at the

Hilton Colombo Residences

22 January 2016

REPORT

EU-SL TRADE SEMINAR

2016

2

CONTENTS

03 Introduction

04 Members of the Head Table

05 Welcome Address - Mr. Arnold Perera, Vice President ECCSL

05 Address - H. E. Mr. David Daly – EU Ambassador to Sri

Lanka and the Maldives

07 Keynote Address - Hon. Dr. Harsha de Silva, MP –

Deputy Minister of Foreign Affairs

07 The New EU Trade Strategy – Mr. Andreas Julin, Trade

Policy Coordinator for South Asia, DG Trade EC

09 GSP Plus – Mr. Nikos Zaimis, Deputy Head of GSP and

Sustainable Development Unit, DG Trade, EC

10 Export Helpdesk – Ms Alina Boiciuc, Head of GSP Plus

section, DG Trade, EC

23 EU-SL Trade and Investment Relations – The Path to

Regaining GSP Plus – Dr. Saman Kelegama, Executive

Director, Institute of Policy Studies

28 Private Sector perspective on doing business with

organisations in the EU Region – Mr. Mahesh

Hirdaramani, Director Hirdaramani Group

29 Interactive Panel Discussion

30 Vote of Thanks - Mr. Roshan Lyman – Attaché Trade,

EU Delegation to Sri Lanka & the Maldives

31 Agenda

3

EU-SL TRADE SEMINAR

INTRODUCTION

The European Chamber of Commerce of Sri Lanka (ECCSL) hosted a breakfast seminar

themed – “EU: Sri Lanka’s No. 1 Trading Partner” – at the Hilton Colombo Residences on

22 January 2016.

The seminar – a joint initiative of the ECCSL, the Delegation of the European Union to Sri

Lanka and the Maldives and the Sri Lanka Apparel Exporters Association, was intended to

provide an opportunity for the business community to interact with some key members of a

high profile mission from the European Commission (EC) and the European External Action

Service (EEAS). This mission was in the island in order to discuss various issues with the

Government, including the possibility of regaining the GSP Plus facility.

The three officials who participated in the seminar were Mr. Andreas Julin, the Trade Policy

Coordinator for South Asia, DG Trade, who spoke on EU-Sri Lanka trade relations with a

focus on the new EU Trade Strategy; Mr. Nikos Zaimis, the Deputy Head of GSP and

Sustainable Development Unit, DG Trade, who addressed the main features of the GSP Plus

scheme and what measures Sri Lanka would need to take to regain the concession and Ms.

Alina Boiciuc, Head of GSP Plus section, DG Trade whose presentation was a guide to the

online Export Helpdesk on the EC website, for relevant information on EU tariffs,

requirements, preferential arrangements, quotas and statistics affecting business in

developing countries.

The information shared by the EU mission at this seminar built on matters discussed at a

previous ECCSL seminar in March last year themed, “Can Sri Lanka Regain GSP Plus?”

The seminar commenced with the Welcome Address by Mr. Arnold Perera, Vice President of

the ECCSL, followed by an Address by H.E. Mr. David Daly, Ambassador and Head of

Delegation of the European Union to Sri Lanka and the Maldives. The Keynote Address was

delivered by Hon. Dr. Harsha de Silva, MP, Deputy Minister of Foreign Affairs.

Other speakers were Dr. Saman Kelegama, Executive Director of the Institute of Policy

Studies, who provided an overview of the trade and investment relations between the EU and

Sri Lanka and a brief presentation by Mr. Mahesh Hirdaramani, Director, Hirdaramani

Group, who spoke on the window of opportunity for Sri Lanka to regain and make use of the

GSP Plus concessions.

The presentations were followed by an interactive Panel Discussion and the seminar

concluded with the Vote of Thanks by Mr. Roshan Lyman, Attaché Trade, EU Delegation to

Sri Lanka & the Maldives.

MEMBERS OF THE HEAD TABLE:

