Lanka clinches new EU GSP

As many EU GSP beneficiary economies witnessed an end to their benefits, on January 1, 2014 with the activation of the new GSP scheme, some countries, including Sri Lanka, will continue their shipments to world's largest economy.

Despite the reduction of the number of countries enjoying EU GSP in June 2012, Sri Lanka has clinched 10 more years of this lifeline from the world's largest trading bloc.

"The EU Parliament approved the New GSP Scheme in June 2012 and it came into effect on January 1, 2014. Sri Lanka will continue to be a beneficiary of the Scheme," said Industry and Commerce Minister Rishad Bathiudeen during the Budget debate in Parliament recently.

The EU is the largest economy and the largest trading block in the world, acting as the top trading partner for over 80 countries - a feat of strength that no other economy has matched in modern times.

The EU ranks first in inbound and outbound international investments. The EU is also Sri Lanka's largest global trading partner (US ranks second). EU is a 500 million market and holds promise for Lankan exports.

According to a spokesman for the Department of Commerce, there is an increasing trend in trade and the balance of trade between EU and Sri Lanka has been in favour of Sri Lanka.

Trade between Sri Lanka and EU which was at $ 3 billion in 2004 rose $ 4,946.18 million in 2012. Sri Lanka's major export items to EU are apparel, diamonds, tea and rubber products. EU is also one of the most diversified investors in Sri Lanka, with leading European companies operating in almost all sectors of economy - specially, FMCG, higher education, apparel, infrastructure, manufacturing, agro, technology and even in strategic development projects.

The UK, Germany, Italy, Belgium, France and Sweden are the leading EU investors in Sri Lanka. EU's specific investment segments include hosiery, knitwear, surf sails, electronic products, light engineering, rubber based products, (eg tyres), coir-based products, gem and jewellery, diamond processing, tourism and recreational products, security printing, infrastructure development, activated carbon, food processing, computer software and ICT.

In June 2012, the EU redesigned its GSP scheme and the beneficiary countries were reduced from 177 to 90. Twenty countries in high and upper-middle income range do not get preferential access to the EU from January 1.

Among them are Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Brazil, Venezuela, Belarus, Russia, and Malaysia.

Their exports will now enter the EU under normal tariff applicable to all other developed countries. Of the former 177 GSP beneficiaries, 90 countries will continue to benefit from GSP - with Sri Lanka among them. The new GSP scheme will remain in effect for ten years from January 1.

Sri Lanka is listed in the 'Low and Lower Middle Income GSP beneficiaries' category in the new scheme, and several other countries in the same category too will continue to be entitled to EU GSP (similar to Sri Lanka). Among them are Indonesia, India, and China.