November 5, 2009 / 3:05 PM / 10 years ago

Q+A-EU's GSP+ trade concession and Sri Lanka

By Shihar Aneez

COLOMBO, Nov 5 (Reuters) - Sri Lanka’s deadline to respond to a European Union rights probe report is Friday, if it wants to try to retain a lucrative trade concession from the bloc which helps Sri Lanka’s top export, garments. [ID:nCOL517986]

Following are some questions and answers on the EU trade concession and the possible impact if it is lost.

WHAT IS THE EU GENERALISED SYSTEM OF PREFERENCES PLUS (GSP+)?

It is a special incentive scheme for sustainable development and good governance, offering tariff cuts to support vulnerable developing countries in ratification and implementation of international conventions in these areas.

WHY IS THERE A POSSIBILITY OF SRI LANKA LOSING GSP+?

An EU probe has found Sri Lanka in breach of international human rights laws. Western diplomats say it will be very difficult for Sri Lanka to come back from losing it at this stage.

WHY DOES IT MATTER FOR SRI LANKA?

Sri Lanka is one of 16 countries with GSP+ status. Garment exports, the country’s top foreign exchange earner, have benefited substantially with a 6-7 percent concession, and the EU has been the product’s main buyer. The value of the benefits has been estimated at 78 million euros ($116 million). Losing GSP+ means EU buyers will have to pay more for Sri Lankan exports, thus the exporters lose price competitiveness and market share.

IS THERE ANY WAY SRI LANKA COULD GET GSP+ RENEWED?

If Sri Lanka could address the concerns of the EU in the next few months, there is a possibility. Diplomats say some of those concerns include settling over 150,000 war displaced, releasing a journalist who has been sentenced for 20-year jail term under anti-terrorism laws, and ensuring media freedom.

WHAT DOES LOSING GSP+ MEAN FOR THE SRI LANKAN ECONOMY?

Closure of small and medium scale garment firms, job losses mainly among the rural poor, and a decline in global investor confidence would be some of the consequences. The central bank has said exporters will still be competitive after the loss of the scheme due to depreciation of the currency against the euro and pound. But garment exporters say their buyers have already signalled a move away from them to lower price garments. (Editing by Jerry Norton)





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