4

1. Mr. Arnold Perera, Vice President, ECCSL

2. H.E. Mr. David Daly, Ambassador and Head of Delegation of the European Union to

Sri Lanka and the Maldives

3. Hon. Dr. Harsha de Silva, MP, Deputy Minister of Foreign Affairs

4. Hon. Sujeeva Senasinghe, MP, State Minister of International Trade

5. Mr. Nikos Zaimis, Deputy Head of GSP and Sustainable Development Unit, DG

Trade, EC

6. Mr. Andreas Julin, Trade Policy Coordinator for South Asia, DG Trade, EC

7. Ms. Alina Boiciuc, Head of GSP Plus section, DG Trade, EC

8. Dr. Saman Kelegama, Executive Director, Institute of Policy Studies

9. Mr. Mahesh Hirdaramani, Director, Hirdaramani Group

10. Mr. Roshan Lyman, Attaché Trade, EU Delegation to Sri Lanka & the Maldives

5

WELCOME ADDRESS

Mr. Arnold Perera, Vice President of the ECCSL, welcomed the members of the head

table and participants to the seminar. He thanked His Excellency Mr. David Daly,

Ambassador and Head of Delegation of the European Union to Sri Lanka and the Maldives,

and Mr. Roshan Lyman, Attaché Trade, EU Delegation to Sri Lanka and the Maldives for

their support in organising this seminar. He noted that since the EU is the No. 1 Trading

Partner of Sri Lanka, he hoped the seminar would help business partners in Sri Lanka to

understand the key constraints between the EU and Sri Lanka, and how they can be

mitigated. Mr. Perera then invited His Excellency Mr. David Daly to address the gathering.

ADDRESS

H.E. Mr. David Daly, Ambassador and Head of Delegation of the European Union to Sri

Lanka and the Maldives, welcomed all those present and thanked the ECCSL for partnering

with the Delegation in organising the seminar, and observed that it was “yet another excellent

event done together.”

Outlining his presentation, the Ambassador stated that:

this was a tale of three cities viz. Colombo, Geneva and Brussels,

the EU is supporting Sri Lanka’s efforts to regain GSP Plus, and

an important meeting had taken place between the Delegation and the Government of

Sri Lanka to discuss the process of restoration of GSP Plus.

A Tale of Three Cities – The effort to regain the GSP Plus concession is fundamentally

being implemented in Colombo. The key to qualifying for restoration of the facility lies in the

implementation of the 27 international conventions which cover labour, the environment and

human rights issues. He quoted the late Lakshman Kadirgamar when he said: “the cake has to

be baked at home.”

With regard to Geneva, the Ambassador noted that GSP Plus is a trade gift, an act of

generosity by the EU to developing countries as a trade incentive to encourage compliance

with the 27 international conventions. The EU also has to conform to WTO rules. Thus, EU

assessments on GSP Plus are objective.

Each international convention has a monitoring body which determines whether countries are

complying or not. Therefore, Geneva is important in the context of compliance with WTO

rules as well as those of UN bodies and the ILO.

The views of the High Commissioner for Human Rights, Prince Zeid Ra’ad Al Hussein, after

his visit to Sri Lanka in February, will also impact Sri Lanka’s application process to regain

GSP Plus.

6

Brussels, the home of the EU, is where Sri Lanka’s application will be processed, the

Ambassador stated. The EU will be responsible for the navigation of the application and will

forward it to the Council of Ministers comprising 28 countries and then to the European

Parliament.

The Ambassador reiterated that the EU will support Sri Lanka’s application process for the

restoration of the GSP Plus facility. In November 2015, the Council of Ministers had

expressed support for Sri Lanka, and had observed that there exists a positive note of progress

by Sri Lanka.

Referring to the inaugural meeting of the new Working Group (WG) on Governance, Rule of

Law and Human Rights, the Ambassador stated that the WG, which was established under

the EU-Sri Lanka Joint Commission, provides an opportunity to engage in open, constructive

dialogue and indicates the EU’s commitment to regular high-level discussions on those

sensitive and important issues. He said that the preparatory work done by both parties was

necessary to negotiate a very complex process.

He said that even though there is still a lot to be done by the Government of Sri Lanka, it is

also clear that progress has been made and continues to be made and that the meeting of the

Working Group marked an important step forward.

Observing that the EU will closely follow the transformation on the ground, he added that the

EU has a similar mechanism in 40 countries.

Whilst being appreciative of the recent Cabinet approval to amend the Code of Criminal

Procedure, to allow those arrested for committing an offence to access a lawyer, Ambassador

Daly observed that the future repeal of the Prevention of Terrorism Act and its replacement

with a comprehensive National Security Act would be in line with international standards.

However, the issue of torture and emblematic causes such as the Trinco Five killings need to

be resolved and the EU will be closely monitoring the efforts by the Government in this

regard.

Ambassador Daly affirmed that he is confident that the EU and Sri Lanka can jointly navigate

the process, but pointed out once more that ‘the cake must be baked at home.’

7

KEYNOTE ADDRESS

Hon. Dr. Harsha de Silva, MP, Deputy Minister of Foreign Affairs, discussed the

Government’s efforts in applying for the restoration of the EU’s GSP Plus concession.

