Losing GSP+ a double whammy to the economy - Economists | Sunday Observer

Losing GSP+ a double whammy to the economy - Economists

20 June, 2021

Losing the GSP+ trade concessions at this crucial time is a double whammy to the economy which is in perilous state, said top economists who also noted that it is hilarious to want other countries to open their markets for our exports and even give us concessions when we have shut doors for their exports.

Former Central Bank Deputy Governor Dr. W.A. Wijewardena said the EU is the second largest export destination for Sri Lanka and the country has a trade surplus with them, like the trade surplus with our biggest export destination, USA. “We partly finance our trade deficits with China, India and Japan in that order of magnitude. If the EU cuts our exports, it will be a double whammy for Sri Lanka which is hard pressed for foreign exchange to meet its import and loan repayment commitments. Sri Lanka will be further driven toward China.

“The worst is that these issues are pandemic such as Covid-19; the chances are that the USA and the UK will follow it since those two countries were also supporters of the recent UNHRC Resolution against Sri Lanka. This country also runs a trade surplus with the UK. “Hence, these are not simple matters that can be brushed away as international conspiracies; they are complex global economic issues that need far-sighted strategies for fruitful resolution,” he said. Professor in Economics, University of Colombo, Sirimal Abeyratne said it hilarious that we want other countries to open their markets for our exports and give us even concessions, but we want to keep our market closed for their exports.

The GSP+ preferential treatment by the EU countries is available for eight countries which can meet its eligibility criteria. Among them, these countries should have a vulnerable developing economy with low levels of exports to the EU market, while they should be able to effectively implement the specified international conventions.

“The former indicates that the country should be ‘poor’ to be eligible for the GSP+ concession. It is sad to say that throughout under many different leaders and governments, we have maintained our ‘poverty’ level of the economy so that we continued to receive the GSP+ concession. And we have lost it due to the latter reason, which is the country’s failure to implement effectively the specified conventions.

“Therefore, the question is whether we should win it back which would confirm that “we are still poor” or we should lose it which would confirm that “we are unable to implement the convention”,” he said.

The EU Parliament recently adopted a resolution urging the EU Commission to consider a temporary withdrawal of Sri Lanka’s GSP+ status and the benefits.

The resolution cited the Government’s persistent failure to adopt and enact human rights reform and repeal the Prevention of Terrorism Act (PTA) as reasons for the resolution.

Sri Lanka regained access to the tariff preferences under the GSP Plus in May 2017 on the condition that it replaced the PTA and effectively implements 27 international conventions, including on human rights.

The resolution noted that the GSP+ scheme offers better access to the EU market for the country’s exporters, in return for further progress in fully implementing those conventions.

The Resolution stressed that the GSP+ scheme had offered Sri Lanka a significant economic boost, from which exports to the EU have increased to 2.3 billion euros, making the EU, Sri Lanka’s second-largest export market.