GSP Regulation Sri Lanka, SriLanka GSP Conditions, Sri Lanka GSP Regulations: Fibre2fashion

While the EU and the US are reconsidering their options regarding the GSP status with Sri Lanka, what is its impact in the Sinhala island?

The EU adopted a GSP regulation scheme bringing it into force from 1^st January 2009, till December 2011. GSP is a trade arrangement which enables 176 developing countries to gain preferential access to the EU markets in the form of reduced tariffs for their goods in the European markets. The standard GSP provides preferences to 176 developing countries on over 6,200 tariff lines. A special scheme known as the GSP+ offers additional tariff reductions to shore up more susceptible countries. The Everything But Arms (EBA) arrangement provides duty free and quota free access for all products from 49 Least Developed Countries (LDC).

The primary objective of the GSP is to aid in minimizing poverty and promoting sustainable development among the developing countries. Preferential tariff rates offered by the EU for the developing countries enable them to participate in the international trade, and generate additional export revenues. Countries eligible for GSP benefits must satisfy several criteria. The initiatives taken by the country to protect the workers rights, acceptable work conditions, hours of work, prohibition of compulsory labor, checking on the minimum age of employment, prohibiting child labor, and right of collective bargaining will be considered while enabling GSP benefits.

US has decided to review Sri Lankas GSP status. It states that is has accepted a petition to investigate the fact, whether or not Sri Lanka is eligible to meet the criteria related to worker rights. The petition filed by the AFL-CIO (American Federation of Labor and Congress of Industrial Organizations) has stated allegations that Sri Lanka has violated labor standards. This includes violation of freedom of association, collective bargaining, non-enforcement of labor laws, and anti-union discrimination in the Sri Lankan apparel sector. It is stated to be the result of poor labor conditions, and non-compliance with international labor standards especially in the export processing zones and the apparel sector.

Will reclamation of GSP benefits affect the Sri Lankan Economy?

The international body findings have exposed findings regarding violation of human rights, and exploitations in the apparel industry. Some of the top apparel manufacturing companies in Sri Lanka are listed therein. The duplicity of these apparel conglomerates are exposed in a shocking manner in the complaint. Sri Lanka is at the brink of losing both the EU, and US GSP benefits. Earlier, the Republic of Maldives lost its GSP benefits due to such complaints. The EUs suspension of the GSP preferential tariffs is expected to lead to a loss of US$ 500 million for a year. This will mean a loss of 12% of the apparel exports of the country. Observers also comment that, if the GSP benefits are terminated, massive economic downfalls would crop up, and more job opportunities would be lost. Trade unions of the apparel sector have voiced their concern of cost cutting by employers in the apparel sector.

On the contrary, some experts assert that, Sri Lanka is not likely to be much affected by this as most of the textile and apparel products exported to US are excluded from the GSP regulations. They believe that the country posses the ability to achieve higher levels even without the GSP benefits. Though GSP benefits are a bonus for countries to enter into the global market, still, Sri Lanka is not dependent on the discounts for ever.

Labor cost in Sri Lanka is comparatively lower against the European labor cost which is an advantage for Sri Lanka as Europe has many manufacturing units. Some firms in the country believe that added focus on productivity would add an advantage as high levels of productivity would improve the quality of their goods, and buyers will continue to do business with them even without any concessions. This would be a key step in developing better links with the international buyers.

Speculations regarding the recoup of GSP benefits from Sri Lanka have evoked mixed reactions globally, with arguments happening in favor of, and against the country.

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