Quipping on Ambassador Daly’s quote, the Minister noted that the cake is indeed being

baked at home and is about to come out of the oven, and he is confident that it will be both

edible and tasty.

Dr. de Silva observed that the negotiation process with the EU throughout the previous year

had been tough but sincere and that while the Government accepts that a lot of things have

yet to be done, he is also glad that the progress is good. He said that implementing

Government policy is not necessarily an easy task, and that such progress is due to the current

political leadership and the commitment of public service officials.

There is still a complicated relationship between Geneva and Colombo regarding compliance

on the 27 international conventions, he said and efforts are ongoing to bring about change in

the UNHRC resolution. Sri Lanka hopes that when the High Commissioner for Human

Rights visits the island in February, he will confirm the progress being made by the

Government.

On the issue of reconciliation, he said that consultations are underway with victims and both

state (security forces) and non state actors (civil society) on the democratic process needed

for a practical reconciliation process. The Government believes that the process can be

finalised in a few months.

One of the more serious economic constraints that exists for the Sri Lanka Government is the

limitation on enjoying tax concessions when exporting to its No. 1 trading partner in the

world.

The Deputy Minister concluded on a hopeful note by saying: “We will do whatever that

needs to be done to get GSP Plus back.”

EU-SRI LANKA TRADE RELATIONS

Presenting the Policy Declaration and Action Programme under EU’s new Trade Policy

titled: Trade for All, Mr. Andreas Julin, Trade Policy Coordinator for South Asia, DG

Trade, European Commission, stated that the rationale for a new trade and investment policy

is a response to the current public debate on potential impact of trade policy on citizens’ daily

lives. It underlines the need to adjust to the new realities, in particular in the Global Value

Chains where the way products are made is changing.

Furthermore, he said that there is a need to reassess the targets for access to markets: both in

terms of geography and also in terms of scope and issues (new type of barriers); and finally

the need to ensure we get the most out of the existing trade deals: which concerns collective

8

efforts on implementation and enforcement, so as to benefit all small and big participants to

trade.

“Trade for All" – a new, more responsible Trade and Investment Strategy

What does "trade for all" mean? - It means that benefits of trade should be

accessible to all: consumers, workers, self-employed and citizens at large, small,

medium and large enterprises as well as people in partner countries, in particular the

poorest in the developing world.

What does "responsible" mean? - It means effective, transparent and based on EU

values

Mr. Julin went on to define the following term effective in the context of being responsible.

EEffffeeccttiivvee:

Taking into account new economic realities: more integrated global value chains,

increased importance of imports, international regulatory co-operation, digital

economy, energy and raw materials, IPR protection, facilitating trade in customs,

servicification of trade, etc.

Ensuring trade and related policies are coherent and mutually supportive: e.g. trade

liberalisation goes hand-in-hand with sustainable development, mobility of

professionals, adjustments in labour markets, etc.

Optimising trade effects by reinforcing implementation and enforcement: enhance

partnership with Member States, EP and stakeholders, and

Addressing specific needs of SMEs: e.g. via dedicated FTA provisions

He said that “responsible” also means transparent and based on values:

TTrraannssppaarreenntt::

Opening up trade negotiations to more public scrutiny by publishing key negotiating

texts, as for example, done in the Transatlantic Trade and Investment Partnership

(TTIP) negotiations.

Engage in a regular dialogue with the Member States, European Parliament (EP) and

public at all stages of policy conduct.

BBaasseedd oonn VVaalluueess::

Safeguard the European social and regulatory model at home.

Use trade agreements and preference programmes as levers to promote, around the

world, sustainable development, human rights, fair and ethical trade and the fight

against corruption.

Lead a reform of investment policy globally.

9

Briefly speaking about the Negotiation Agenda, Mr. Julin said that the WTO is at the heart of

the agenda and that the EU pushes for the conclusion of the Doha Development Agenda

(DDA) to ensure WTO’s central role in developing and enforcing the rules of global trade.

There are also bilateral and regional agreements which need to be completed like the

Transatlantic Trade and Investment Partnership (TTIP), and the EU-Japan FTA negotiations.

EU also seeks to strengthen its presence in Asia-Pacific by concluding FTAs with India,

Thailand and Malaysia and initiate possible new FTAs with Australia, New Zealand, the

Philippines, Indonesia or investment agreements with Hong Kong and Taiwan.

EU also has an ambitious agenda with Latin America, while redefining its relationship with

African partners. It also seeks to modernise existing agreements with Turkey, Mexico and

Chile.

