The GSP+ Affair

by K. Mylvaganam, May 21, 2008

The talk of the day, particularly in the political, industrial and financial circles, is about the Generalised System of Preferences (GSP+).  This is a facility allowed by the European Union (EU) and America to certain developing countries to export some of their products duty free. The EU has exempted 7000 items and the USA 3000 items from Sri Lanka. The only condition on which this facility is extended is that those countries enjoying this facility should fall in line with the International Covenant on Civil and Political Rights (ICCPR). This means that these countries must adopt the 27 protocols of the United Nations (UN).

Sri Lanka has been making use of this facility for the past nearly two years. This is to be reviewed every two years and that dateline is falling on the 31st December 2008 for the EU and by the end of June for the USA. Both the EU and USA have threatened that they may not extend the GSP+ for a further period unless Sri Lanka endorses the 27 protocols of the Covenant. The President and his ministers, spearheaded by G.L. Peris, have been trotting the globe trying to wriggle out of the signing of the protocols. But their attempts seem to have proved futile. Now the tone of the government seems to be changing. Certain ministers have expressed their opinion to the effect that the GSP+ is no big deal; sour grapes attitude. But it is an open secret that over 200,000 jobs will be in jeopardy if the GSP+ is withdrawn by the EU alone and a loss of foreign exchange of Rs.2 billion or more will be lost. Several factories especially in the garment industry will be forced to put down their shutters.

Now the government is in a quandary as to whether it should go ahead and sign the protocols or refrain from it and face the consequences. If it puts its signature on the protocols, then it will have to abide by the conditions mentioned therein. This will mean avoiding the Human Rights violations totally. Is that practically possible after the draconian rule it and its extended arms have been enjoying all these years? It is not a simple task for the government and its forces to protect Human Rights under the existing situation. When we talk of protection of Human Rights it will mean among others the cessation of the following:

• Abductions – either for political or economic reasons
• Extrajudicial killings
• Attacking innocent citizens
• Rape
• Arbitrary arrests
• Torture
• House breaking and plundering.
• Unduly detaining the detainees without being presented to courts
• Obtaining written statement under duress
• Denial of legal assistance.
• Denying visits by the families of those detained.
• Denying food and medical assistance to the detainees.
• Locking up detainees in dark rooms.
• Hindering Human Right Organisations access to places of detention.
• Refraining from informing the families of those arrested.

The interesting part of this GSP drama is that the United National Party (UNP), the deadliest enemy to the ruling party, has promised to give their support to the government when this issue is taken up in the parliament. Earlier the government was able to palm over the Human Rights (HR) violations that happened in the North East on the Liberation Tigers of Tamil Eelam (LTTE). But now, after “liberating” the East and having the major part of the Jaffna peninsula under its command, the government cannot simply pass the buck to the LTTE any longer. The HR violations have worsened in the East since the Pillaiyan group – a paramilitary outfit of the army – has been allowed to hold fort in the East.

With the economy of the country going from bad to worse due to the rise in prices of both essential and nonessential items and the increase in the cost if living, the government is in a desperate situation. The trade deficit has shown a drastic increase this year. In 2007 the deficit was US$ 447 Million, but for the same period in 2008 it has doubled, amounting to US$ 937 million. If this trend were to proceed the total deficit for the year will hit an all-time high figure exceeding US$ 5000 million. The trade deficit for 2006 was US$3371 million and for 2007 it was US$ 3560 million. The two main causes for the increase in imports are the increase in prices of wheat, rice, fuel, vehicles and other essential and nonessential items. Also, the import of military equipments has reached an all-time high level.

The increase in oil prices has been a blessing to the rubber exports, as world market prices too has increased considerably. Tea prices also have gone up. There was a striking increase of 72% in agricultural export earnings. The total export earnings of agricultural products amount to 25% of total export income. Yet these were not sufficient to breach the gap as the imports of goods and the prices of imported goods also have soared substantially.

There is a decline in the export earnings of the textiles and garments. This industry contributes to nearly 50% of export earnings. There has been a drop of 2.7% so far this year.

From the above figures one can decipher how dependant the government is on the textile and garment exports. Most of the exports from this industry go to European countries and the USA. Hence, a withdrawal of the GSP+ will have devastating results on the country’s economy, which is already in ruins. Without the GSP+ it will be impossible to compete in the world market.

The government first went on its knees begging for the extension of the GSP facility. When that seemed to fail, it is taking an anti-West attitude in recent times. It is aligning itself more and more with China and Iran, both of whom are a thorn in the flesh of Europe and America. This seems to be bearing fruit.

Who knows! This trick of the government might work and it may even win the GSP+ back for Sri Lanka. After all, the Western countries are only interested in what would be beneficial to them at the end of the day. Hence one should not be surprised if the GSP facility is extended for a further one or two year period with a “warning” in the last moment.

kmylvaganam1974@gmail.com