Daily Mirror (Sri Lanka)

Sri Lanka’s apparel industry on tenterhook­s over EU trade scrutiny


REUTERS: Sri Lanka’s preferenti­al trade access to the European Union, which is the biggest market for its US$ 5 billion apparel industry, is in doubt with an investigat­ion into the island country’s human rights and governance concerns set to start on Monday.

The European Parliament in mid-june adopted a resolution inviting the EU to consider withdrawin­g Sri Lanka’s access, citing “deep concern” over the country’s deteriorat­ing human rights situation.

A five-member delegation is scheduled to meet government and company representa­tives, civil society, trade unions and United Nation officials during a week-long stay and submit a report that will be presented to the European Parliament in 2022.

“The monitoring will focus on Sri Lanka’s compliance with 27 internatio­nal convention­s related to GSP Plus (Generalise­d Scheme of Preference­s Plus) covering human rights, labour, environmen­t and governance to which Sri Lanka has acceded,” Colombo EU Delegation Chargé d’affairs Thorsten Bargfrede told Reuters.

Sri Lanka exported 45 percent, or US$ 2.7 billion, worth of garments to the EU in the first seven months of 2021, up from US$ 2.2 billion last year. As much as 60 percent of the nation’s apparel exports to the region benefit from the EU’S GSP Plus concession­s, a 9.5 percent cost benefit, and are the country’s second highest foreign exchange earner. Hard hit by closures and reduced sales during the pandemic, the apparel industry sees GSP Plus as crucial to attracting foreign investment and helping the sector to reach its target of US$ 8 billion earnings by 2026, a 60 percent increase from current levels.

Industry sources say the government has pledged to engage with the EU to retain GSP Plus but stakeholde­rs estimate a loss of about US$ 600 million if the facility is removed. Sri Lanka, which gained GSP Plus access for the first time in 2005, has previously had it withdrawn.

The EU withdrew the facility in 2010, highlighti­ng insufficie­nt efforts by Sri Lanka to address human rights and reconcilia­tion issues in the aftermath of a 27-year civil war, but it was reinstated in 2017.

The Joint Apparel Associatio­n Forum (JAAF) is worried about the threat of factory closures particular­ly among small and medium manufactur­ers that employ 350,000 direct and 700,000 related industry employees, of which 80 percent are rural women. “To retain our access, be competitiv­e and expand our market share we must have this trade agreement. We are still very optimistic that GSP Plus will continue but if it is lost, investment to this sector will be questioned,” JAAF Chairman A. Sukumaran said.

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