Financial Times

Heed apparel trade warning
Exporters of apparel, on which this country is heavily dependent for foreign exchange earnings as well as employment generation, have sounded the alarm over what they say is the abuse of a concession which the European Union has granted Sri Lanka to ensure better access to European markets.

A. Sukumaran, the newly re-elected chairman of the Sri Lanka Apparel Exporters Association, drew attention to what amounts to a serious abuse of an international agreement this country has signed when he spoke at the association’s recent annual general meeting.

It seems that garments made in other countries are being surreptitiously transhipped through Sri Lanka under the guise of being made in this country to take advantage of the GSP + duty concession.

Sukumaran also said the industry was concerned over the lack of accurate records with the Department of Commerce, giving the details of apparel exports to EU using GSP scheme. “This is a major concern to us especially at a time when there is speculation that garments manufactured in other countries are transhipped using the GSP+ benefits offered to Sri Lanka,” he has said. The association has urged the Department of Commerce to take immediate steps to keep accurate records and to make them available on a timely manner.

This latest problem to affect our garments industry is a very serious matter indeed and should be nipped in the bud before it gets out of hand.
Our garments industry has enough problems on its hands already what with having to cope with the competitive pressures brought about by the end of the textile quotas system. We seem to have weathered the end of quotas alright so far but that is no reason for us to be complacent or allow such abuses to take place.

The gloomy forecasts of mass unemployment and factory closures have not come to pass – at least not yet. And the industry’s programme to adjust to the new reality and competition seem to be working so far.

The importance of the apparel industry and the critical role it plays in the country’s economy can be gauged from the fact that the government has accepted the industry’s budget proposals almost in their entirety – surprising even the industry itself.

Garments entering the EU under the GSP Plus scheme have to meet certain requirements under rules of origin criteria to be eligible to be considered as originating in the exporting country.

That such abuses should occur at a time when the industry is lobbying for the rules of origin criteria to be lowered to 35 percent from an average of 50 percent now and to be allowed to source inputs from East Asian countries apart from SAARC member nations is very dangerous indeed.

The EU importing states could easily make the abuse of the GSP + scheme to deny us further concessions. Those unscrupulous exporters who are engaged in this game should realize it could have serious repercussions for the industry and the entire country.

The country and the business community cannot afford to be complacent about such abuses. It is time for the industry itself to take action. After all it is the industry itself which would know better than anyone else who the culprits are and be in a position to identify them.

For the government’s part, the Commerce Department should have a better data collection system. It is hard to believe that in this day and age it does not have the required data to ensure proper monitoring of apparel exports. The duty free access to the EU is something which the apparel industry and the government fought hard to get. We cannot allow a few shady businessmen to jeopardise such an important trade concession.

Back to Business