Concessions and credibility
Last week, the Minister of Foreign Affairs announced that a delegation of European Union (EU) representatives is scheduled to visit Sri Lanka next week to assess the EU’s Generalised Scheme of Preferences Plus (GSP+) tax concessions granted to the country. The EU is Sri Lanka’s second-largest trading partner. It goes without saying that for dollar-strapped Sri Lanka, the GSP+ concessions scheme is a vital economic lifeline.
According to the Institute of Policy Studies, in 2023, Sri Lanka exported goods worth $ 3.63 billion to the EU and the United Kingdom (UK) representing 30% of total exports of Sri Lanka for that year. The 1,301 products exported by Sri Lanka under the six-digit Harmonized System (HS) codes, concentrate on key sectors such as wearing apparel, rubber, seafood, and tea. Notably, the EU and the UK are major export destinations for wearing apparel accounting for over half (54.9%) of Sri Lanka’s total wearing apparel exports. As such, the importance of maintaining GSP+ while Sri Lanka struggles to reach economic stability and recommences debt repayment in the coming years should be evident to all parties concerned. GSP+ preference offers Sri Lanka zero tariffs on many goods, granting relative price competitiveness in the EU market. Without GSP+, tariffs would revert to the EU’s Most Favoured Nation (MFN) rates. The preference margin – the difference between MFN and GSP+ – is more than 10 percentage points for high-value export sectors like wearing apparel.
However, Sri Lanka has a long-standing issue with credibility which can negatively impact the island nations’ prospects of holding on to this valuable set of concessions. Consecutive governments since 2010, have made promises to the EU which were conditional for the GSP+ to be extended, but have failed to deliver. Such failures, despite their domestic implications, paint Sri Lanka as a nation that has weak credibility in the international arena. Despite undertakings to repeal the much-criticised Prevention of terrorism act (PTA) undelivered, and strengthening domestic mechanisms for justice and reconciliation remaining at a standstill, Sri Lanka has little to show in the way of progress other than two peaceful transitions of government and Presidency, sound exercise of democracy and elections without violence, and credible numbers which point to adherence to the IMF bailout programme.
In an October 2021 interview with The Sunday Morning, EU former Ambassador Denis Chaibi pointed out that the European Parliament passed a resolution on 10 June 2021 in which it expressed a number of concerns. “It was mainly about human rights and individual freedoms, with a particular focus on the Prevention of Terrorism Act (PTA) and the shrinking space for civil society to operate. On the Prevention of Terrorism Act (PTA), the resolution expressed grave concern about what is perceived as arbitrary arrest and detention under the PTA, without due process and access to justice. The emphasis is on due process. In other words, for many arrested under the PTA, it would be useful to immediately give those detained a fair trial on valid charges and, if there are no charges, to look at the possibility of releasing them. The resolution also deplores the continuing discrimination against religious and ethnic minorities such as Muslims, Hindus, Tamils, and Christians,” he said.
However, at present (2025), with all that transpired since 2022 to date, the EU’s main focus when it comes to the review seems to be unchanged, with how Sri Lanka deals with the fundamental freedoms of its citizenry, the Prevention of Terrorism Act (PTA), reconciliation process, the space provided for civil society. Meanwhile, improving anti-corruption measures, decriminalising same-sex relations, freedom of association and collective bargaining, and drug control in compliance with human rights commitments, and environmental conventions remain EU priorities.
As such, the Government, which has demonstrated a willingness to improve anti-corruption measures and strengthen the domestic mechanism for justice and reconciliation should move quickly to give confidence regarding their policies and expedite the repeal or replacement of the PTA during their talks with the visiting EU delegation to rebuild Sri Lanka’s credibility and sustain the concessions from the European collective, that the island desperately needs.
https://www.themorning.lk/articles/GpJsAfoEwB8bss9aMJ5R