Explaining what the Negotiation Agenda means for South Asia, Mr. Julin said that the new

strategy –

confirms the basic pro-development stance of EU trade policy,

ensures that economic growth goes hand-in-hand with social justice, respect for

human rights and high labour and environmental standards,

aims to expand EU action on sustainable development,

gives more prominence to human and labour rights in trade work, including through

preference programmes such as GSP, and

makes new efforts to support fair and ethical trade schemes and ensures responsible

management of supply chains.

Mr. Julin also observed that in South Asia, the largest beneficiary of GSP is India, the largest

beneficiary for GSP Plus is Pakistan, and the largest beneficiary under the Everything But

Arms (EBA) initiative is Bangladesh.

Summarising his presentation, Mr. Julin observed that this more responsible approach

responds to new economic realities in line with the EU’s foreign policy, which is based on

three key principles - effectiveness, transparency and values – thereby ensuring that this trade

policy benefits as many people as possible.

GSP PLUS FACILITY

Mr. Nikos Zaimis, Deputy Head of Unit at the Directorate General for Trade, Sustainable

Development and GSP, said that he was a member of the Delegation which attended the

meeting of the Working Group on Human Rights in Colombo, earlier.

He said that the EU’s trade policy is effectively pushing for labour, environment and human

rights to be upheld; and that the GSP scheme is the flagship. The facility of allowing

10

countries to export products at zero duty is a means of encouraging governments to

implement the values of the EU.

Even though now fewer countries can benefit from GSP, those who are eligible are receiving

greater benefits currently. The value of bilateral trade, which is eligible for GSP benefits is

two billion euro and only 58 percent has been utilised under the GSP scheme.

The framework of the GSP scheme comprises a reforms schedule which helps countries to

identify their shortcomings and status and also facilitates continuous engagement with

countries even after they have been granted GSP Plus. There are also written communiqués,

meetings, trade groups, Joint Commissions and visits.

As the EC is responsible to 28 governments in the EU and the European Parliament, it has to

report annually on the status of beneficiary countries on human rights, labour rights, good

governance and environment protection policies. The reports must be balanced and need to

show achievements, failures and constraints.

Mr. Zaimis was pleased about the progress in Sri Lanka and noted that a new cycle of

relations has begun between the EU and Sri Lanka, and progress must be maintained through

continuous engagement. Once the EC is convinced that Sri Lanka is eligible for the GSP Plus

concessions, then it becomes the advocate for the country with the European Parliament.

The business community is the immediate beneficiary and it is important that it understands

the reasons why GSP Plus is granted and supports the Government in the implementation of

the 27 international conventions.

Zaimis explained that after making the formal application, the European Council (EC) would

evaluate it for six months, after which, if the EC is satisfied, it would act as the lawyers,

defending Sri Lanka’s application as it is forwarded to the European Parliament.

The European Parliament will debate for two months prior to passing a resolution. However,

this period could be extended for up to four months, which would mean that if the application

is submitted in February, the information on whether GSP Plus is granted would be known by

either October or December of this year. The original plan of the new government was to

apply for GSP Plus before the end of 2015 and receive the facility by mid-2016.

Mr. Zaimis also said that the purpose of the scheme is actually to help countries recognise

their shortcomings. “No country is perfect not even in the EU,” he said and added that it will

be Utopian to expect things to happen in a day, and all before the GSP Plus is granted.”

EXPORT HELPDESK

Ms. Alina Boiciuc, Head of GSP Plus section of the Directorate General Trade guided the

participants on the way to utilise the European Commission Export Helpdesk, the online

portal to access the world's largest single market.

11

In just a few clicks, companies can find information on the EU tariffs, requirements,

preferential arrangements, quotas and statistics relating to imports from trade partner

countries.

Additional Features

Latest news

Features

Resources

What the tool doesn’t provide

An info line or call center

A trade finance or technical assistance

A market intelligence data or business plans

Information on private standards (eg from supermarket chains), services or investment

A matchmaking of exporters and importers

Tariffs

Binding Tariff Information

Duty relief and suspensions

Quotas

Antidumping

Tips & tricks on EU tariffs

Requirements

Understanding the EU market

Sanitary and phytosanitary

requirements

Environmental requirements

Technical requirements

Marketing standards

Import restrictions

Tips & tricks on EU requirements Statistics

EU trade flows inside &

outside Europe.

