- Says Sri Lanka is ready for new trade relationship with EU sans GSP Plus
- But says all diplomatic channels are used to address issue at hand
- Assures govt. is making country’s economy resilient to face a possible loss of GSP Plus
Sri Lanka is preparing itself for a trade relationship sans GSP Plus with the European Union (EU), said Finance State Minister Ajith Nivard Cabraal, after the European Parliament recently adopted a resolution urging the EU Commission to withhold the benefit over the country’s alleged human rights practices.
Ajith Nivard Cabraal
The government indicated it is ready to look beyond the era of GSP Plus, as it would seek to build resilience among exporters and in the overall economy to withstand the possible implications that could stem, should the European Commission withhold the benefit.
“We are getting ready for it. I say with responsibility, we are making our economy ready to be able to confront it,” said Cabraal in reference to the potential loss of the trade concession from the EU.
GSP Plus is a concession on duty enjoyed by importers in the EU, when they procure goods from the economically vulnerable countries such as Sri Lanka. Sri Lankan exporters also indirectly get benefited, due to their relative price competitiveness in comparison with the exporters who do not enjoy the same benefit.
Sri Lanka anyway is set to lose GSP Plus when the country gets elevated to an upper-middle-income status, once it surpasses the gross national income (GNI) per capita of US $ 3,996, according to the World Bank’s new classification of the income brackets.
Sri Lanka was looking to surpass this threshold in 2021. The country’s GNI per capita contracted in 2020 to US $ 3,582, after the economy shrank 3.6 percent in 2020.
“While we address this issue of the potential loss of GSP Plus at diplomatic level, I think what we must do is to get prepared ourselves economically to be able to confront the risk,” Cabraal noted.
“We are cognisant of the risk. We have also designed strategies to manage the risk. So, if you must do this (withdraw the concession), we cannot stop it. It is a concession offered to your buyers. Offering it or not is up to you. But what we have do is safeguard our factories and their employees, which we will do,” he said recounting how he approached the issue when the EU wanted to withdraw the concession in 2010, which they did before reinstating in 2017.
Assessing the potential impact of the loss of GSP Plus, Softlogic Stockbrokers a few days ago said while the concession helps to boost the country’s export performance, its losing would not create a major vacuum, given the sizeable trade surplus Sri Lanka maintains with the EU, albeit the potential margin contraction and slow growth in sectors such as apparel, agriculture and fisheries.