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| Sunday, 25 January 2004 |
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EU grants special incentives to Sri Lanka Sri Lankan manufacturers exporting to the European Union (EU) markets whose products qualify as originating in Sri Lanka will benefit from the special incentive arrangements granted by the European Commission (EC) for the protection of labour rights (known as the social clause) in December. As of February (their exports will be more competitive than those of competitors. Sri Lanka and Moldova are the only two countries which have been granted this special incentive. The EC's Generalised System of Preferences (GSP) has a development-oriented dimension which provides for special incentives rewarding compliance with international social (social clause) and environmental standards (environmental clause). In 2002, the Sri Lankan Government wrote to the European Commission requesting that Sri Lanka be granted special incentives under the social clause, indicating that the country was in compliance with the core labour standards referred to in the International Labour Organisation (ILO) conventions on forced labour, freedom of association and the right to collective bargaining, non-discrimination in respect of employment and occupation, and child labour. The EC carried out an independent evaluation on the above and concluded that Sri Lanka was making good progress towards full compliance with the core labour standards and therefore decided to grant this incentive. Under the GSP scheme, Sri Lanka, like other developing countries, enjoyed a reduction in duty of 3.5 percentage points from the MFN (Most Favoured Nation) rate for the sensitive products, with the exception of the garment sector where the reduction was 20 per cent of the MFN rate. Half of the products covered by the GSP scheme are classified as non-sensitive products and these enjoy complete duty-free status when entering the EU market. With the granting of the labour incentive, as of February 1 all Sri Lankan sensitive products which received a 3.5 percentage points reduction from the MFN rate will receive an additional five percentage points reduction which will make the total reduction from the MFN rate to 8.5 percentage points. The textiles and garment sector, which received a 20 per cent reduction from the MFN rate, will now receive an additional duty reduction of 20 per cent, which will make the total reduction from the MFN rate to 40 per cent. Some products with specific duties which currently enjoy under the GSP scheme a 30 per cent reduction from the MFN rate will have an additional reduction of another 30 per cent under the labour clause, thus bringing the total reduction to 60 per cent off the MFN rate. The only exceptions to this are the specific duty items which currently enjoy reduction of 15 per cent under the GSP scheme; they will receive an additional 15 per cent reduction as per the labour clause, bringing the total reduction to 30 per cent off the MFN rate. Sri Lanka will benefit from this clause in 2004 and 2005. In 2006, a complete new GSP system will be introduced. In the meantime, Sri Lanka will have to continue its efforts to improve its social situation to benefit from the social incentives under the GSP scheme. |
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