Preferential arrangements

Rules of Origin (ROO)

Generalised Scheme of Preferences (GSP)

Economic Partnership Agreements (EPAs)

Free trade agreements (FTAs)

Autonomous trade regimes

Overseas countries and territories (OCTs)

Customs Unions

12

13

The top 20 user countries in 2015

HOW does it help companies? WHY does it help companies?

import conditions for each product

exported to the EU market

Health, safety, technical standards,

marketing standards

Available online

Custom duties, duty discounts,

quota database (link)

All information free of charge!

How to make use of reduced

duties? (trade preferences)

Rules and proofs of origin

Our data are "real life data" –

frequent updates

Who to contact for advice?

Competent authorities in MS,

customs offices, chambers of

commerce

Contact form to lodge individual

requests – we respond within 3

working days

Trade statistics – how much of

my product is already exported to

the EU?

All trade flows – product by

product, country by country – from

2002 till 2014

Trade figures are at hand (total

or product-specific)

14

HOW DOES THE HELPDESK WORK?

1st Step

Go to "My export" and define the product code for your product

My export form:

The system helps you find the code

Search Results Chapter List

Code Product Description

0809 Apricots, cherries, peaches (including nectarines),

plums fresh

1 0809 apricots, cherries, peaches (including nectarines), plums

fresh

2 0809 10 apricots

0812 Fruit and nuts, previously preserved (for example) in

gas, in brine, in sulphur water or in other preservative

unsuitable in that state for immediate consumption

3 0812 90 25 apricots; oranges

4 0812 90 25 90 apricots

0813 Fruit, dried, other than that of headings 0801 to 080... or

dried fruits of this chapter

5 0813 10 apricots

2007 Jams, fruit jellies, marmalades, fruit or nut puree and

pastes, obtained by cooking, whether or not containing

other sweetening matter

Code Product Description

6 2007 99 39 22 apricots

7 2007 99 50 45 apricots

8 2007 99 97 37 apricots

Apricots

15

2nd Step

Fill in the Search Form

What? Where from? Where to?

YOUR SEARCH RESULTS

What is in there for exporters? (1)

Apricots – CN 08091000 – exported from Armenia to EU

EU requirements for "edible fruits and nuts"

explained

with legal references & links to EurLex

the competent authorities dealing with the requirement in the EU member state

Optional:

EU requirement for products from organic production

Tariff rate for FTA

- GSP+: 0% *)

- non-pref. quota: 10% **)

- Non-quota: 20% **)

Rules of origin for apricots

*) GSP+ = Generalised System of Preferences Plus

**) Countries without an EU trade agreement, quota and non-quota

What is in there for exporters? (2)

Apricots – CN 08091000 – exported from Sri Lanka to Poland

• VAT rate for Poland for avocados : Reduced rate of 5% for fruits and vegetables

16

• Additional information on VAT in Poland

• General import procedures in Poland; Polish customs offices

• Trade statistics: Imports in quantity and value into the EU/ Poland from Sri Lanka

THE RESULTS ON SCREEN

REQUIREMENTS: FRUIT JUICES

17

REQUIREMENTS: FRESHWATER CRAYFISH

REQUIREMENTS: APPAREL (MEN'S OR BOY'S OVERCOATS, RAINCOATS –

MANMADE FIBRE)

Specific requirements for 03062910

Control of contaminants in foodstuffs

Control of residues of veterinary medicines in animals and animal products for human

consumption

(Only required for aquaculture)

Health control of fishery products intended for human consumption

Health control of fishery products intended for human consumption

Traceability, compliance and responsibility in food and feed

Labelling for fishery products

Labelling for foodstuffs

Voluntary – Products from organic production

18

RESULTS ON SCREEN: CUSTOMS DUTIES - APPAREL (MEN´S OR BOY´S

OVERCOATS, RAINCOATS – MANMADE FIBRE)

RESULTS ON SCREEN: CUSTOMS DUTIES FOR FRUIT JUICES EXPORTED

UNDER GSP

19

RESULTS ON SCREEN: CUSTOMS DUTIES FOR FRESH WATER CRAYFISH

(UNDER GSP)

20

RESULTS ON SCREEN: CUSTOMS DUTIES FOR APRICOTS EXPORTED UNDER

GSP

OTHER INFORMATION: VAT & IMPORT PROCEDURES

What you can find in this section of the result page?

VAT rate

VAT provisions applying in Poland

VAT provisions for the EU

Import procedures Poland

Import procedures EU

21

RESULTS ON SCREEN: RULES OF ORIGIN FRUITS & NUTS (TARIFF CODE

CHAPTER 20: PREPARATIONS OF FRUITS)

RULES OF ORIGIN: CRAYFISH CHAPTER 03: FISH AND CRUSTACEANS

RULES OF ORIGIN: APPAREL – OVERCOATS - CHAPTER 62

22

MORE QUESTIONS?

