolio inflows may choose alternate locations. Organisations granting aid and concessionary loans and nations and trading blocs providing preferential access, may also review their levels of assistance and access to markets.”

(End of extract – January 19, 2006)

Regaining what we earned

The apparel, footwear and tableware companies and all others who are affected, have worked long and hard for years, invested time, money and technology, foregone returns, carried costs and carried losses and people to achieve world-class status. 

These industries did not get to where they are because they were domiciled in a nation with a long history, rich culture, proud heritage, warm climate, and scenic beauty. They did not earn this concession because somebody somewhere called us a big miracle or a small one or because we promoted the nation as a destination for tourism as a “land like no other”.

The industry strived to be globally competitive. They became eligible, and were enjoying this preferential market access not necessarily as a handout. It was earned with dignity. It was earned over time. It was earned by investing in processes and people. Having done so, they sweated, toiled and persevered to remain there.

Our people from the cities and rural parts who worked with these industries and had food put on the tables of their families as a result, worked hard and complied with good manufacturing practices and persevered to progress towards quality. Thus, a progressive leadership has a responsibility to protect their position in the global marketplace. 

Walking away is not a response

The answer is not to walk away from the EU as a market while engaging in idle rhetoric for consumption in the local marketplace, while we lose our position in a global marketplace. This will only raise the hopes of people, that there are other markets whether in Eastern Europe or Asia. That statement is not wholesome, honest or sincere.

Industrialists do not simply establish a beachhead, plant a lion flag as it were, and start selling their wares. If Eastern Europe and Asia are potential markets let us target those markets anyway, but not as a “new girl” in order to spite the previous one, who rightly or wrongly, we have been estranged from by default or otherwise. It is the industrialists who will know how hot or not, these so-called “new markets” are.

Not a one-way concession 

Those who buy our products in the EU do not do so out of compassion or philanthropy, to help a nation that was at war or battling a tsunami or a recession. They buy these because they either look good in them or find them good to showcase on their fine dining tables or elsewhere.

Those who procure our goods and wholesale or retail them in Europe at a profit and those who are employed by them are all beneficiaries. So are their individual consumers at a time when Europe itself has to stimulate consumption rather than impose measures of austerity.

While we simply do not have the right to demand its continuity, or to make a public spectacle at the highest levels by fasting to death, or by organising protests against the EU, I am also unsure whether it is right, just or fair, or to use a typically English term, ‘proper’ for the EU to deprive us of GSP+ in its entirety.

We on our part have a responsibility to protect the good name of the country while maintaining our dignity and self-respect. Those who provide the preference have a responsibility to ensure that what is allowed as a preferred import is sourced from a country or countries which are and are perceived to be responsible. But this is not a black or white issue. It requires deep thinking on both sides.

EU’s convergence criteria

We can adopt several approaches – one a ‘sour grapes’ defeatist approach, the other a negotiated programme and an action plan to incrementally and progressively achieve a higher level of respectability.

The latter does not require compliance with the entirety of the wish list of the EU or even if taken piecemeal and in a phased-out manner, does not require to be done because they wish it done, but because we wish to do it for ourselves. If, on our part, we are not to be defensive, offensive or defeatist, the EU should also not be rigid.

We all know how the macro economic convergence criteria required of EU member countries do not necessarily make the best sense or reflect the best logic. In far more diplomatic language, this is a caution I conveyed in a seminar in 1999 at the BMICH, while serving as a panellist, coincidentally by choosing Greece as an example.

The then EU Ambassador to Sri Lanka was also on the same panel. But I was not an economist then – two decades ago – and neither am I one now. It was common sense, practicality, the need to balance macroeconomic management imperatives, fiscal responsibility targets and other convergence criteria, with socio-political imperatives of nations such as Greece – that drove my concerns and comments.

Getting out of a rut

We in Sri Lanka were in a rut for 30 years. It is not only successive Governments, the Armed Forces, and business enterprises but also the worker in the city or the village who had to endure the pain.

