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‘GSP-plus utilisation by exporters declining’

08 Sep 2022

 
  • Commerce Dept. says exports can compete without tariff concession 
  • Notes that exporters are not ‘heavily dependent’ now
    By Imesh Ranasinghe    Sri Lanka’s exports can compete without the tariff concessions provided by the European Union’s (EU’s) Generalised Scheme of Preferences-Plus (GSP+), as the utilisation of the GSP+ by exporters is declining, stated the Department of Commerce (DoC), suggesting that exports are not heavily dependent on the said concessions.  In its annual report for 2021, DOC stated that Sri Lanka’s GSP plus utilisation rate in 2010 was at 73%, which was the highest percentage recorded in a year, but from 2011 to 2017 exports, on average, except in 2013, had been on the increase whereas the utilisation rate of GSP-plus had been on the decline. The report states that from August 2010 to 2017, Sri Lanka’s exports to the EU under the GSP standard, increased from EUR 2.1 billion to EUR 2.6 billion, while the GSP utilisation rate went down from 66% in 2011 to 55% in 2017, but it was increased from 58% in 2018 to 63% in 2019. “Purpose of availing of GSP+ concession is to enhance Sri Lanka’s overall exports to the member countries of the EU. In a scenario where a country’s exports to the EU are growing and at the same time, the utilisation of the GSP is declining. It suggests that a country’s exports are not heavily dependent upon GSP+ concessions. It is a salutary development where Sri Lanka’s exports can compete without tariff concessions of GSP plus,” the DOC said in its annual report. Sri Lanka had been utilising the standard GSP scheme of the EU since 1971 until 2005. In 2005, Sri Lanka became a beneficiary of the GSP+ facility of the EU, which is given to support economically vulnerable developing countries, upon effective implementation of the 27 UN conventions on core human rights, labour rights and other sustainable development and undertaking to extend cooperation for regular monitoring.  However, in August 2010, Sri Lanka lost the EU GSP+ facility, and since then, until May 2017 Sri Lankan exports to the EU were benefited under the Standard GSP scheme. Sri Lanka regained the GSP+ on May 2017.  The DOC states that since the inception of the GSP+ scheme, it has significantly contributed to enhancing Sri Lanka’s overall exports to the EU by improving the price competitiveness of GSP-eligible and utilised products.  However, the report stated that it has generally been observed that as far as Sri Lanka is concerned, there has been a positive correlation between enhanced GSP concessions and the growth of Sri Lanka’s exports to the EU during the 1990s up to 2010 and this positive correlation is continuing after the regaining GSP plus in 2017. However, in terms of the recent sector-wise utilisation of GSP+, even though over 7,000 product lines have been at zero duty under GSP plus, Sri Lanka’s exports under GSP plus are concentrated on a few product sectors.  As of 2019, the highest utilisation rate of 99.92% of GSP plus was seen in the Edible Preparations product sector, although Sri Lanka’s highest export earner Apparels only has a utilisation rate of 51.75%. “The reason for low utilisation in the apparel sector is that the cost of compliance with the stringent Rules of Origin criteria (ROOs) far outweighs the benefit of the tariff concessions,” the DOC said. In the last one-year period, Sri Lanka’s GSP+ concession was under threat, as the European Parliament adopted a special resolution adopted in June 202 calling for an assessment on whether there is sufficient reason, as a last resort, to initiate a procedure for the temporary withdrawal of Sri Lanka’s GSP+ status on grave human rights violations with the accelerating militarisation of civilian governmental functions, the reversal of important constitutional safeguards, political obstruction of accountability, exclusionary rhetoric, intimidation of civil society, and the use of anti-terrorism laws. In July 2022, the EU also reminded newly elected President Ranil Wickremesinghe to work in full compliance with its GSP+ commitments. According to the Institute of Policy Studies (IPS), a possible withdrawal of GSP+ will increase the tariffs for Sri Lankan products up to the Most Favoured Nation (MFN) tariffs. Consequently, products coming from Sri Lanka will be more expensive in the EU market, directly reducing the export demand from Sri Lanka. 


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