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Investigation

Govt. non cooperation puts GSP+ in the balance

The apparel sector has benefitted most from
the GSP+ concessions

By Mandana Ismail Abeywickrema, Nirmala Kannangara, Raisa Wickrematunge
and Michael Hardy

The European Union has expressed its frustration over the Sri Lankan government’s refusal to cooperate with the review to extend the Generalized System of Preference Plus (GSP+) trade concession to Sri Lanka.

EU Commissioner for Sri Lanka, Bernard Savage says that the government’s stance has made it even more difficult for the EU to carry out its process.

“The Sri Lankan government has formally refused to cooperate with the review, which certainly doesn’t make the process any easier. We would have much preferred the government to cooperate with us,” he told The Sunday Leader.

Savage further noted that there were no negotiations about the GSP+ as it is a unilateral concession made by the EU.

“We have made a review of Sri Lanka’s eligibility and the commission will make a recommendation around October 18. The EU Council will take about two months to act on whatever recommendation we make,” he said.

Meanwhile, explaining the government’s stance with regard to lobbying for the GSP+ trade concession, member of the four member ministerial committee to respond to the concerns raised by the EU in its preliminary report on the country, Export Development and International Trade Minister, Prof. G.L Peiris told parliament that Sri Lanka would not submit to any investigation by a foreign nation or a group of persons on the pretext of ascertaining whether the GSP+ facility should be granted or not.

Peiris said the government had subscribed to this stand consistently and that the government had applied for this facility for a further period of three years.

He also said that the government had instructed the Sri Lankan ambassador in Brussels to continue to have a dialogue with the relevant authorities of the European Union in this regard.

The 103-page evaluation report submitted to Sri Lanka by the European Union (EU) on extending the trade concession granted to the country has raised serious concerns over the non-compliance on the part of the government to the EU’s criteria, especially with regard to human rights.

The preliminary report sent by the EU to the Sri Lankan government has raised serious concerns over alleged human rights violations associated to the war between the security forces and the LTTE. The GSP+ concession is granted to countries based on a list of 27 conventions, which cover areas of human rights, good governance, labour and environment that need to be ratified by member countries.

The EU’s GSP+ trade concessions have contributed greatly towards the country’s economic growth and its withdrawal would result in a multi million dollar loss, economists said. The Central Bank’s Report for 2008 states that exports to the EU comprised of 36% of total Sri Lankan exports.

Although the US was the single largest export destination, accounting for 24% of total exports, the UK was the second largest with 13%. The report also noted that exports to the US had declined by 5.1% mainly due to the fall in apparel exports.

Exporters in other sectors as well greatly value the EU market for Sri Lanka’s exports as it has become the number one market for Sri Lanka’s exports amounting to US$ 3 billion in 2008, accounting for over 36% of Sri Lanka’s total exports.

Furthermore, exports have grown since granting of the GSP+ zero tariff benefits from US$ 1.9 billion in 2005 to US$ 3 billion 2008. Apparel exports, the major item of export to the EU, increased from US$ 1 billion in 2005 to US$ 1.6 billion in 2008.

CEO, Frontier Research, Amal Sandaratne said that if the concession was removed, there could be estimated losses of between US$ 150 to 200 million. “In addition there would be higher duty barriers for Sri Lankan exports to the EU. Buyers would not want to incur higher costs, and might instead turn to cheaper substitutes,” Sandaratne explained.

The end result according to Sandaratne would either be a total fall in exports, or a fall in the money manufacturers.

“This in turn would lead to job loss with workers being laid off to cut costs,” he warned.

The EU market has played a key role in Sri Lankan exports,

During January to July 2009 the country’s apparel exports to the US recorded a decline of 14 % and this drop was compensated by increased exports to the EU market.

The apparel sector is one of the key industries that benefit immensely from the GSP+ facility. The sector is also the largest contributor to the domestic economy, contributing 8% to GDP and about 40% to the total industrial production. The EU is the major export market for apparels and accounts for 51% of total exports.

The GSP+ facility is provided for 7,200 export items.

State investigating signatories to statement on Sara

The controversy surrounding the possibility of Sri Lanka losing the GSP+ facility from the EU even resulted in state investigation units inquiring into a statement condemning the death threats received by Executive Director of the Centre for Policy Alternatives, Dr. Paikiasothy Saravanamuttu.

