A Deep Dive into Export Impact, Labour Consequences & Policy Pathways
🌍 What is GSP+?
The Generalised Scheme of Preferences Plus (GSP+) is a trade mechanism offered by the European Union (EU) that allows vulnerable developing countries like Sri Lanka to export a wide range of goods to the EU market duty-free. In return, beneficiary countries must implement 27 international conventions covering human rights, labor standards, environmental protection, and good governance.
This preferential treatment makes Sri Lankan products more competitive in the European market—particularly in sectors such as wearing apparel, rubber, seafood, and tea.
📈 Sri Lanka’s GSP+ Performance: A Vital Trade Link
- In 2023, Sri Lanka exported USD 3.63 billion worth of goods to the EU and UK, making up 30% of its total exports.
- The wearing apparel sector accounted for 54.9% of these exports, highlighting its strategic importance.
- 1,301 products are exported under the six-digit HS code system to the EU and UK, many of which benefit from GSP+ tariff reductions.
- Products like men’s underpants, brassieres, and shirts are among the top items exported under GSP+.
However, utilisation rates vary:
- Only 52.3% of knitted and non-knitted apparel exports benefit from GSP+ due to complex rules of origin.
- In contrast, rubber products had a 96.4% utilisation rate, contributing over USD 340 million to exports.
⚠️ What Happens If GSP+ Is Withdrawn?
According to the Institute of Policy Studies (IPS) in its study titled “Who Stands to Lose?”, the potential loss of GSP+ would have devastating effects:
📉 Export Losses
- Sri Lanka could face export losses of up to USD 1.23 billion, a 36.7% drop from 2019 levels after accounting for utilisation rates.
- The wearing apparel sector alone could lose USD 996.38 million, representing a 44.63% drop in exports.
The preference margin—or the difference between the current GSP+ rate and the Most Favoured Nation (MFN) tariff—can be more than 10 percentage points for key products. Losing this advantage would make Sri Lankan goods significantly more expensive in the EU.
👩🏭 Employment Impact: Vulnerable Workers at Risk
The withdrawal of GSP+ wouldn't just hurt exports—it would hit Sri Lanka’s workforce hard, especially in low-income and rural districts.
- 73,574 workers are at risk of losing jobs.
- 87.1% of these vulnerable jobs are in the wearing apparel industry, which currently employs 475,741 workers.
- 70.5% of the apparel workforce are women, many of whom are low or medium-skilled.
Out of the vulnerable group:
- 42,958 are female workers in low/medium-skilled roles.
- Overall, 82% of at-risk workers fall into the low and medium-skilled category.
- Regions like Kegalle and Ratnapura will be among the hardest hit.
🧭 Sri Lanka’s Policy Response: What Needs to Be Done
🟢 1. Reaffirming Commitment to Conventions
In a mid-October 2024 meeting, Sri Lanka reassured the EU Ambassador of its commitment to uphold the 27 international conventions that underpin GSP+ eligibility—recognizing GSP+ as a lifeline for economic growth and inclusive development.
🔄 2. Increasing GSP+ Utilisation
Efforts must be made to:
- Simplify compliance with rules of origin
- Expand cumulation of non-originating materials (e.g., Sri Lanka’s cumulation agreement with Indonesia recently approved by the EU)
- Enhance technical capacity of exporters to comply with EU standards
🧩 3. Planning for the Future
Sri Lanka is at risk of graduating out of GSP+ eligibility as it moves toward upper-middle-income status. Long-term solutions include:
- Negotiating a Free Trade Agreement (FTA) with the EU
- Diversifying into higher-value, high-tech export sectors
- Strengthening domestic industries’ resilience through supply chain reforms
🏁 Conclusion: GSP+ is Not Just a Trade Tool—It's an Economic Necessity
The evidence is clear—losing GSP+ would deeply harm Sri Lanka’s export economy, formal manufacturing sector, and most vulnerable workers, especially women in rural areas. While Sri Lanka’s development ambitions are commendable, losing GSP+ at this critical economic juncture could set back years of progress.
Preserving and maximising the benefits of GSP+ is not just a diplomatic goal—it’s a national priority.
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