23

EU-SRI LANKA TRADE & INVESTMENT: REGAINING GSP PLUS

Dr. Saman Kelegama, Executive Director, Institute of Policy Studies outlined his

presentation thus:

• Overall picture on trade and investment with EU

• EU-Sri Lanka trade

• GSP and GSP Plus Schemes

• Impact of the GSP Plus Scheme

• Regaining GSP Plus

EU-Sri Lanka Trade and Investment

The EU is Sri Lanka’s single largest export market and the 4th largest import source. In 2014

the EU accounted for 31 percent of exports and eight percent of imports. While the EU is an

important trading partner for Sri Lanka, in 2012 Sri Lanka was the 57th import partner, the

75th export partner and accounted for just 0.1 percent of EU trade. EU investment in Sri

Lanka in 2014 amounted to US$ 535 million – 33% of total FDI.

India is the EU’s 9th trading partner, while Bangladesh is the 45th and Pakistan 50th.

The majority of Sri Lanka’s trade with the EU is concentrated in UK, Italy, Germany,

Belgium, France and Netherlands.

Product-wise analysis of Sri Lanka’s Exports to EU in 2014

Product Category Share of Sri Lanka's

Exports to EU

01-05 Animal & Animal Products 3.1

06-15 Vegetable Products 7.0

16-24 Foodstuffs 4.3

25-27 Mineral Products 0.2

28-38 Chemicals & Allied Industries 1.0

39-40 Plastics / Rubbers 9.9

41-43 Raw Hides, Skins, Leather, & Furs 0.4

44-49 Wood & Wood Products 0.7

50-63 Textiles 64.1

64-67 Footwear / Headgear 0.5

68-71 Stone / Glass 2.3

24

Product Category Share of Sri Lanka's

Exports to EU

72-83 Metals 0.4

84-85 Machinery / Electrical 1.6

86-89 Transportation 1.6

90-97 Miscellaneous 2.1

Product-wise analysis of Sri Lanka’s Imports from EU in 2014

Product Category Share of SL’s

Imports from EU

01-05 Animal & Animal Products 0.9

06-15 Vegetable Products 2.5

16-24 Foodstuffs 5.3

25-27 Mineral Products 0.6

28-38 Chemicals & Allied Industries 13.9

39-40 Plastics / Rubbers 6.5

41-43 Raw Hides, Skins, Leather, &

Furs 0.2

44-49 Wood & Wood Products 6.2

50-63 Textiles 12.6

64-67 Footwear / Headgear 0.1

68-71 Stone / Glass 3.3

72-83 Metals 9.2

84-85 Machinery / Electrical 27.5

86-89 Transportation 5.2

90-97 Miscellaneous 6.1

Source: Calculated using WITS database (online). Available at: http://wits.worldbank.org/

25

The most significant export item is textiles (accounting for around 64 percent of total exports

to the EU). Most significant import items include machinery / electrical, chemicals and allied

industries and textiles. The EU is Sri Lanka’s largest export earner, accounting for 46 percent

of exports.

EU GSP Scheme

The EU has multiple trading models and bilateral partnerships with different partner

countries. The main trading framework between the EU and Sri Lanka is the GSP Scheme

which is a non-reciprocal preference scheme afforded by the EU to developing countries.

Under GSP, three separate preference categories exist viz. the Standard GSP scheme (1971),

Everything But Arms (EBA) scheme (2001) and GSP Plus scheme (2005). Sri Lanka’s

exports have benefited significantly under the GSP scheme, particularly under GSP Plus.

The standard EU GSP scheme, which is the most widely used programme, provides

preferences to 175 developing countries and territories on roughly 6400 tariff lines. The

GSP+ scheme offers additional tariff reductions over and above the standard GSP scheme to

15 developing countries with vulnerable economies, providing duty free access to over 7200

products. EBA - all products originating from LDCs except for arms and ammunition are

given duty-free and quote-free (DFQF) access to the EU market. The programme covers

approximately 7,200 tariff lines.

The GSP Plus Scheme

It offers additional tariff reductions over standard GSP to identified developing countries

• 7,200 products for LDCs

• 6,400 products for middle income countries (e.g. Sri Lanka)

Eligibility based on economic and non-economic (political) factors

• Economic:

• Economically vulnerable in terms of size or low diversification of

exports

• Meeting Rules of Origin (ROO) criteria

• Non-economic – implementation of 27 international conventions on human

rights, labour standards, sustainable development and good governance

26

The three core objectives are:

poverty reduction

promoting sustainable development

promoting good governance

Sri Lanka became eligible for preferences in July 2005 in the aftermath of the tsunami

(December 2004).

