Urgent reforms vital to secure new GSP Plus scheme - EU Ambassador

• EU ambassador warns the framework must act as an active catalyst for economic modernisation rather than a passive trade concession
• Govt. green-lights new application, aiming for a successful transition ahead of the 2027 regulatory landscape
• Apparel sector labels securing duty-free access a “do or die” situation amid Europe’s shift toward sustainability

By Nishel Fernando

With the European Union transitioning to a new regulatory framework, urgent calls for structural reforms are echoing across Sri Lanka to secure a successful transition to the newly revised generalised scheme of preferences (GSP) Plus facility - a lifeline critical for the survival and growth of the island’s export sector. 

During the Sri Lanka German Business Forum 2026 in Colombo last week, organised by the Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka), industry leaders stressed that embracing sustainability and market liberalisation is essential to future-proof exports. 

Delivering a core warning on these requirements, European Union Ambassador to Sri Lanka and the Maldives, Carmen Moreno, urged the country to utilise the facility as an active mechanism for sustainable job creation, rather than viewing it merely as a passive trade concession.

Underscoring this urgency, recent trade data illustrates the heavy reliance of local industries on European markets. EU imports from Sri Lanka stood at approximately 2.7 billion euros (Rs. 1.04 trillion) in 2024, with about 1.5 billion euros (Rs. 579.7 billion) directly benefiting from GSP Plus preferences. While Sri Lanka’s preference utilisation rate reached a record 69 percent in 2024, significant portions of eligible exports remain underutilised. 

Export Development Board (EDB) Chairman Mangala Wijesinghe emphasised that the European region remains a vital market, accounting for nearly twenty-four percent of the island’s total exports.

Recognising these economic stakes, Wijesinghe announced that state officials are fully committed to proceeding with the new application process to secure uninterrupted duty-free access, revealing that preliminary negotiations are already underway. “We have already discussed with our political hierarchy,” Wijesinghe stated during the panel discussion, adding, “so we have received the green light.” He noted that the government is expected to submit a formal application soon, pointing out that Sri Lanka has until March next year to complete the necessary procedures to successfully transition into the new scheme.

This proactive approach is essential, as the transition to the new EU GSP regulation operates on a strict timeline, with the revised framework set to officially take effect on January 1, 2027. While the new framework has recently cleared its final legislative hurdles and been adopted by the European Union, Ambassador Moreno, when asked about the immediate procedural steps, noted that the EU mission is currently awaiting the formally published regulations. Once published, beneficiary countries must formally submit a comprehensive written request to the European Commission, initiating a rigorous evaluation process that typically takes up to ten months. 

The revised framework maintains the core requirement of ratifying twenty-seven international conventions on human rights, labor rights, environmental protection, and good governance, while adding new obligatory conventions, including those on the rights of persons with disabilities and the involvement of children in armed conflict. Requesting countries are mandated to provide binding undertakings and actionable plans to ensure effective on-the-ground implementation.

A significant domestic hurdle in meeting these stringent requirements remains the country’s counter-terrorism legislation. The European Union has consistently voiced deep concerns over the continued use of the Prevention of Terrorism Act (PTA), repeatedly urging Sri Lanka to replace it with legislation that strictly aligns with international human rights conventions. 

While the government has introduced the new Anti-Terrorism Bill (ATA) as a replacement, the proposed legislation has continued to face intense scrutiny from international bodies and civil society for retaining broad executive powers and vaguely defining offenses. 

Meaningful and transparent progress on this legal reform is considered a critical requirement for a successful review under the incoming GSP Plus framework.

Elaborating on the rigorous nature of this monitoring process, Ambassador Moreno pointed out that the facility has failed to promote widespread industrialisation in the past, with the country’s industrial base stagnating at roughly twenty-five percent of its gross domestic product. She stressed that compliance with the new scheme’s stringent conditions should be viewed as a catalyst for economic modernisation rather than an external imposition. 

Addressing past tensions, she noted there is a lingering misunderstanding of the facility within the country, stemming from its temporary withdrawal over human rights issues. Moreno explained that the GSP Plus is an agreement built on shared commitments to international conventions, highlighting that ongoing monitoring cycles heavily dictate continued market access.

Urging immediate action, Moreno emphasised that domestic economic reforms must be enacted to make the scheme’s true potential a reality, particularly as the European market rapidly shifts toward green energy and digital integration. “Sri Lanka could have benefited much more from this duty-free access,” she noted, pushing the country to dismantle protectionist barriers, open its markets, and position itself as a reliable, ethically compliant trading partner in an era of geopolitical fragmentation. She further pointed to significant untapped export potential in sectors like agriculture and agro-processing, which require immediate regulatory modernisation and quality assurance upgrades to meet evolving European standards.

The critical nature of retaining the EU market through the new scheme was heavily echoed by the private sector, particularly the apparel industry, which forms the backbone of the country’s export economy. Sri Lanka Apparel Exporters Association Chairperson Rajitha Jayasuriya described the continuation of the GSP Plus facility as a “do or die” situation for local garment manufacturers. 

She noted that European buyers are increasingly moving away from basic low-cost manufacturing toward a strictly sustainability-driven regulatory landscape. Under these evolving market conditions, maintaining the tariff advantages offered by the GSP Plus scheme is absolutely essential for Sri Lankan apparel exporters to remain competitive against regional peers and secure their foothold in the European market.