By Charumini de Silva
In a critical evaluation of Sri Lanka›s trade to the European Union (EU), a top diplomat last week said exports to the region were in an unfavourable position and warned that Sri Lanka would not only lose its GSP+ facility, but also the market, as a result of their non-compliance of international conventions.
Senior career diplomat Grace Asirwatham, who is the Sri Lankan Ambassador to the EU, pulled no punches while delivering the keynote address at a webinar titled ‘GSP+: Past, Present, Future’ last week. It was organised by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and the Colombo Chamber of Commerce.
“The GSP+ mechanism doesn’t apply automatically, rather the countries need to apply to benefit from the trade preferences. To be eligible, countries need to fulfil certain criteria. Failing to comply with 27 international conventions related to human rights, labour rights, environmental protection standards, international standards, good governance, and sustainable development will not only cost GSP+ but also trade to the region,” Asirwatham said.
Presenting the current situation and her evaluation on trade to the EU in the past 16 years, the Ambassador stressed that Sri Lanka had the lowest utilisation of 62.75%, compared with the eight other GSP+ beneficiary countries that apply the facility over 90% of the tariff concessions.
She outlined six areas that Sri Lanka must focus on to increase exports with the EU under the GSP+, which offers duty-free access to 66% of tariff lines and 7,000 products. The six areas were: rule of origin criteria, product diversification, market diversification, volume expansion, raised awareness and minimal rejection of export consignments.
The Ambassador revealed that Sri Lanka’s export consignments of biscuits, rice, betel leaves, fruits, vegetables, plant items and pepper had received notice after they had been found to contain various prohibited substances and for also exceeding residual levels of pesticides.
She also raised concerns over an impending anti-dumping investigation by the European Commission.
“The Commission will initiate an anti-dumping on complaints with sufficient evidence on products exported from Sri Lanka. These include bicycles, aluminium foils, etc.,” she warned.
Prior to Brexit, the EU was Sri Lanka’s largest export market, accounting for 30% of the total exports. Since regaining GSP+ in May 2017, Sri Lanka’s exports have increased by 28%.
“Around 62% of Sri Lanka’s GSP+ eligible exports to the EU are garments and apparel products. However, half of the garment exporters aren’t utilising the concessions as they are unable to qualify under the rule of origin criteria. The double transformation criteria is also another reason why the apparel sector is unable to use GSP+ tariff concessions,” Asirwatham explained.
She emphasised the need to encourage more investments into fabric manufacturing in Sri Lanka to help apparel exporters reap the maximum benefits of the agreement.
She said that trade authorities must help exporters in finding the best categories and create more awareness on preferential benefits as opposed to most-favoured-nation (MFN) duties.
“We need to do a market survey and categories and products that will give 0% tariffs and higher margins on our profits.”
The need to diversify export products and markets was also stressed. “We have to export more processed food, value-added, organic, fair-trade, zero-waste, healthy, innovative and natural products. Our markets are limited to only about nine to 10 countries, but there are 27 countries. All the other beneficiary countries are exporting to at least 20 countries. We need to have promotional activities expanded to other countries.”
Highlighting that traditional exports to the EU had stagnated in recent years, she stressed that trade volumes needed to be increased in new sectors with innovative products.
“The measures we take today will help Sri Lanka to increase GSP+ utilisation and to expand trade with the EU, with an overall improvement in the number of markets, the volume of exports, range of products and introduction of new products. This is our time to make maximum use of our GSP+ facility, to make sustainable economic prosperity with economic resilience.”