Sri Lanka is on the brink of re-gaining the European Union’s much sought after trade concession, GSP + (Generalised Scheme of Preferences) after five long years of withdrawal.
Many countries enjoy EU’s special trade facility, but only a mere eight countries are currently granted the exclusive GSP + concession, which provides duty free access for a total of nearly 6,500 goods, to the world’s biggest economy, the European Union. The EU offered GSP + to Sri Lanka in 2005, months after the devastating tsunami. The industry, especially, the Ready Made Garment (RMG) sector thrived as a result, until the concession was withdrawn in August 2010, amid allegations of rights abuses during the end of the LTTE war. The then government refused to comply with the conditions put forth by the EU to renew the tariff concession.
The Unity Government in June 2016 formally applied for GSP+ after months of discussions and action on the ground. The European Commission announced last week that it has decided to submit the proposal to the EU Parliament supporting Sri Lanka’s case. While the Industry welcomed the latest developments in the EU front, opposition parties have been accusing the government of compromising the country’s interests to gain EU trade concessions.
Deputy Foreign Affairs Minister, Dr.Harsha De Silva, in an interview with the Sunday Observer denied these allegations as mere political witchcraft.
The excerpts of the interview:
Q:The European Commission has proposed to restore the special conditions under the GSP plus tariff relief for Sri Lankan exports, are you confident that this proposal will be approved by the EU membership and EU parliament, for Sri Lanka to become the ninth country to enjoy these exclusive privileges? How long will this process take ?
A: We are absolutely confident, because many leaders have told both the Prime Minister and the President that they are fully backing Sri Lanka on this, at many international fora. There is no doubt that the proposal by the European Commission will have their collective support.
The proposal will go to the EU parliament on Monday. Then, the next process will take a minimum of two, and a maximum of four months. The proposals will have to be endorsed by each member parliament, and finally, the EU parliament in Brussels, before Sri Lanka is granted GSP plus status.
Q: What is the quantum of benefits the country stands to gain if GSP plus concessions are restored? Many garment factories closed down, when GSP plus concessions were withdrawn in 2010 due to a lack of compliance by the then government. How will you get about reviving them?
A: In fact, lots of academic research have been done on this, several journal articles published, both, locally and internationally. The general loss suffered during the past five years can be estimated at over one billion US dollars, according to academic research.
But, that is only one part of the loss, the bigger loss was the lost opportunity to competitively export to the EU duty free. When we got the GSP plus for the first time the utilization rates went up, but, when we lost the concessions the utilization rates dropped. As a result, the other countries were able to consolidate and expand their exports. What we hope to do and what the industry hopes is, to take advantage of the duty free access and regain our lost market.
GSP plus duty free concession will be close to ten percent. In a competitive market it is a huge amount. Over a thousand different items can be exported to Europe without any duty at all, if we qualify for GSP plus.
Although members of the former regime are reluctant to admit, as a result of GSP plus withdrawal, incomes suffered, and many jobs in semi urban areas vanished. But, once again we are poised to expand and divert our export portfolio into Europe. We have seen over 200% increase in fish exports to EU in the last couple of months, as against the corresponding period, the previous year because, we were able to remove the fishing ban. There is a huge increase in jobs and livelihoods for poor people in this sector in Sri Lanka.
Q:Under new GSP plus concessions, do benefits remain the same, or do we stand to gain more, covering additional products or additional tariff relief ?
A: The concessions are the same, with complete duty free access to the EU market for hundreds of Lankan exports. I think there are three other Asian countries, Pakistan, the Philippines, Mongolia, which get this duty free access to the EU market.
What happened to Sri Lanka’s exports over the past years is very sad. The previous government did not place the necessary emphasis we ought to have, on exports. In 2000, Sri Lanka exported 34% of its GDP, but by 2014 end, when we assumed office the exports had fallen to 14%. And there was a crisis with respect to foreign loans, value of the rupee as against the US dollar, cost of living, job issues. They are all related to the shrinking exports.
Exports are at the centre of the country’s development story. It gives a huge boost to create jobs, bring in new investments and set up new factories. Today, many countries have surpassed us. A few years ago, we were on par with Bangladesh in terms of exports, but today, their export volume is 15 times more. So, we have a lot of catching up to do.
Q: The GSP Plus trade concessions will definitely help boost the country’s economy. But, there are allegations that you have compromised Sri Lanka’s foreign policy and sovereignty, for the sake of Forex. How do you respond to this allegation?
A: That is absolute nonsense. We have just fulfilled the promises given to the people before the election. The people threw out the authoritative regime in January 2015 to reestablish democracy in the country.
We established independent commissions, the rule of law, good governance, rights of human beings. The EU has recognized our commitments, including the enactment of the 19th Amendment. This has nothing to do with demands of the East or the West, or any foreign government. These are the promises given by us to the people. The masses have endorsed these demands, not just once, but twice. At no point have we compromised our sovereignty. These are allegations of bankrupt politicians.
Q: There were claims that the GSP plus trade concessions were unreasonably tied to 58 conditions, which were later pruned down to 15. Has the government agreed to abide by these conditions ?
A: Let me reiterate that there had never been any unreasonable conditions whatsoever. There had been a bunch of international obligations that we have been talking about on a multilateral basis, which have nothing to do with GSP plus concessions. Right to Information is something that we promised the people, and had been trying to put in place since our days in the opposition. The former authoritarian regime did not allow us to do that. Our government introduced right to information laws, it is a strong point for GSP plus as well.
There were no conditions that unduly infringed on the sovereignty of the country, everything was about good governance and rule of law.
The Minister of Foreign Affairs is at the centre of driving this process forward. We had a discussion with the President, Attorney General, Ministers, including Mahinda Samaraisnghe, Susil Premajayantha and Faizar Mustapha, and Secretaries of Ministries, on Poya Day (Thursday) to address the concerns of the respective political parties.
Everyone agreed to every single point in the national human rights action plan which is being formulated.
Q: The EU had reportedly demanded reviewing the list of Tamil diaspora groups and individuals in the terrorism list. Has this been pursued in relation to restoring GSP plus tariff concessions ?
A: I don’t remember everything we discussed, but generally, we discussed restoring the rights of the people and the effective implementation of international human, labour and environment rights conventions, that we have become party to, voluntarily.
Q: Britain is Sri Lanka’s biggest export destination within the EU. Nearly, one third of total Lankan exports to EU reach Britain. With the impending exit of the former colonial giant from the world’s biggest trade bloc, do you think it was a good bargain ?
A: Britain’s actual exit will not happen immediately. Sri Lanka’s industry stands to benefit until such time. And in fact, we did not agree to any condition that infringes on the country’s sovereignty.