The restoration of the European Union’s “Generalised Scheme of Preferences” (GSP Plus) is one of the most significant diplomatic victories of the Yahapalana Government, on par with its handling of the human rights resolutions at the UN Human Rights Council.
This is great news for our exports sector, especially the apparel industry which accounts for 46 percent of Sri Lanka’s exports to the EU, with the GSP Plus being a trade concession system that allows developing countries to pay less or no duties on their exports to the EU. This gives them vital access to EU markets and contributes to their economic growth. The one-way trade preferences would consist of the full removal of duties on 66% of tariff lines, covering a wide array of products including textiles and fisheries, the EU said.
The mention of the UNHRC in the first paragraph is no coincidence. Sri Lanka lost the GSP Plus status in 2010 during the Mahinda Rajapaksa presidency, due to the UNHRC alleging violations of human rights. The GSP+ trade concessions are linked to a country’s compliance with human rights and labour rights conventions.
When the EU evaluated Sri Lanka in 2014 it found that the country was not adhering to three of the 27 international covenants that a country must abide to qualify for the consideration of GSP Plus. Although the previous Government raised a hue and cry about these conditions affecting Sri Lanka’s sovereignty, they were actually beneficial to all Sri Lankans. Human rights are universal – we must adhere to all HR norms and practices if we are to be a member of the global community. Sri Lanka very nearly became a pariah state because the previous Government’s lackadaisical attitude to human rights and its failure to address any of the concerns raised by the international community.
In restoring the facility, the European Council has said it welcomed the significant advances made by Sri Lanka to restore democratic governance, initiate national reconciliation and re-engage with the international community and the United Nations system while noting that the country still has room for improvement on the HR front.
It was none other than President Maithripala Sirisena who broke the news that the EU was on the verge of re-granting this facility. President Sirisena, Prime Minister Ranil Wickremesinghe and Foreign Minister Mangala Samaraweera deserve plaudits for this achievement that is yet another sign that Sri Lanka is no longer isolated on the global stage.
The restoration of GSP Plus will be a huge boost for the apparel industry, but it is not the only industry that will benefit. There are a variety of other products from flowers to precious metals that come under the purview of GSP Plus. Now these industries face the onerous challenge of making the maximum use of the GSP Plus facility, bearing in mind that Sri Lanka is not the only pebble on the beach.
In fact, some of Sri Lanka’s most fierce competitors in apparel and several other industries in the Asian region also enjoy the GSP or GSP Plus trade concessions. Among them are Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Myanmar, Nepal, Timor Leste and Yemen. Worldwide, there are eight countries that enjoy the enhanced GSP Plus - Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan, Paraguay and the Philippines. We have to catch up with some of these countries that enjoyed GSP Plus uninterrupted.
This is essential, since the EU is Sri Lanka's biggest export market accounting for nearly one-third of Sri Lanka's global exports. In 2015, total bilateral trade reached euro 4.7 billion. In the same year, even without the GSP Plus, EU imports from Sri Lanka amounted to euro 2.6 billion and consisted mainly of textiles as well as rubber products and machinery. The trade potential with GSP Plus on board is much greater.
But our exporters cannot sit on their laurels even with the GSP Plus back in play. Being a Middle Income country, Sri Lanka mostly does not qualify for many loans and grants from foreign governments. Trade is the best alternative, as exemplified by the famous slogan “trade, not aid”. The Government has begun an urgent mission to intensify exports and trade. Free Trade Agreements are due to be signed with several countries including China. Developing the Colombo and Hambantota Port, as well as the proposed investment zone in Hambantota, will help propel exports which have benefitted by the depreciation of the rupee. Sri Lanka is well on its way to becoming a hub for the SAARC region, but we have to think beyond that.
Sri Lanka has to diversify its exports and reach new markets beyond North America and Western Europe. There are some regions which our exports do not reach at all. More promotional campaigns should be started to popularise Sri Lanka’s exports, especially tea and gem and jewellery. Increasing exports is also the answer to the country’s Balance of Payments concerns. GSP Plus is thus a timely shot in the arm for our export sector which must pursue a vigorous expansion in the coming years.
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