EU gives SL a wake-up call on trade policy

• First formal review mission on GSP+ shortly following resolution against SL in June

EU Ambassador Denis Chaibi

Delivering a wake-up call to the Government, the European Union (EU) Mission in Sri Lanka last week stressed on the need to align trade policies before the situation worsens.

Although import restrictions imposed by the Government are understood in the context of the Balance of Payment (BOP) crisis, EU Ambassador Denis Chaibi said: “Conventions of the World Trade Organisation (WTO) should be respected.”

“Last year, EU exports to Sri Lanka were the lowest recorded in a decade,” he told a webinar titled ‘GSP+: Past, Present, Future’. It was jointly organised by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and the Colombo Chamber of Commerce. 

Pointing out that the balance of trade with the EU had always been in favour of Sri Lanka, the Ambassador raised concerns on the serious imbalance exacerbated by import restrictions not formally notified to the WTO.

“We have no problem with the beneficiary balance for Sri Lanka, because the EU believes in free and fair trade. However, at some stage, there should be a reflection before this matter gets worse,” Chaibi stressed.

He explained that some considerations could be given if the restrictions were temporary and duly notified.

It was also revealed that a mission was scheduled in the coming months to assess the progress of Sri Lanka to retain the GSP+ concession.

Although it is yet to be decided whether the review will be held virtually or in person, Chaibi said the EU was keen to allow Sri Lanka to continue to reap the benefits of GSP+ for which it wanted to ensure the concerns raised on the human rights front were addressed.

“Commitment to international conventions, where social standards are respected make economies more competitive,” he said, adding that Sri Lanka was in a good position compared to other countries in the region. 

The mission will conduct the first formal review of Sri Lanka’s compliance to the conventions laid out by the EU and progress in areas of concerns since a resolution was adopted by the European Parliament in June, urging the European Commission to temporarily withdraw Sri Lanka’s GSP+ status.

Underlining the benefits enjoyed by Sri Lanka through the preferential access to the largest and most competitive high-end EU market, Chaibi said: “It is not easy to replace a market.”

Last year Sri Lanka’s merchandise exports amounted to $ 10 billion, and the Government has set a target of $ 12 billion in 2021, of which $ 5.7 billion was achieved by June.

The EU remains Sri Lanka’s largest export market, accounting for 30% of the total. Nearly 60% of Sri Lankan exports benefit from some form of preferential access due to EU GSP+ and US GSP schemes.

The resolution on Sri Lanka was adopted noting the Government’s persistent failure to adopt and enact human rights reforms and repeal the draconian Prevention of Terrorism Act (PTA). Up to 628 votes were cast in favour of, 15 against, and there were 40 abstentions.

In January 2020, the EU delegation in Sri Lanka reassured that it would continue the GSP+ concessions to Sri Lanka till 2023 while noting that there would be ‘no changes’ in the rigorous monitoring of the country’s progress in implementing the conventions.

Sri Lanka regained the EU GSP+ privileges for Sri Lankan exports in May 2017. The trade preferences under GSP+ consist of the full removal of duties on 66% of tariff lines, covering a wide array of products, including textiles and fisheries.

The GSP+ scheme is conditional on Sri Lanka advancing human and labour rights and working towards sustainable development. Since the resumption of GSP+ concessions in 2017, Sri Lanka’s total exports to the EU has increased by 28%.