RIU: What Brexit means for UK-Sri Lanka trade
View(s):The advent of Brexit gives rise to a new set of concerns to Sri Lanka particularly since the UK is one of the major trading partners of Sri Lanka.
In this context preventive measures must be taken to secure and maintain the current preferential market access to the UK, according to a RIU Trade surveillance report in association with the Sri Lankan High Commission in London.
Trade with the UK amounts to over 10 per cent of the total annual trade and trade between the two countries has been rising over the last 18 years.
“In this context, the GSP+ scheme under which Sri Lanka observes a great deal of preferential market access to the European Union (EU) including the UK, paves the way to immense potential to further enhance the trade performance between the two countries,” the report said.
Sri Lanka exports nearly US$3 billion worth of goods to the EU and 29 per cent of these exports are dominated by the UK amounting to approximately $1 billion in 2018. Even though the other members of the EU are equally strong economically, their purchases from Sri Lanka are less than what is purchased by the UK.
RIU said apparel is the most exported product to the UK in the diversified product basket. However, it is visible that there are more opportunities to penetrate the UK market through an array of further diversified products.
Sri Lanka currently has market access to the EU, including the UK through the current EU scheme of GSP (Regulation – EU – No 978/2012 of the European Parliament and of the Council of October 25, 2012), which came in to effect on January 1, 2014 for a 10-year cycle and is due to end on December 31, 2023. This scheme aims to support economic growth and job creation in the beneficiary countries by generating increased export revenue. While benefiting from the market access gains offered under preferential import duty concessions under the standard GSP Scheme, Sri Lanka was readmitted to the EU Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) Scheme from May 19, 2017.
Post-Brexit situation
In a scenario of the UK leaving the EU with/without a trade deal, the main preoccupation of the Sri Lanka Government will be, at least to secure the existing market access opportunities, which Sri Lanka is currently enjoying under the EU-GSP+ Scheme. However, in view of the UK’s long-standing favourable policies of trade and development with developing countries in the form of tariff and non-tariff concessions, it is highly unlikely that the UK will entirely terminate the EU-GSP+ Scheme when it leaves the EU after March 2019. Rather, the current EU-GSP+ Scheme will be continued over a period until the UK comes up with its own preferential tariff scheme outlining the criteria for selecting beneficiary countries, rules of origin and other measures.
“Considering that Sri Lanka currently benefits from a positive and growing balance in its merchandise trade with the UK, it is important for Sri Lanka to be able to enjoy the existing GSP+ concessions for some time until it is graduated from the scheme, a few years after it first reaches the threshold of the World Bank ranking of Upper-Middle Income category. Sri Lanka does not have many years to be complacent of its current status. Therefore, a dialogue with the British government has already commenced at a very high level, which aims to ensure that Sri Lanka will continue to reap the benefits through an array of measures implemented by the UK Government in the form of tariff and non-tariff concessions. In a scenario of the UK leaving the EU with/without a trade deal with the EU, it is imperative that Sri Lanka’s trade position with the U.K. is secured,” the report noted.