News
Impact of US GSP withdrawal mild, renewal likely
View(s):The United States’ decision not to renew GSP benefits to Sri Lanka and 119 other countries will not have a major impact on Sri Lanka’s exports to that country, while there is a strong likelihood of the programme being renewed in the coming months with retrospective benefits, officials said
In 2016, Sri Lanka exported US$2.8 billion worth goods to the US. Apparels which accounted for 70 percent of the exports to the US, and footwear were not included in the GSP concessionary trade scheme, they said. The concessions covered tyre and rubber products.
The Generalised System of Preferences (GSP) Programme expires today (December 31, 2017) and has not been renewed, the US Embassy said on Thursday. While speculation mounted over this routine move, foreign policy experts dismissed claims that the US was engaged in a tit-for-tat over Sri Lanka’s recent siding with 128 other countries in a UN vote condemning US President Donald Trump’s decision to recognise Jerusalem as the capital of Israel.
“That’s nonsense,” said one expert, pointing out that Congress – which has to approve the renewal of the GSP – and Trump are not the “best of friends”.
This is not the first time that Congress has delayed renewing the preferential scheme, in force since 1974 and which needs to be renewed periodically. The scheme provides exporters in 120 countries duty free access to the US on 3,500 selected products. Compared to the European Union GSP + programme which helps Sri Lanka immensely, benefits from the US GSP, though it helps, are far less.
When President Barack Obama signed the ‘Trade Preferences Extension Act of 2015’ on June 29, 2015 authorising the renewal of the GSP scheme it was almost two years after it had expired on July 31, 2013. That renewal is the one that expires on December 31, 2017. That was the first time that it took such a long time to renew the scheme since it has been regularly renewed at the end of the one or two-year cycle.
“There are expectations that Congress will renew it sometime later. Also when such a renewal occurs, products eligible under this scheme automatically get the benefits for the period that the programme was not in force (retrospective effect) as has happened in the past including the two-year suspended period (July 2013 to July 2015),” one expert said.
In 2008, the American Federation of Labour and Congress of Industrial Organisations (AFL-CIO), a US trade union collective, petitioned the US Government to remove Sri Lanka from the GSP scheme because its labour rights practices did not conform to International Labour Organisation (ILO) conventions. Unlike the EU GSP + which is linked to both human and labour rights, the US GSP is only linked to labour rights.
While the petition was heard, there was no suspension of US GSP and eventually matters were sorted out with Sri Lanka agreeing to set up three trade union centres in free trade zones. Anton Marcus, a leader of a top trade union movement in the free trade zones, said that while there is no major impact on exports to the US from the latest development, there are worries that some companies whose products are eligible for the concessions could fall back on the ILO conventions of freedom of association and collective bargaining and thus affect workers.