Re-applying for EU GSP+ trade concession

During the recently concluded visit of European External Action Service Acting Managing Director – Asia and Pacific Paola Pamploni, the Government of Sri Lanka expressed its intention to re-apply for the vital trade concession scheme – the EU GSP+.  The GSP+ of the EU is a non–reciprocal tariff concession given to low–or lower–middle–income countries, conditional upon the implementation of 27 international conventions related to labour and human rights, environmental and climate protection, and good governance.

In order to ensure compliance with the 27 international conventions, the Government is undertaking legislative reform that include repeal of the Prevention of Terrorism Act (PTA) as well as introducing amendments to the Online Safety Act (OSA). While in opposition, the NPP strongly condemned the OSA, with current leaders previously calling it a highly flawed piece of legislation intended to suppress dissent. However, after coming to power, the party has been accused of using the same legislation to stifle criticism by the Opposition. In fact, many NPP members of Parliament have reportedly lodged complaints with the Criminal Investigation Department (CID) regarding online trolling and defamation by Opposition supporters, using the same Act they previously opposed.

Critics have slammed the imposition of strict conditions by the European Political and Economic Union related to human rights and civil liberties, but such tough conditions have prevented administrations from undertaking acts that severely breach human rights and curtail freedom of expression in the island. Had it not been for the EU GSP+, there would have been severe infringement of the democratic space in the country under the presidency of Gotabaya Rajapaksa.

In 2010, Sri Lanka lost the EU GSP+ during the tenure of Mahinda Rajapaksa due to the then administration’s failure to effectively implement specific UN human rights conventions regarding civil/political rights, torture, as well as the rights of children. Between 2005 and 2010 (during the initial period of GSP+), under the preferential market access, the country’s  exports to the EU grew on average by 7.96% despite a decline in consumer demand in Europe because of the financial crisis in the region from 2009 to 2010. Contrastingly, during the 2010-15 period, Sri Lanka’s exports to the EU grew by a mere 1.02% with the direct tariffs being reinstated on Sri Lankan imports to the EU, making them uncompetitive compared to similar imports from other developing economies such as Bangladesh, India, and Vietnam.  Since Sri Lanka re-gained GSP+ in 2017, its GSP+ utilisation increased from 55% in 2017 to 63% in 2019 while Sri Lanka’s total exports to the EU increased from Euro 2.6 billion in 2017 to Euro 3.0 billion by 2019.

Early this year, both India and the EU successfully concluded negotiations on a landmark Free Trade Agreement (FTA). Key export items from India to the region like textiles, apparel, marine, leather, footwear, chemicals, plastics, sports goods, toys, gems, and jewellery will become eligible for zero duty once the FTA comes into force. In view of the aforesaid development, the continuity of the EU GSP+ trade concession is extremely vital to safeguard the island’s export industries.

Meanwhile, the UK, which is no longer a member of the EU, granted enhanced benefits to Sri Lanka under the Developing Country Trading Scheme (DCTS) by implementing liberalised rules of origin effective from this year. Under the revised framework, Sri Lanka’s apparel manufacturers are permitted to source up to 100% of their raw materials globally while continuing to enjoy zero-tariff access when exporting garments to the European state.

The continuity of favourable market access to the EU would be vital given the Government’s ambitious export agenda which seeks to increase the value of total exports to $ 36 billion by 2030.