IPS releases latest publication

The GSP scheme was initiated by the UNCTAD in 1968 with the objective of enabling developing country exports to enter developed country markets under preferential rates. Sri Lanka has been a beneficiary under the GSP scheme over the last three decades.

However, meeting the scheme's objective of export expansion seems to have fallen short and Sri Lanka has not been able to export effectively under the EU and US GSP schemes, which are the most important non-reciprocal preference arrangements providing access to Sri Lanka's main export markets.

The publication using three indicators (coverage, utilisation and utility rates) assesses the usefulness of the EU and US GSP schemes for Sri Lanka and discusses Sri Lanka's performance under both schemes while suggesting possible measures that can be taken to improve the schemes.

In the case of the EU GSP scheme, a substantial proportion of exports are covered - as much as 98 per cent of exports from Sri Lanka to the EU are eligible for preferential treatment. Though the product coverage is high under the EU scheme, Sri Lanka records low utilisation and utility rates of about 40 per cent, highlighting that the scheme has been of limited use.

The study finds that some sectors such as textile and textile articles, which is the main export sector from Sri Lanka to the EU, are unable to fulfill the Rules of Origin (RoO) requirements, highlighting the need to simplify the existing RoO criteria in the EU to improve the usage of the scheme.

The facility of using inputs from South Asia for meeting the RoO requirements which is provided under the regional cumulation rule has proved useful only for a limited number of sectors and the extension of the idea beyond South Asia under the proposed super regional cumulation together with simplification of the RoO criteria could substantially improve Sri Lanka's utilisation of the EU scheme.

While the coverage rate is low in the case of the US GSP scheme (about 8 per cent), Sri Lanka records a high utilisation rate of 89 per cent but a low utility rate of 7 per cent. The US scheme has been of limited use to Sri Lanka due the exclusion of textile and textile articles from preferential treatment. One way to increase the real benefits of the US scheme is to improve the product coverage of the scheme.

The analysis of Sri Lanka's experience of both schemes highlights several reasons for their limited use. These include low product coverage (in the case of the US scheme), strict rules of origin criteria (in the case of the EU scheme), and weak supply capacity of the country.