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Govt’s
stand on GSP+Scheme and Sri Lanka
Following
report reflects the Government’s stand on the GSP+ scheme.
The report is based on a presentation made by Sri Lanka Embassy
in Brussels to a group of EU Members of Parliament.
Background
Sri Lanka qualified for the GSP+ facility for the period 2006-2008,
on account of compliance of its international obligations
on human rights, labour rights, good governance and environmental
issues as per the GSP Regulation. This facility was granted
to Sri Lanka since July 2005, following the 2004 Tsunami.
Due consideration was also given to the fact that the EU considered
Sri Lanka as a less diversified, disadvantaged and vulnerable
small economy.
The scheme provides access to 7200 Sri Lankan products at
zero duty into the European Union, based on 50-60% domestic
value addition, as per the Rules of Origin criteria stipulated
by the regulation. Sri Lanka is the only country in South
Asia and one of 2 countries in Asia benefitting from GSP+
concessions.
Impact of GSP+ on exports
Sri Lanka’s total exports to the EU under the GSP+ scheme
in 2007, stood at €1.8 billion. While apparel represented
60% of total exports, other export products which have benefitted
immensely from GSP concessions were fruits and vegetables,
fisheries products, leather products, ceramic products, and
bicycles.
Sri Lanka is heavily reliant on a limited number of products
and a few markets. While tea and apparel feature prominently
among Sri Lanka’s export profile, its main markets are
the United States of America and the European Union. The apparel
sector accounts for over 50% of total exports to these markets.
The GSP+ scheme has contributed positively towards the diversification
of Sri Lanka’s export base and it accounts for approximately
15% of the country’s GDP.
Impact of GSP+ on socio economic
development
Exports under the GSP+ scheme has provided direct and indirect
employment to well over 1 million people.
Sri Lanka can be considered a model among developing countries
with regard to its ethical trading practices. Sri Lanka is
one of the few countries in Asia, where use of child labour
has been banned through national legislation. Over 100 garment
factories in Sri Lanka have been awarded with the “garments
without guilt” label by the International Certification
Authorities for their adherence to providing better environment
for workers. Ethical trading practices being followed in Sri
Lanka also cover tea and many other products exported to the
European Union.
The GSP scheme can also be considered as a means of providing
incentives for the developing countries to comply with international
conventions pertaining to protection of human rights, labour
rights, good governance, and protection of environment.
Several aspects of socio-economic development in Sri Lanka
has benefitted from the EU GSP+ scheme.
1. Empowerment of Women - The Employees are mainly women who
have become bread winners of their families.
2. Eradication of poverty and distribution of income - It
has brought about dramatic social transformation, reducing
the divide between the urban and rural sectors, thus promoting
social equity in a very practical sense.
3. Environment and Sustainable Development - In view of the
ethical trading practices being followed in Sri Lanka, the
Marks and Spencer, the global apparel giant, opened its first
ever world green apparel factory in Sri Lanka in April 2008,
in association with a local apparel manufacturing company.
4. Development of the Rural Economy - Over 60% of the garment
factories are located outside the Colombo District and it
has contributed significantly towards balanced regional development
and to reduce migration from village to urban areas.
5. Development of the Small and Medium Enterprises - 95% of
the fisheries industry and 70% (595 factories) of the garment
industry consists of SMEs. It is pertinent to note that all
exporters of fisheries products have made substantial investments
in processing facilities in order to meet EU standards.
After clearing the Eastern Province of the LTTE in 2007, the
Government of Sri Lanka has embarked on an accelerated programme
to restore democracy and develop the area, hitherto inaccessible
due to the problem of terrorism. The Government held local
government elections in the Batticaloa District in March 2008
and concluded Provincial Council elections in the entire province
in May 2008. Following the elections, a Tamil politician representing
one of the minority communities, was appointed the Chief Minister
of the Province. The Government has embarked on a massive
development programme to revive the Eastern Province with
set targets to achieve improving infrastructure, agriculture,
livestock, transport, health, education and water supply for
irrigation and domestic use. The government has sought assistance
from the international community in its efforts to develop
the province which will send positive signals to the people
of the Northern Province, part of which is still under the
control of the LTTE, to also join the democratic fold.
