The European Union is to adopt a reformed GSP law in October 2013 and a new preference scheme is to apply from January 1st, 2014.
UNP MP Eran Wickramaratne has said that Sri Lanka stands to lose US$ 5 billion over the next 10 years if the country does not enter into EU’s new GSP scheme.
The new GSP scheme will last for 10 years. In February 2013, the EU released procedural rules on how to treat the applications for the GSP+ arrangement. The product categories will be revised over a two-year period. There are 29 developed economies (of which 15 are in the European Union) that welcome products from developing countries.
Wickramaratne has explained the benefits of the scheme; the duty exemption means a more competitive price to the consumer in the importing country, enabling the Sri Lankan exporter to increase its share of the market and providing new exporters with an edge to break into a market.
“If we do not have the advantage of “GSP +” our competitors in other countries for Apparels, tea and rubber products will enhance their market share. Ten years from now our dominant industries will become marginal exporters to the EU and USA. It will be near impossible to recover from such loss of market share and competitiveness,” the UNP MP has noted.
While Sri Lanka will qualify to apply for “GSP+”, there are conditions to be met such as the rules of origin, and compliance with global treaties. Sri Lanka declined the GSP benefit in 2009 due to the ongoing military conflict and the country’s inability to comply with the conditions. The decision that the country took at that time is estimated to have caused a loss of more than US$ 1 Billion, closure of hundreds of factories and loss of thousands of jobs.
More than four years after the end of the conflict we must re-engage our dominant trading partners in Europe and North America, Wickramaratne has said The absence of GSP beginning 2014 will translate into a potential loss of about US$ 350 Million per annum. The loss over 10 years can exceed US$ 5 Billion. Given the state of the global economy and the declining exports from Sri Lanka the advantage of GSP has become more pronounced. According to Wickramaratne,
GSP is the casualty of a failed foreign policy. “There were understandable reasons to terminate the GSP preference in 2009. The Government’s inability to forge stronger links with our major export markets more than 4 years later may weigh-in on the decision to apply or not apply for the GSP. A foreign policy that does not improve our global standing in the community of nations, neither providing strength to our export markets is indefensible,” he noted.