The only mantra for Sri Lankan exports to regain its competitive edge and recover lost grounds in the European market is through reapplying and obtaining the Generalized System of Preference (GSP) plus facility for which the country has been determined eligible, the outgoing Chairperson of the Exporters Association of Sri Lanka (EASL), Dawn Austin, suggested last week.
These comments were made in the wake of Secretary to the Treasury Dr. P.J. Jayasundera recently indicating that the government is not planning to request for the reinstatement of the GSP plus, when it comes for renewal in June next year.
Making her address at the 16th Annual General Meeting of EASL held last week, Austin highlighted that from the exporters’ point of view, the new GSP facility introduced by the government of Norway, which came to effect from January 1, 2013, is a rainbow of opportunities; as it had increased the product coverage, widened the concessions and provided an opening for lower middle income countries to diversify their exports, particularly in the fields of textile and apparel.
She further said that with the introduction of the new GSP concession, Sri Lanka is entitled to enjoy duty free access to all industrial products, including all textile items. The facility also provides preferences on selected agricultural products, which will be beneficial for certain exports from the country.
“With a greater number of countries joining the European Union (EU), there are few emerging markets that are accessible to Sri Lanka. At the end of the day, economically strong Asian countries are themselves not buyers of certain lines of products from Sri Lanka as they themselves sell the same skills and resources we do, and manufacture or produce the same items,” she emphasized.
The outgoing Chairperson also perceived that India-Sri Lanka Comprehensive Economic Partnership Agreement (CEPA) contributed to dissuading the country’s exports from tapping the vast Indian retail market due to the many insidious Non Tariff Barriers implemented. She said that the EASL has already alerted authorities with regard to the situation.
Meanwhile, when asked whether Sri Lanka’s decision to not apply for GSP plus was wise given that it comes at a time when exports to the European Union still holds a major proportion of the island’s total exports, former Deputy Governor of the Central Bank Weerakoon Wijewardena, however, said that the decision was justified when looking at a macro economic long-term perspective.
“What has been said by the regulator made a lot of economic sense as economists do not approve setting up economies based on subsidies, because they encourage people to move into sectors which have been subsidized,” Wijewardena, who is now an Independent Consultant in Economics and Banking said. He noted that ‘those’ subsidized economic activities never gain capacity to stand on their own feet thereby becoming a huge burden to the economies concerned and do not learn to manage risks, because their risks are assumed by those who provide subsidies.
“The development of an export sector that does not rely on subsidies is, in fact, wise counselling. However, that ‘no-subsidy’ policy has to be extended to other sectors of the economy as well, and should not be used selectively to deride one sector that has not got the subsidy because Sri Lanka has failed to meet the subsidy requirements imposed by the EU,” he held.
Nonetheless, the economist identified GSP plus, which facilitates partial liberalisation as the second best option in the absence of full trade liberalisation in the world. Elaborating, he said that, until the world moves to the latter, even a partial liberalisation should be welcome because the country has to compete now with those who have got the benefit from such partial liberalisation.