When Friends Fail

by Peter Ratnadurai, October 21, 2009

Sri Lanka was granted special trade concession, GSP+, back in January 2005 as a goodwill gesture from its “friend” the EU; it is the only country in Asia to benefit from the scheme. That move helped Sri Lanka's garments export industry, which accounts for half of all exports, promote its place as a preferred source for many of Europe's retail giants.

The World Trade Organisation (WTO) prohibits discrimination between developing countries. The GSP+ scheme was implemented under the “enabling clause,” apparently to reward countries that “ratify and implement a list of human rights and good governance conventions.” The onus, therefore, is on the EU to evaluate each beneficiary against a strictly set criteria on a regular basis and prove that the recipient is entitled to the benefit.

When the scheme was set-up, 27 conventions were listed by the EU (see annex for list). All beneficiaries were required to have ratified, fully implement and allow monitoring of implementation. Soon afterwards, as early as 2006, there were questions as to whether Sri Lanka was fully implementing at least a dozen of the conventions.

Dragging Feet

In 2006, for example, the Karuna paramilitary group, a proxy of the state was accused by UNICEF and rights agencies of recruiting child soldiers, with the tacit assistance of state security forces. It was deemed that the government was doing “nothing” to stop this vile practice. Likewise, unaccounted disappearances gathered pace, with up to 100 ethnic Tamils disappearing every week at  one point.

Nonetheless, the EU refused to monitor if the conventions were being fully implemented. There was no question of terminating the scheme.

Any country that wanted to benefit from the GSP+ for the second term, beginning January 2009, were requested to submit applications by November 2008. There were many credible allegations from reputable human rights organisations and the UN to suggest Sri Lanka was not entitled to be a beneficiary. Nonetheless, by virtue of submitting an application, Sri Lanka qualified for the scheme, though it was always known Sri Lanka did not qualify to benefit.

That investigation, despite overwhelming evidence stacked against Sri Lanka - not least the existence of internment camps holding hundreds of thousands - was made to last just over a year. It took the EU 370 days to come up with a 40 page document. Furthermore, the investigation wasn't and didn't need to be exhaustive. If the rules had been applied in spirit, any violation of the conventions, minor or major, multiple or single, would disqualify Sri Lanka from the scheme.

Another interesting point to note is that as early as March 2009, Sri Lanka refused to allow an investigation. This nullified Sri Lanka's application. What most of us would know as “terms and conditions” in the application itself stipulate that Sri Lanka must be open to monitoring cum investigation of the extent to which the relevant conventions are being implemented. Though Sri Lanka's application had become void, the EU decided to give time by extending the investigation.

It is like someone applying for a job and being appointed, regardless of whether they meet the personnel requirements, simply because they've applied. Even when the person is alleged to be ill-qualified for the post, and even when they refuse to attend an interview or hearing, they are allowed to continue with the employment, pending findings of an investigation that lasts more than a year. That's absurd, to say the least.

Far from over

There are disturbingly premature celebrations amongst Tamil circles in the belief that GSP+ has been terminated: it hasn't. The EU will take at least another two weeks simply to decide if it is to submit the report to the member states, who will then take at least another two months to decide if the Sri Lanka should be suspended. Given the extent of evidence against Sri Lanka, if  a positive decision is made, Sri Lanka will cease to benefit from the scheme from end of June 2010.

What is most amusing is that though Sri Lanka would not have qualified as a beneficiary for even a day, it would have benefited for half of the term, one and a half years, by simply submitting an application. Could any other country have managed the same? Unlikely.

Come June 2010, the EU may yet decide that Sri Lanka has changed its tune and it can continue to benefit from the GSP+. Or it may launch another investigation, on the basis of a reapplication, and thereby extend benefits for the whole term, during which an apparent “investigation” would have taken place. As the saying goes, where there is will there's a way. If rewarding Sri Lanka is what the EU wants to do, it will circumvent all legislation to do it.  

Importance of GSP+

Given this sorry reality, Tamils shouldn't find comfort in playing sour grapes. GSP+ is an important trade benefit to Sri Lanka. More than a quarter of Sri Lankan exports, or 15% of foreign currency earnings, are from exports of goods to the EU. In particular, garments from Sri Lanka are around 6% cheaper for EU retailers; this is often footed by EU tax payers as part of their national taxation.

GSP+, however, is not the be-all-and-end-all of Sri Lanka's garment exports. It may well be that various components of the supply chain soak up the 6% between them and reduce theimpact on jobs to zero. In that case, the chain would become brittle and unable to withstand any further financial shock, i.e. from a consumer boycott campaign. That, though, depends on actions from a hereto failed diaspora.

On the other end, Sri Lanka may lose any advantage gained by the scheme; te EU's share of Sri Lanka's market may fall to 2004 levels. That would mean a reduction of around 20%. Media figures of 250, 000 job losses are based on all exports to EU ceasing. That certainly won't happen. A return to the pre GSP+ era would at maximum mean a loss of 50, 000 jobs.

So, job losses for Sinhalese, which is needed for them to pressure their government to abide by fundamental conventions on human rights, is anywhere between 0 and 50, 000; that's 0% to 10% of the apparel industry workforce.

What now?

In campaigning for the scheme to end, I have been led down a chain to a single British retailer. In Brussels, they talk of pressure from London. And in London they talk of pressure from retailers. At the retail consortium and in the press the name Marks and Spencer crops up very often.

M&S has set-up its global logistical hub in Sri Lanka and is reluctant to source from elsewhere. The saddest aspect of all this is that many thousand Tamils who live in close proximity of M&S clothing stores have been writing, in vain, to Brussels, while the reason for the GSP+ being extended to Sri Lanka has been much closer to their homes.

Now, both to ensure GSP+ is terminated, and then to see through that it has practical effects on the regime in Sri Lanka, sufficient pressure must be exerted on the likes of Marks and Spencer to source their garments from elsewhere. The Burma Campaign did so with a diaspora population much, much less than Tamils.

Our inability act, even at this stage when 300, 000 of our kith and kin enter their sixth month of internment is most shameful. The EU is most willing to excuse its failing friend. Our families and friends may not be alive to excuse us for failing to act now.