While the EU and the US are reconsidering their options regarding the GSP status with Sri Lanka, what is its impact inthe Sinhala island?
The EU adopted a GSP regulationscheme bringing it into force from 1st January 2009, till December2011. GSP is a trade arrangement which enables 176 developing countries togain preferential access to the EU markets in the form of reduced tariffs fortheir goods in the European markets. The standard GSP provides preferences to176 developing countries on over 6,200 tariff lines. A special scheme known asthe GSP+ offers additional tariff reductions to shore up more susceptiblecountries. The Everything But Arms (EBA) arrangement provides duty free andquota free access for all products from 49 Least Developed Countries (LDC).
The primary objective of the GSPis to aid in minimizing poverty and promoting sustainable development among thedeveloping countries. Preferential tariff rates offered by the EU for thedeveloping countries enable them to participate in the international trade, andgenerate additional export revenues. Countries eligible for GSP benefits mustsatisfy several criteria. The initiatives taken by the country to protect theworkers rights, acceptable work conditions, hours of work, prohibition of compulsorylabor, checking on the minimum age of employment, prohibiting child labor, andright of collective bargaining will be considered while enabling GSP benefits.
US has decided to review Sri Lankas GSP status. It states that is has accepted a petition to investigate the fact,whether or not Sri Lanka is eligible to meet the criteria related to workerrights. The petition filed by the AFL-CIO (American Federation of Labor andCongress of Industrial Organizations) has stated allegations that Sri Lanka has violated labor standards. This includes violation of freedom of association,collective bargaining, non-enforcement of labor laws, and anti-uniondiscrimination in the Sri Lankan apparel sector. It is stated to be the resultof poor labor conditions, and non-compliance with international labor standardsespecially in the export processing zones and the apparel sector.
Will reclamation of GSPbenefits affect the Sri Lankan Economy?
The international body findingshave exposed findings regarding violation of human rights, and exploitations inthe apparel industry. Some of the top apparel manufacturing companies in Sri Lanka are listed therein. The duplicity of these apparel conglomerates are exposed in ashocking manner in the complaint. Sri Lanka is at the brink of losing both theEU, and US GSP benefits. Earlier, the Republic of Maldives lost its GSPbenefits due to such complaints. The EUs suspension of the GSP preferentialtariffs is expected to lead to a loss of US$ 500 million for a year. This willmean a loss of 12% of the apparel exports of the country. Observers also commentthat, if the GSP benefits are terminated, massive economic downfalls would cropup, and more job opportunities would be lost. Trade unions of the apparelsector have voiced their concern of cost cutting by employers in the apparelsector.
On the contrary, some expertsassert that, Sri Lanka is not likely to be much affected by this as most of thetextile and apparel products exported to US are excluded from the GSP regulations.They believe that the country posses the ability to achieve higher levels evenwithout the GSP benefits. Though GSP benefits are a bonus for countries toenter into the global market, still, Sri Lanka is not dependent on thediscounts for ever.
Labor cost in Sri Lanka is comparatively lower against the European labor cost which is an advantage for Sri Lanka as Europe has many manufacturing units. Some firms in the country believe that added focuson productivity would add an advantage as high levels of productivity wouldimprove the quality of their goods, and buyers will continue to do businesswith them even without any concessions. This would be a key step in developingbetter links with the international buyers.
Speculations regarding the recoupof GSP benefits from Sri Lanka have evoked mixed reactions globally, witharguments happening in favor of, and against the country.
References:
Comments