The expiration of US Generalized System of Preferences (GSP) for Sri Lanka and 119 other countries, with effect from today will not have any negative impact as every country will need to pay the same duty and be placed on a level playing field, Deputy Minister of National Policies and Economic Affairs, Dr. Harsha de Silva said.
The US GSP program has been renewed by US Congress as a normal practice and it applies to all 120 countries.
“So we are not singled out and there is no disadvantage at all. All the countries will be on the same level of competition like just now. In any case, only US$173m of $2.8 billion of exports to US last year had US GSP. Apparels only $27m,” the Deputy Minister asserted.
According to a research by the Institute of Policy Studies, although nearly three quarters of Sri Lanka’s exports to the United States are concentrated on apparel and articles, only about 0.2% of the current apparel exports are eligible to receive GSP concessions. Exporters of rubber, the second largest export product to US, will have only about a quarter of their exports covered under GSP concessions.
Meanwhile, analysts pointed out that when the US GSP scheme was authorised for renewal in 2015 by the former United States President Barack Obama, he had only signed the ‘Trade Preferences Extension Act of 2015’ on June 29, 2015 almost two years after it expired in 2013. Thereafter, the preferential duty-free tariffs to the US market for selected products were applied retroactively for the years that were missed out.
The scheme, instituted in 1974 and renewed periodically is designed to promote trade in developing countries. The full list of GSP-Eligible Beneficiaries (as of March 2017) is found on this link https://ustr.gov/sites/default/files/gsp/Beneficiary%20countries%20March%202017.pdf
Govt to lobby for continuation of program
By Manjula Fernando
Reassuring that the non-renewal of special trade concessions for 120 ‘designated beneficiaries’ including Sri Lanka by the US Congress was not a panic factor, the Government said it will nonetheless lobby for the continuation of the duty-free program for the benefit of exporters.
In a statement issued late Friday, the Foreign Ministry clarified that the situation has arisen because the US Congress had not re-authorised the renewal of GSP concessions before adjourning for the year 2017, resulting in automatic expiration on December 31.
All those exporting goods to the USA from Sri Lanka under the GSP scheme, will, therefore, be subject to non-preferential duties from January 1, 2018.
“This is not the first time the re-authorisation of the trade concessions was delayed by the Congress,” a spokesperson said, adding that when the renewal is effected after similar lapses, importers are granted refunds of excess duty paid on GSP goods.
The GSP program aimed at promoting economic growth in developing countries was implemented in January 1976. It expires periodically and has to be renewed by the US Congress to remain in effect.
The US economy is the largest single destination for Sri Lankan exports accounting for more than 27.5% of total exports. In 2016, of total export earnings which amounted to US$ 10.3 billion, exports to the US accounted for US $ 2.8 billion.
In the first 10 months of this year, Sri Lanka’s exports to the US closed in on US $ 2.4 billion. However, only a little over 6% of Lankan exports are eligible for US GSP.
The Foreign Ministry confirmed that Sri Lanka’s largest single export item to the US, readymade garments, is not being exported under the GSP program, meaning that the non-renewal will not affect this sector adversely.
On the contrary, Sri Lanka’s garment exports to the EU is covered by the GSP plus concessions, and the trade block remained Sri Lanka’s largest export destination, absorbing 36% of total annual exports, according to the European Commission.
The spokesperson said the Government is hopeful that the program will be renewed by the US Congress when it opens sessions in the new year. Sri Lanka is the 11th largest GSP exporter to the US and its 66th largest goods trading partner.
A senior diplomatic source said it was too early to say if this decision was related to the recent resolution at the UN in Geneva, denouncing a decision by the US to recognise Jerusalem as the Capital of Israel. Sri Lanka voted with 128 other counties in favour of the resolution.
The Foreign Ministry later said the vote decision was based on Sri Lanka’s long held traditional and principled position, which is in keeping with the international understanding that Jerusalem is a final-status issue that must be resolved through negotiations between the two parties on the basis of the relevant UN resolutions.