End of GSP+ deal to affect apparel firm's profit margins

08 Jul '10

2 min read

End of duty-free access to Europe, owing to end of the trade deal, will not create an upheaval for the apparel industry, although, it might pinch the already thin profit margins, informed an industry official.

A Sukumaran, Chairman of the Joint Apparel Association Forum said that, the industry was finding ways to tone down the loss of GSP+ deal, when it comes to an end in August.

In addition, under the GSP+ trade deal, only one-third of the exports get qualified, while the remaining two-thirds are unaffected by the loss of the deal, continued Sukumaran.

Hence, end of GSP+ deal would not imply as a disaster for the garment industry, although, it might affect it in some way such as the industry experiencing a slump in the exports, thereby, lessening employment. But going by the current dearth in workforce in the apparel industry, absorption of about 25,000 people can also take place, informed Sukumaran.

EU countries decided to lift the GSP+ privileged trade benefits from Sri Lanka, owing to EU Commission naming it as, 'vital shortcoming', on the issue of human rights. Hence, Sukumaran said that, it is most likely that, the garment exports, which are Sri Lanka's key industrial export, might come down by 10-15 percent this year, reaching US $2.7-2.8 billion, as compared to last year.

With the end of the GSP+ trade deal, exporters from Sri Lanka will lose duty free entry to EU markets and an import duty of 9.6 percent will be levied on their deliveries.

However, Sri Lankan exporters are now of the thought that, while EU buyers might agree to pay the import duty or share the same with domestic producers, others might disagree and explore different nations for their requirements.

Although, work is underway to safeguard the thin profit margins, apparel industry will be unable to lessen their costs by 9 percent, as the economic nitty-gritty is functioning against them.

Fibre2Fashion News Desk - India