GSP plus, a double-edged sword - Experts

by Lalin Fernandopulle

The assurance given by the government that the Generalised System of Preferences (GSP plus) trade concession will be restored early next year was hailed by apparel exporters who are eager to avail themselves of the zero duty export benefit to increase export volumes and product lines.

However, the GSP plus concession could be a double-edged sword according to experts.

Chairman, Sri Lanka Apparel Institute, Prof. Lakdas Fernando said the trade concession to Sri Lanka is a blessing in disguise. We must make use of the GSP plus in the short-term but on the long-term there should be concrete proposals to strengthen the industry with effective marketing, new technology and innovative products to compete in the global market.

The industry must cater to the niche market with quality products which will enable companies to pay higher salaries, he said.

Experts said over dependence on trade concessions could have an adverse effect on the long run. The industry should be geared for stiff competition in the global market. The withdrawal of the quota system dealt a severe blow on those who were not ready for it. The GSP Plus scheme offered to Sri Lanka in 2008 was withdrawn in 2010 due to the former government failing to comply with European Union regulations on human rights, good governance, environment and labour laws.

Director, Favourite Group, Kumar Mirchandani said when the rest of Asia is negotiating trade agreements with Europe and USA is essential that Sri Lanka enjoy the GSP Plus concession to be competitive and boost export volumes.

“If not, we will fall back and export growth will be hampered. Vietnam is negotiating a Free Trade agreement with Europe. Getting the GSP Plus concession is good but we need to go beyond it and intelligently negotiate trade agreements with all major markets in mutually favourable terms,” he said.

However, according to industry personnel the re-instatement of trade concessions will be a huge boost to apparel exports. They said the trade concession is also vital to be competitive and be ahead of other exporters in the region. General Manager, Timex and Fergasam Group, Mohamed Rizwi Thaha said the restoration of GSL Plus will be a great opportunity to increase exports.

Exporters could enhance the volume and product lines under the zero duty concession. This will also enable companies to create more employment opportunities with higher wages.

The Timex and Fergasam Group exports to the USA and Europe.

“We could expand our range of products to more countries in Europe,” Thaha said.

Prime Minister Ranil Wickremesinghe assured local apparel industry representatives last week that Sri Lanka will regain the GSP plus trade concession from the European Union early next year. Sri Lanka’s exports to Europe is expected to gain 12 percent under the GSP plus concession which will not entail new conditions.

However, there is nothing without a price. To gain there has to be pain. Garment industry employers were called upon by the Premier to increase the wages and retirement benefits of workers when the GSP plus concession is restored. Apparel exporters agreed to meet the conditions with the reinstatement of the trade benefit.

Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva said the factories that were shut down will resume operations and existing companies could expand services and create better-paying jobs.

Experts said the loss to the country each year due to the withdrawal of the GSP Plus was around Rs. 1 billion. Discussions between the government and European Union officials to secure GSP Plus was launched early this year.