Well….now onto EU GSP+
View(s):
Hurrah or Aiyo? The European Union (EU) comes calling for its ‘pound of flesh’ in return for tax concessions, often zero taxes for more than 7,000 items imported by Europe. Wrong! That is an unkind or unfair assessment of these concessions; after all, Sri Lanka’s exporters and the huge mass of local workers immensely benefit from these concessions.An EU delegation is due to arrive at the weekend to review the GSP+ arrangement, which technically ends only in 2027. The EU will examine whether Sri Lanka has fulfilled its part of the bargain in meeting the 27 conditions attached to these tax breaks, while another five conditions are to be added.
The discussion is important as Sri Lanka’s performance (in meeting these conditions) will sway the decision to be made when the next round of concessions is announced, in 2027 and beyond.
REVIEW TIME: It’s that time of the year when Sri Lankan decision makers are walking on tenterhooks. Officials are uncomfortable and the nerves of ruling party politicians are frayed, and most agree to do whatever is necessary to satisfy the EU, only to keep it on the backburner until the next review comes up.
A regular bone of contention in these discussions is the promised dismantling of the controversial Prevention of Terrorism Act (PTA) which is sought under the conditions. This has become a political football kicked around by whoever is in power or the administration that follows. Otherwise, if promises were made to repeal this legislation, during the last EU review in October 2021, why haven’t these promises been kept by three administrations (including the current NPP regime) since then? In fact the current government has also detained people under this law.
Thursday: I got a call this morning from Ruwanputha, my young economist friend, just as I woke up early for breakfast and to write the column.
“The EU delegation is coming to discuss the GSP+ deal. I wonder what the reaction of the authorities would be to the fact that we have not fulfilled all the conditions,” he said. “The PTA is the main bone of contention,” I said.
“This time the need to fulfil these conditions is even greater than previous promises in view of the US threatening to impose 44 per cent tariffs on Sri Lankan goods,” he said. “That’s right, we need to keep the EU happy because we don’t want to face a situation where both our key markets are unhappy” I said.
Two issues that would figure prominently during the discussions are the PTA (the EU negotiators would insist on a time-bound promise to abolish this repressive law) and the freedom of association (freedom for workers particularly in the FTZs to join unions and be union-activists). Union activists like veteran trade union leader Anton Marcus (who is due to meet the delegation on April 30 along with other unions), say zero tax benefits and GSP+ concessions should trickle down to the workers which they add is not happening.
A Quick Response Unit by the Labour Department to mediate disputes between workers (via unions) and management has been abandoned. Marcus said at the last National Labour Advisory Council meeting, the Labour Minister promised to restore this mechanism. “Trade unions are blacklisted and activists victimised,” said Marcus.
EU is Sri Lanka’s second biggest trading partner and second main export destination, absorbing more than 20 per cent of Sri Lankan exports.
In a recent article, appearing in this newspaper, Grace Asirwatham, a former Sri Lankan ambassador to the EU, said that in 2023, Sri Lanka’s exports to the EU totalled approximately €2.6 billion, with textiles and garments constituting the largest share. These industries, which benefit significantly from GSP+ preferences, play a key role in Sri Lanka’s economy, accounting for nearly half of total exports to the EU. Other key exports include rubber products, tea, fish, spices, coconut products, food and beverages and gems and jewellery.
She said the EU is also a major source of imports for Sri Lanka, supplying machinery, chemicals, pharmaceuticals and vehicles that are vital to industrial development and healthcare systems.
The EU reviews its regulations every 10 years to ensure they remain effective and aligned with evolving global and internal priorities. The current EU GSP Regulation No. 978/2012 was initially set to expire on December 31, 2023. However, due to delays in finalising the new framework, it has been extended until December 31, 2027, ensuring continuity of the scheme, she said.
Taking a breather from writing on a complex subject, I walked into the kitchen and picked up a ‘maalu paan’ and a second mug of tea, before venturing to the window to find out what the trio was up to under the margosa tree. They were in fact discussing today’s topic: exports.
“Angalum karmanthayey inna magey yaluwo den katha-baha wenney americawey theerana apita balapanney kohomada kiyala (My friends in the garment factories have been talking about some issue in the US which might affect our garment exports),” said Kussi Amma Sera. “Apey sahodara sahodariyo eh rassawal matha jeevath wenney. Egollanta arakshawak thibunoth hondai (Our brothers and sisters depend on these jobs. I hope they are protected),” noted Mabel Rasthiyadu. “Apey angalum yanney americawata saha europayata. Eka nisa api eh ratawal amanapa karanna honda-ney (Our garments go to the US and Europe and we must not offend them),” added Serapina.
In the meantime, the tussle with the US may have been partly resolved after a government delegation discussed the tariffs with US officials in Washington on Tuesday. Currently, garment import tariffs in the US range from 6 per cent to 32 per cent and Sri Lankan items fall in between while exports, as of now, need to fork out an additional 10 per cent (imposed on all countries during the 90-day pause of the US decision where Sri Lankan goods were to be taxed at 44 per cent).
According to Export Development Board data, exports to the US, Sri Lanka’s single largest export destination, which absorbs 23 per cent of Sri Lanka’s merchandise exports, increased by 13.83 per cent to US$274.89 million in March 2025 compared to March 2024. Exports to the US over the period January to March 2025 increased by 9 per cent, reaching $775.6 million.
At the end of the day, what is important is to keep Sri Lanka’s trading partners, particularly the US and the EU, happy and ensure that such trade-offs are beneficial, equitably to both sides. The forthcoming negotiations between the government and the EU hinge on fulfilling the time-bound promise to scrap or amend the PTA and also allow trade unions without restrictions. That would be the top-most priority of the authorities. Well let’s wait and see what happens!
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!