The apparel sector was a major beneficiary of GSP Plus; and the significant preferences for

apparel products were: zero percent tariff rate compared to 5.9 to 9.6 percent under standard

GSP. The GSP Plus concession had important implications on poverty and welfare where

about 250,000 workers were employed in the apparel sector and about one million livelihoods

were dependent on the industry. The majority of the sector’s labour force comprises women

from rural areas.

GSP Plus concessions were withdrawn in 2010 based on concerns of shortcomings in respect

of Sri Lanka's implementation of three UN Human Rights Conventions – the International

Covenant on Civil and Political Rights (ICCPR), the Convention against Torture (CAT) and

the Convention on the Rights of the Child (CRC).

Hence, in order to regain the facility, 27 international conventions have to be ratified – 16

core conventions on human rights and labour and 11 conventions on good governance and

environment, inclusive of the above-mentioned ICCPR, CAT and the CRC.

The EU has raised concerns mainly with regard to these three conventions. And these

concerns intensified in the immediate post-war period. The EU wanted an investigation on

these matters in 2010 before the GSP-Plus renewal, but the previous government’s position

was that the proposed investigation would be intrusive to the country’s internal affairs and a

breach of its sovereignty. The end result was that Sri Lanka lost GSP-Plus status in August

2010.

Moreover, in early 2014, Sri Lanka fisheries exports faced a ban (Red Card) in the EU for

reasons stemming from illegal fishing.

There was a decline in absolute apparel export earnings from EU such as a nine percent

decline in annual growth in 2012 compared to 2011; a slowdown in annual growth – 11

percent in 2014 compared to 26 percent in 2004. The labour sector experienced a loss of

2,000 jobs from direct employment due to the closure of just two factories.

Though there was a decline in competitiveness by Sri Lanka’s exports in the South Asian

region, other countries in the region were still eligible. e.g. Bangladesh is an EBA

beneficiary; Pakistan became eligible for GSP Plus concessions in 2014 and India is in the

final stages of negotiating an FTA with the EU.

Economic

Political

27

There is no clear impact of GSP Plus on FDIs in the apparel sector, but EU FDI as a

percentage of the total FDI shows a fast declining trend

Regaining GSP Plus

After the regime change in Sri Lanka the new government began working on regaining GSP

Plus and the new Sri Lankan application is now in the final stages. The Ministry of Foreign

Affairs has prepared Sri Lanka’s current position on Civil and Political Rights, and an Inter-

Ministerial Committee under the Chairpersonship of the Director General of Commerce is in

the process of preparing Sri Lanka’s position on CAT and CRC. Eighty five to ninety percent

of the new application to regain GSP Plus is ready.

Before the application goes to the European Commission, European Council, and the

European Parliament, Sri Lanka has to get the fisheries export ban by the EU removed. All

indications are that this ban will be removed by April or May 2016, as Sri Lanka has now

addressed the concerns raised by EU. Sri Lanka will have to submit the GSP Plus application

by that time so that the path is cleared for the EU to have a fresh look.

Rules of Origin (ROO) Criteria

ROO criteria determine the value addition threshold that needs to be met in order to become

eligible for concessions. It is particularly problematic for the apparel sector since large

proportion of inputs (65%) are sourced from abroad; and it has affected full utilisation of

concessions – 40% during the early years. The criteria need to go beyond South Asian

regional cumulation to Asian region Super cumulation; which will help improve utilisation

which is currently at 58 percent. Cross cumulation was granted to unprocessed tobacco by

EU.

Exports should either be ‘wholly obtained’ from the beneficiary country or the non-

originating materials contained in the final product must have been ‘sufficiently worked or

processed’ in the beneficiary country.

The Way Forward

Regaining GSP Plus is more of a political process than an economic one. Developing

countries like Sri Lanka depend heavily on better market access to large markets like the EU

28

to strengthen their export-led industrialisation. Especially at a time when the EU is facing an

economic downturn, EU buyers, despite having a close rapport with Sri Lankan suppliers,

may opt for cheaper suppliers who benefit from duty free access to the EU.

It is difficult to re-establish a lost market and Sri Lanka has already lost five years without

GSP Plus. Sri Lanka needs GSP Plus soon to catalyse its export-led industrialisation-based

growth strategy.