Following is the statement, which was signed by concerned citizens, intellectuals and civil society organisations:

“Statement Condemning Death Threat Against Dr. P. Saravanamuttu

As concerned citizens and members of civil society organisations committed to the protection and defence of human rights and democracy in Sri Lanka, we are gravely disturbed at the most recent attempt to intimidate Dr. Paikiasothy Saravanamuttu, Director, Centre for Policy Alternatives through a death threat by letter posted to his home. We condemn it unreservedly.

On August 20th, 2009 Dr. Saravanamuttu received a letter threatening him with death for allegedly passing information to the European Union which the letter claims will result in the GSP + plus facility being denied to Sri Lanka.

Dr. Saravanamuttu, and the organisation he heads, the Centre for Policy Alternatives, is involved in contributing to public policy making and implementation processes to ensure good governance, proposing constructive policy alternatives aimed at strengthening and safeguarding democracy, pluralism, the rule of law, human rights and social justice, and drawing attention to the social and political consequences of development. At a time when space for dissent has been restricted he has been one of the outspoken critics showing exemplary courage in speaking out.

He is a well respected scholar and is invited to speak and write not only on Sri Lanka but on broader issues of democracy, governance and social justice issues at a global level, by many institutions and organisations around the world.

In the past years, Dr. Saravanamuttu and the CPA have engaged in a range of actions aimed at ensuring that the Sri Lankan government honours its obligations under Sri Lankan law and international conventions that it has ratified. This work has often been in collaboration with other Sri Lankan organisations concerned with the promotion and protection of human rights in accordance with the right of association and expression guaranteed in the Constitution.

The campaign to call for the Government of Sri Lanka to comply with its obligations under the International Covenant on Civil and Political Rights (ICCPR) and a host of other international agreements that Sri Lanka has ratified has been an ongoing one by CPA and other organisations working to ensure human rights accountability in Sri Lanka. The engagement of these groups with the discussions on the extension of the GSP+ facility to Sri Lanka is part of this wider process. As reiterated by the CPA, its position is that GSP Plus benefits must be renewed, and that Sri Lanka should use the opportunity to also strengthen its human rights protection framework by complying with international and national law.

We deplore the intimidation levelled at Dr. Saravanamuttu and call upon the state to take all necessary measures to investigate and bring to justice those responsible for making these threats. We also extend our solidarity and support to Dr. Saravanamuttu and to all at the Centre for Policy Alternatives at this time, and call on the authorities to ensure that all steps necessary are taken to guarantee the safety and security of Dr. Saravanamuttu, his family and his staff.

27 August 2009”

However, the CID eventually questioned many of the signatories of this statement.

Dr. Sepali Kottegoda, Women and Media Collective:

“They asked me whether I knew Sara and how I found out about the petition. They asked where I had seen the death threat, and I told them that I had seen it on the Center for Policy Alternatives website. They were very polite, and said that headquarters had sent them. They made it clear that they were only doing what they were asked to do. The investigation didn’t frighten me at all — in fact, the Women and Media Collective is currently drafting a similar statement about death threats to activists in other parts of the country.”

Dr. Paikiasothy Saravanamuttu:

“The petition was circulated independently of me. If the CID was questioning the signatories to find out how they found out about the death threat, that’s fine. But it carries the implication that people are being intimidated by signing the petition. In a functioning democracy, that should be completely impossible. It has a chilling effect on civil society. As far as the investigation is concerned, I made a statement to the local police, two statements to the Colombo Crime Division, and a 12-page written statement to the CID. I pointed out to the CID that the government has been using violent language against me. The Defense Ministry and the government propaganda machine has been vilifying me during the actual investigation.”

Signatory who wished to remain anonymous:

“I was asked to come to my office for the interview. They asked me whether the death threat was serious or not, and I said that was for them to decide. I found the CID a little incompetent. They didn’t seem too keen to know what was going on. It was more about trying to discredit the signatories of the petition. It was interesting to see how the government reported it. The President basically put the Channel 4 incident, the UNP, the UN, and this statement in one box, saying that this is all a conspiracy against the country. To me, this is a crazy argument. It’s just like after 9/11 in America — nobody is allowed to challenge the government. The whole investigation wouldn’t have happened if the petition didn’t coincide with the visit from the UN.”

