Former President Mahinda Rajapaksa

The Government should not create unrealistic expectations about GSP+ among the public, former President Mahinda Rajapaksa said yesterday.

He added that programmes should…… be started to help businesses prepare for the inevitable transition to a future without any EU trade concessions, through the diversification of products and markets. Providing low interest capital to modernize factories, tax incentives for expansion, upgrading the skills of the labour force may be some of the measures needed to facilitate this transition. It is hoped the government will give due consideration to these matters, he said.

In a press communiqué, he noted that, “fulfilling the conditions to qualify for GSP+ could cause permanent damage to a country’s political, legal and institutional framework, which is why the Rajapaksa Government allowed GSP+ to be withdrawn in 2010 without agreeing to the political demands the EU made for the continuation of GSP+ such as instituting war crimes inquiries against our armed forces and greater devolution of power.

“After we lost the GSP+ in 2010, we came under the general GSP scheme and our exports were charged a concessionary rate of duty by the EU. Since GSP+ was restored to Sri Lanka last month, the government has said that there will be a boom in exports of everything ranging from fisheries products to apparel and other industrial goods to Europe. Hopes have been generated of foreign investors flocking to Sri Lanka to make use of duty free access to the EU market. The Government keeps telling the people that our entire future can be built upon GSP+. However, it should be understood that GSP+ offers only temporary economic benefits,” the press communiqué added.

The communiqué further added that the EU-GSP schemes were always designed to take a country gradually from zero duty to paying a concessionary duty and later to paying the full duty. Zero duty access or concessionary duty access under the EU’s GSP schemes was never meant to be perpetual. Countries lose GSP concessions as their economies grow. At times such concessions can be withdrawn by the donor countries for other reasons as well. In 2005, the quota system for apparel imports into the USA which countries like Sri Lanka relied on heavily was abolished. Yet Sri Lankan apparel exports to the USA continued to grow. Sri Lankan export industries have certain marketable strengths such as the absence of child labour, adherence to high environmental standards and comparatively good working conditions for employees. Buyers can thus rely on getting an untainted product from Sri Lanka.

“Since we are very close to the USD 4,035 per capita threshold, we should prepare for a future without any GSP concessions from the EU, by building on the strengths we already have. Ironically, the transition to a future where we will have to pay the full import duty to the EU would have been easier if we had simply remained within the ‘general GSP’ scheme paying a concessionary duty until we cross the USD 4,035 mark. It should be borne in mind that because the GSP+ was restored to Sri Lanka, once we cross the USD 4,035 mark, we will have to make a sudden transition from enjoying zero duty status to paying the full import duty. The government should inform the people and the export industries that we are on the verge of losing not only the recently restored GSP+ but the ‘general GSP’ concession that we had since 2010 as well,” the communiqué read.