The Sri Lankan garment industry says the loss of the GSP+ preferential trade benefits will be felt, but will not be catastrophic.

Yesterday (24 June) the Sri Lankan government categorically rejected European Commission (EC) conditions to extend the GSP+ duty free trade scheme for another six months, which would have included the government giving a written commitment to improving the country's human rights record.

This means the GSP+ will no longer be available for Sri Lanka after 15 August this year.

However, in application terms, the GSP+ will not be available for Sri Lankan exporters shipping their goods to the EU from around 10 July.

Total gains from the GSP+, which has given Sri Lanka's apparel exports zero duty access to the EU since 2005, are estimated at around US$150m annually.

"Yes, the GSP+ loss will be a loss, but it will not be a catastrophic loss," A Sukumaran, the chairman of the Joint Apparel Association Forum (JAAF), told Just style in an interview today.

"This is because out of our total exports to the world, only about one-third use the EU GSP+. At this point about 50% of our exports are to the EU. Out of that, about two-thirds use the GSP+.

"So out of total exports only about one-third of our exports will be affected by the GSP+ loss. That is why the loss will not be catastrophic to the industry," said Mr Sukumaran.

The head of the JAAF, which represents the garment industry in Sri Lanka, also said the EU had "moved the goal posts on the GSP+," forcing the Sri Lankan government to respond as it did.

"Originally we believed the EU wanted to allow us to have the GSP+. But having looked at their latest letter and their conditions, it looks like they keep moving the goal posts. So any government will have this reaction," said Mr Sukumaran.

However, the apparel industry, which is the biggest beneficiary of the EU's GSP+, says it will ask the government to continue a dialogue with the EU on the GSP+.

The industry is expecting a 12-15% drop in export earnings this year due to a combination of recession impacts in western countries and the loss of the GSP+. Exporters say European orders have already dropped since the start of the year because of the uncertainty regarding GSP+ availability.

Conditions "infringe national sovereignty"
Yesterday, the Ministry of External affairs and the Ministry of Media told the press (at two separate events) that the latest EU conditions were no longer trade related but infringed on national sovereignty, and therefore could not be accepted.

The EC said it had been willing to allow the GSP+ to continue for a further six months provided the Sri Lankan government agreed to 15 conditions.

Among its conditions, the EC wanted the Sri Lankan government to repeal remaining Emergency Regulations, the Public Security Ordinance and the Prevention of Terrorism Act.

The Sri Lankan government maintains these regulations are related to national security and are therefore not areas for foreign governments to dictate terms as the country is still recovering from 30 years of terrorist activity.

"We cannot possibly surrender decision making on highly sensitive matters like this, matters that go to the very heart of national wellbeing, to any foreign country," the Minister of External Affairs, GL Peiris, said at a press conference yesterday.

The other EC conditions were also seen to be of a political nature rather than trade related and were not acceptable, the government said.