Other exports too will be affected

Apart from apparels, other major exports to the European Union (EU) countries under the GSP+ duty free concession include leather products, fish, vegetables and fruits, rubber products, gems and jewellery,

Financial Controller, Jafferjee Brothers Exports (Pvt) Ltd, V. Balasurendra told The Sunday Leader that in the event the country loses the GSP+ concession exporters to the EU would have to reduce their prices in order to retain their buyers.

“If we do not reduce our prices then the EU buyers would certainly turn to other importers and eventually we would lose our buyers. We are at the mercy of the buyers and all depends on the rate of duty we have to pay in the event of losing the GSP+ concession,” Balasurendra said.

According to Balasurendra, Jafferjee Brothers export 60% of their rubber products to the USA and Canada and 40% to Sweden and UK.

However when asked whether they would find an alternative market to export their products in order to avert any losses, Balasurendra said they depend on the existing market.

According to jewellery exporters, Tropical Findings, losing the zero rate duty concession would badly impact the local export business but added that Tropical Findings would not find it so difficult as their major markets were the USA and Far Eastern countries.

“We had the privilege over most of the other countries to get the EU concession but in the event if the country loses the concession it would certainly affect the export industry. In our business the major markets are the USA and the Far Eastern countries so as a result it would not affect us that much but will to a certain extent,” General Manager, Tropical Findings, Dammika Fernando told The Sunday Leader.

Loss of GSP+ will have huge impact

The garment industry has warned that the possible loss of the GSP+ trade concession would have an adverse impact on the sector.

According to Secretary General, Joint Apparel Association Forum (JAAF) Rohan Masakorale the apparel industry would have to pay an additional 10% in the event the country is denied the GSP+ facility, which was enjoyed over the past several years.

“The additional payments differ from one product to another and when talking about the apparel industry the buyer would have to pay an additional 10% in which case the buyer would decide whether to go for our higher priced product or find an alternative. This cost difference would badly impact the industry,” Masakorale told The Sunday Leader.

When asked as to whether the JAAF has found any other alternative market in the event the country loses the European Union (EU) market, Masakorale said that even if the country loses the GSP+ facility the export sector could survive in the EU market.

“Our major buyers are the 15 EU countries and the USA that have the buying power and are going for new fashions. Our products would be exported even if we lose the GSP+ concession but it is up to the buyers to decide whether they would go for our products which would cost more or whether they should buy from any other country which would cost them less,” added Masakorale.

When asked as to how many apparel sector employees have lost their jobs over the past year due to the world recession Masakorale said that the JAAF has not obtained the statistics for the past year but added that it could be around 10,000 – 15,000.

“The JAAF is yet to get the statistics but we believe that around 10,000 to 15,000 have lost jobs while 50 factories have either been closed or are only partly engaging in their business,” Masakorale said.

High possibility of getting GSP+

The Executive Director, Centre for Policy Alternatives, Dr. Paikiasothy Saravanamuttu who has received death threats for allegedly passing information to the EU, which is said would result in the withdrawal of the GSP+ trade concession, said there was still a high possibility that Sri Lanka would be granted the European Union (EU) GSP Plus concessions, despite reports to the contrary.

“I don’t think EU is as determined to penalise Sri Lanka as is made out,” Saravanamuttu said. He confirmed that the Defence Ministry website as well as various “conspiracy theorists” implicated him in contributing material which led the EU to consider refusing the trade concession due to human rights violations. Saravanamuttu strongly refuted the allegations. He said that three Europeans had been chosen by the EU to compile an interim report.

The EU chose to compile the report based on the implementation of the International Covenant of Civil and Political Rights (ICCPR), the Convention Against Torture (CAT) and the Child Rights Convention (CRC) in Sri Lanka. Saravanamuttu earlier insisted that contrary to reports, he supported the EU granting the GSP Plus concession.

Saravanamuttu added that he had been questioned both by the police and CID, with regards to the anonymous death threat he recently received.

The Executive Director observed that if EU decided not to grant the concession, there would be job losses in the apparel industry. He agreed that there was a possibility that Sri Lankan exports would be less competitive due to higher costs.

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