PRIVATE SECTOR PERSPECTIVE ON DOING BUSINESS WITH

ORGANISATIONS IN THE EU REGION

Mr. Mahesh Hirdaramani, Director, Hirdaramani Group made an extremely brief

presentation since most of the issues had been covered by previous speakers. His particular

concern was that Sri Lanka, which is currently a lower middle income economy with a per

capita income of US$ 3,725 in 2014, is very likely to reach upper middle income country

status by 2016 with a per capita income of US$ 4,126. This means that the island will have a

window of just four to five consecutive years to enjoy the facility, before the EU discontinues

both GSP and GSP Plus concessions.

Mr. Hirdaramani pointed out that delays in submitting the application and the time required

by the EU to consider restoration will reduce the period during which the country can benefit;

and appealed to the EU to help expedite the process in the shortest possible period to help Sri

Lanka strengthen its economy.

29

INTERACTIVE PANEL DISCUSSION

The panel comprised all the members of the head table.

Q: Similar to the situation where the EU has got sanction by the WTO to apply more

relaxed Rules of Origin in the African, Caribbean and Pacific States and allow

diagonal cumulation for limited products, can Sri Lanka too be granted derogation

under GSP Plus to export to the EU and increase utilisation rate?

A: The Rules of Origin are specific to the context of GSP and do not follow any other

systems for regional bodies.

The Rules of Origin cannot be customised for Sri Lanka, but they were simplified

recently, and an IT tool will be replacing the current form in 2017.

Q: Will it be counterproductive to Sri Lanka to receive GSP Plus at this point; which

could result in the reduced urgency for increased productivity?

A: GSP Plus looks at the ground situation and the new scheme accepts that perfection

does not exist; but considers the criteria being met on deliverables and then

accompanying the beneficiary in achieving better implementation. Country

obligations increase once GSP Plus has been granted.

Q: What is the time line from the time of submission of the GSP Plus application to

the decision by the EU?

A: The time line is six months from the date of submission. The EU generally takes a

decision within six months, and then sends the application to the Council of

Ministers and the European Parliament for a decision which is usually given within

two to four months. So the entire process can take up to 10 months.

Q: Is there a possibility to upgrade Sri Lanka to FTA level?

A: GSP Plus is not forever. Once a beneficiary country has reached a point of

development, it then gradually ceases to be eligible. Smart businesses will use the

preferences granted under the GSP Plus scheme to consolidate for the future.

Commitments on the Negotiation Agenda for economic consideration for Free

Trade Agreements are made beforehand, and go way beyond goods and services

between the EU and other countries.

30

CLOSING REMARKS

Mr. Roshan Lyman, Attaché Trade, EU Delegation to Sri Lanka & the Maldives, thanked Dr.

Harsha de Silva, Deputy Minister of Foreign Affairs, for participating in the entire seminar,

colleagues from the EU Directorate General, the Board and staff of the ECCSL for organising

the event, Dr. Saman Kelegama and Mr. Mahesh Hirdaramani in the private sector for their

active participation, and representatives from EU member states for attending the seminar

and continuing to support Sri Lanka to regain GSP Plus.

31

EU-SL TRADE SEMINAR – Friday 22, January 2016 8.00 am onwards

at the Union Ballroom, Hilton Colombo Residences

AGENDA 08.00 am: Registration

08.30 am: Commencement of Proceedings – Moderator Ms. Amayaa Weerasinghe

08.32 am: Welcome Address – Mr. Arnold Perera, Vice President, ECCSL

08.40 am: Address --H. E. Mr. David Daly – EU Ambassador to Sri Lanka & the Maldives

08.50 am: Keynote Address by Dr. Harsha de Silva – Deputy Minister of Foreign Affairs

09.05 am: The new EU Trade strategy – Mr. Andreas Julin, Trade Policy Coordinator for

South Asia, DG Trade, European Commission

09.20 am: GSP Plus – Mr. Nikos Zaimis, Deputy Head of GSP and Sustainable

Development Unit, DG Trade, European Commission

9.30 am: Export Helpdesk – Ms Alina Boiciuc, Head of GSP Plus section, DG Trade,

European Commission

09.40 am: EU-SL Trade and Investment Relations – The Path to Regaining GSP Plus –

Dr. Saman Kelegama, Executive Director, Institute of Policy Studies

9.50 am: Private Sector perspective on doing business with organisations in the EU

Region – Mr. Mahesh Hirdaramani, Director Hirdaramani Group

10.00 am: Interactive Panel Discussion

10.20 am: Vote of Thanks – Mr. Roshan Lyman – Attaché Trade, EU Delegation to Sri

Lanka and the Maldives