We got out of that rut with difficulty, despite many who said we couldn’t, many including myself who thought it difficult and time-consuming and that a continuation of the war was robbing a nation of opportunity. There were many who would have liked us to remain in that rut and perhaps wish that we got back into that rut again. 

Nations world over and their leaders who have their heads and hearts in the right place must lend a helping hand to Sri Lanka to get up and begin to walk again. Their response, then, must be to find a way to seek convergence on a way forward rather than to impose an inventory of conditions with unrealistic deadlines. 

If the world got together to pull Afghanistan out of a rut, a rut it yet has to get out of, the same magnanimity, creativity, passion and patience, collective thinking and incremental assistance must drive that response. The world has an ethical and moral responsibility to do so.

Policy space 

I will make bold to say that the European Union itself must be mature enough not to marginalise a country, which to them may not be as strategically important as China or the ASEAN nations. Sri Lanka requires and indeed deserves the policy space and time to progress to the next stage.

In the meanwhile, the industry and those who depend upon it should not be victims. Allowing them to become victims, by default on the part of either the EU or Sri Lanka, would be incompatible with some of the basic reasons for nations or trading blocs to grant concessions-viz. poverty alleviation and sustainable development.

On the latter score has the country and the industry not been compliant? If the answer is yes, does the EU throw the baby out with the bath water? I think that would be irresponsible.

Good enough for any market 

We must remain good enough for any market, whether in Western or Eastern Europe, North or South America, and hold our heads as high as those in markets, which subsidise dairy products or cotton.

While on the one hand we must not permit any one country or any trading bloc to tarnish our image while sitting in and enjoying the comforts of their homes or positions of authority, on the other hand we on our part have to be sensitive, responsible and mature in how we respond.

Our response then should not be to make derogatory public statements, relegate the authors of EU communications into dustbins or walk away and refrain from replying. We must engage the issuer of conditions and begin a process of negotiations. We must seek a realistic timeline and work sincerely towards it.

Building bridges, not burning them

We do not do have to do anything because an IMF or the World Bank or the EU or the UN says that we must do it. We do what we have to do, for ourselves – for the benefit of the people of the country, the current generation and generations yet unborn.

For example, we commit to fiscal discipline and financial prudence, since we know it is a healthy thing to do. We do so because we have a responsibility to the nation’s balance sheet and our people, not because we signed letters of intent, or agreements with conditions or caveats with any single country or institution offshore or to please the resident representative of any single institution, whether bilateral or multilateral on shore.

A political leadership does not have the privilege to urge the people to live in a nation in isolation or aligned only with some countries and estranged from others. That was a policy and a dogma of the past. It is now out of style. China and Russia and even Cuba have learned from these lessons of the past.

On our part, we must build bridges, not burn them. Those bridges are not only with the international community but bridges our industrialists have to the market place. It is a fundamentally necessary infrastructure, of a growing nation – a small nation, whose marketplace is limited.

On its part, the international community must have the maturity to understand that change does not happen because we sign a letter of assurance. Progressive change is possible, but it requires a partnership. A partnership which in turn requires an alignment of interest. A sincere alignment of interest. 

All sides must demonstrate maturity, accountability, responsibility and advance to a level of seriousness, so that we tame a tide rather than put out fires. This requires someone to step forward. But who makes the call? Do the people of Sri Lanka have a stake in that call? If the answer is yes, then the call may be ours to make.

I write while overseas in the early hours of a morning. I invested time to write because I am pained to see the stance of my nation; the stance or absence of a proactive stance on the part of leaders of business and commerce and chambers which represent them; the stance of a European Union, which requires to be flexible, and the absence of a role by a wider international community similar to the role a multiplicity of nations and development partners play in Afghanistan or the coalition forces endure in Iraq.

I am hopeful that better sense will indeed prevail on all fronts.