GSP+ review
The current debate on the renewal of the GSP+ facility to
Sri Lanka should be objective and transparent. Equal focus
should be given to the implementation of commitments undertaken
in the areas of human rights, labour rights, good governance
and the environment, without weighting one area more than
another.
Granting of EU GSP+ scheme to Sri Lanka in that sense is an
incentive in appreciation and recognition of Sri Lanka’s
compliance with International Protocols and Conventions of
interest to the European Union. It is believed that this would
also encourage other countries in the region to learn from
the Sri Lankan experience and make necessary adjustments in
improving their working conditions and other requirements,
to qualify for the GSP+ scheme.
Sri Lanka is a high achiever in terms of the Millennium Development
Goals. While having already achieved the MDGs on Education,
Gender Equality and Health, Sri Lanka is on target to achieving
the remaining MDGs by 2015. The only area in which slower
progress has been recorded is the area of poverty and distribution
of income. The GSP+ scheme has been instrumental in assisting
Sri Lanka achieve the commitments undertaken under the MDGs.
The non-renewal of the scheme will seriously hamper Sri Lanka’s
efforts at achieving the MDGs. In this context, this could
be considered as the EU contribution towards nations achieving
the MDGs on target.
Rules of Origin
Trade Preferences awarded through the GSP scheme provides
a competitive advantage to Sri Lanka among other global suppliers.
The GSP Rules of Origin criteria can act as an effective instrument
of trade policy for integrating economies of developing countries
on a regional basis, through regional cumulation and super-regional
cumulation, thereby facilitating global integration.
From the very inception of the GSP scheme, Sri Lanka has maintained
an open and transparent administrative mechanism to prevent
fraud and trade diversion. Therefore, the proposed change
to the administrative mechanism of the GSP scheme, places
the responsibility of declaring the statement of origin on
the exporter. This mechanism requires a high degree of e-commerce
which is seen as unfairly penalising GSP beneficiaries who
have been scrupulously meeting their obligations. Sri Lanka’s
current overall GSP utilisation rate is at 67% due to the
rigidity of the Rules of Origin criteria, this would decline
further if the proposed amendments suggested by the European
Commission contained in EC Regulation (TAXUD/2046/2007) are
adopted.
The rigidity of the stipulated Rules of Origin regime favours
large developing countries with a powerful industrial base
while it impedes smaller countries from utilising the scheme
to its full potential.
If the European Commission intends to proceed with the proposed
changes in the administration of the EU GSP scheme, Sri Lanka
wishes to join other countries in seeking adequate technical
assistance from the European Union in order to make necessary
improvements to the conduct of e-commerce.
In order to facilitate greater market access, the domestic
value addition content should be lowered from the present
threshold, to enable resource poor countries such as Sri Lanka
to increase its utilization of GSP concessions. It is also
said that the single criteria approach for value addition,
is to be replaced by a sector based approach with enlarged
parameters which require substantial transformation to qualify
for GSP concessions.
Since all developing countries are not homogeneous, less diversified,
vulnerable and disadvantaged small economies like Sri Lanka
should be treated on par with LDCs for GSP Rules of Origin
purposes as the proposed rules will apply across the board
for all developing countries, irrespective of the size of
their economies, availability of raw materials, level of development
of the integrated manufacturing process.
Sri Lanka, therefore, maintains that the original intention
of simplifying the current Rules of Origin to make it more
developing country-friendly should be reflected in the revised
Rules of Origin. The revised Rules of Origin should not in
any manner result in reduction of current level of imports
from Sri Lanka to the European Union, particularly its apparel
exports in which a large segment of the population has found
productive employment.
Thomas Friedman in his book “Lexis and the Olive Tree”
pays an eloquent tribute to these conditions - an air conditioned
work place environment, free breakfast, health and recreation
facilities, and also provision of essential commodities at
subsidized rates. The availability of training of various
kinds placed at the disposal of employees of these garment
factories, offer them vistas of opportunity and a degree of
social mobility, which would have been previously considered
impossible.
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