Let me say this straight and clear. “Sri Lanka has not gained anything on EU conditions laid down to qualify Sri Lanka for EU GSP+ post-Tsunami special offer”. What does the EU offer us and what have we to comply with?
EU offers “zero duty” exports for over 700 listed Sri Lankan products including apparels, rubber and fish products, bicycles, toys, tea and spices, electrical parts and few others to the EU market. That means, though our present basket is limited, over 700 Sri Lankan products can be sold in the EU market at subsidised “zero duty” prices, hopefully gaining increasing volumes. But who gains on increased value on sales?
With heavy corruption across geographical borders including money laundering, this is one major question that is not being asked and answered in detail by the government nor by the manufacturers. What is manufactured here for exports are exclusive “orders” from “Brands” received by product manufacturing companies through “Suppliers” on quoted and agreed prices. They not only have agreed prices, but agreed deadlines in handing over the finished product with pre-defined quality standards. What it means is, a “supplier” brings an order from a global “brand” and a manufacturing company with BOI-SL approval located in Sri Lanka that accepts the order is paid for its manufacture. That product is sold in a consumer market including the EU by its “brand” at a price fixed by the “brand”.
Once the supplier takes over the product from the Sri Lankan manufacturer, we don’t have anything to do with its sales in any consumer market. In simpler language, we don’t have anything to do with the product, once it leaves Colombo port. This too is important. The “zero duty” export concession is provided to listed Sri Lankan products and not to Sri Lanka. It is therefore enjoyed by the “brand” that owns the “product label”, perhaps with a share to the “supplier” on pre-agreed terms. May be, the SL manufacturer too gets “something” through the “supplier”, but that is wholly unofficial and out of public gaze. But for sure, that does not reach Sri Lanka and is not Sri Lanka’s gain.
What are we as a country expected to comply with, to continue with this GSP+ that brings us no economic benefits? First qualification is, Sri Lanka has to remain below the “Upper Middle Income” (UMI) category of countries. Thereafter, Sri Lankan government has to ensure implementation of 27 International Conventions that cover human rights, labour standards and rights, environmental protection and good governance. This does not mean ratification of “conventions” that SL has done in most instances, but also effectively implementing them with new laws and legal amendments where necessary.
Beyond economics, this requirement in effectively and sustainably democratising the Sri Lankan society is definitely worth complying with. Yet, all through past years when EU GSP+ was effective and in operation, neither SL governments nor the EU were serious about any of the 27 international conventions the EU imposed on SL to implement. The EU has sent 03 or 04 GSP+ Review Missions to Sri Lanka during these 17 or 18 years, that met numerous agencies, groups and individuals including the Head of State, relevant ministers, Opposition Leader and politicians, private sector trade unions and funded civil society activists in Colombo. All such review missions left Sri Lanka with a nod for an extension of GSP+ though with reservations at times on delays in implementation, except in 2010 when the EU was under pressure from Tamil Diaspora groups after the civil war was declared over in 2009 May.
This suspension was effective till 2017 for 07 whole years. The new government elected in January 2015 thereafter re-applied for GSP+ in 2016 June. What is important to note is that, during the 07 years SL was denied the “comfort” of “zero tariff” exports to Europe, Sri Lanka’s exports did not drop. According to the “Brief on International Trade” published by the Department of Commerce in October 2021, during the 02 years after the withdrawal of GSP+ the value of Sri Lankan products sold in European markets totalled 01.8 billion Euro. A little more than what it was in 2016, the year before the GSP+ suspension. Surprisingly, the value of merchandise from Sri Lanka sold in European markets during the next few years increased to around 02 billion Euros, before SL regained GSP+ in 2017. It only means, with or without EU GSP+, Sri Lankan products would be there in the EU market.
What needs to be stressed is, 10 plus years of EU GSP+ in full operation (that excludes the suspension), private sector labour that manufacture all Sri Lankan products in the EU markets, have not gained even the basic right to association and therefore not even collective bargaining, except in 01 factory out of over 1,600 factories. Repeal of the notorious repressive law, the PTA that was promised to be repealed way back in 2017 by the then government, is now said to take few more months if it does happen under the present regime and the EU Review Mission seems “okay” with it too. Environmental safety is under an axe with continued deforestation no matter who the government is. Breakdown in law, organised crime and mega corruption that involves the State hierarchy as well, would speak volumes about what “good governance” goes through despite EU monitoring of EU GSP+ with regular extensions.
End of the day, if the EU is not serious about having their conditions implemented, and if Sri Lankan governments can go on dragging their promises for democratisation over decades with no economic gains either, we are only wasting our tariff and tax incomes in billions doled out as annual incentives topping up free infrastructure provided to foreign direct investors, expecting them to provide us with much wanted forex. We need something more than a forensic audit to see how much we have lost as incentives given to export manufacture, a seriously corrupt sector most do not speak about.
That’s a wee bit about EU GSP+ and we Sri Lankans for now.
– Kusal Perera
2025 May 02
