Friday, October 16, 2009

LANKA: European Commission’s GSP+ verdict out tomorrow


PIC details: This is the way many Europeans plan.

After months of heated speculation and debate, the final verdict on the extension of EU’s GSP+ concession to Sri Lanka will be determined by the European Commission tomorrow (Saturday).

Their decision will be communicated to the 27 member European Council for further deliberation and sources at the European Commission explained that the Council will determine within two months if the decision is to be accepted or rejected, in which case a further course of action will be recommended.

However, The Bottom Line learns that the decision made by the Commission will be communicated through relevant diplomatic channels to the Government pending the Council’s discussion.At present, the Government maintains that all efforts were made to lobby support from key European Union parliamentarians and was confident that Sri Lanka has adhered to all conventions specified to maintain the GSP Plus facility.

Speaking on BBC’s HARDTalk on Monday however, Former Foreign Secretary and now Ambassador to the United Nations, Dr. Palitha Kohona said that 200, 000 garment sector employees would be needlessly punished if the EU decides to pressurise the Sri Lankan Government and withdraw the concession.

He said that the European Commission should make a sensible decision adding that “putting barriers in the path of Sri Lanka’s development is cynical.”Foreign Minister Rohitha Bogollagama along with other key ministers has expressed confidence that the facility will remain following positive discussions on the sidelines of the United Nations General Assembly (UNGA) earlier this month. Spain, due to head the EU come January, in particular has expressed support according to the Sri Lanka government. Countries receiving GSP Plus must have ratified and implemented 27 international conventions on rights, labour, development and good governance but a report submitted to the Sri Lankan Government during the last month alleged that several human rights violations reported in the country may lead to the cancellation of the concession.

Sources also revealed that several industries and businesses within Sri Lanka had made appeals to the Commission’s headquarters in Brussels, Belgium to approve the GSP+ concession which gives Sri Lanka the right to export more than 7,200 products duty-free to the EU, which last year accounted for 36 percent of Sri Lanka’s USD 8.1 billion in total exports. The Garment and Textile Industry in the country stands to loose the most with 43% of its annual exports of USD 3.5 billion earned through the EU market.

However, an official privy to the EC discussions revealed to Reuters last month that Sri Lanka is likely to be granted the GSP Plus concession on a conditional basis, with adverse remarks on its human rights record and a caution to improve it.

GSP+: Have we got a plan?

The GSP+ is one of the most important topics in trade policy domain that has been extensively discussed in political, professional and academic spheres during the last couple of months. The subject matter, which was earlier handled by few diplomats and technocrats, has now become a house hold issue in Sri Lanka.


The same has been misinterpreted most of the times by the political, professional, media and academic elements and made the matter worst. The one an only outcome of this situation is, it has resulted in damaging the most needed predictability for our business community. The purpose of this article is to present some facts that can enhance the business predictability without prejudice to the possible out-come of the Sri Lanka’s investigation.

It is worthwhile to note that Sri Lanka is not the only country that has been subjected to EC’s investigation under GSP. Countries such as Belarus and Myanmar (a Least Developed Country) had been subjected to ECs’ investigation and resulted in being de-listed from the GSP beneficiary by the EC, irrespective of their economic conditions and needs. EC has also initiated investigation against the EL-Salvador - a GSP+ beneficiary country - under more or less similar grounds as Sri Lanka.

Further, very recently, Venezuela was de-listed from GSP+ beneficiary countries, since they have not ratified one of the conventions prescribed in the EC GSP+ legislation. These situations signal to us that the EC is bound to follow their legislative procedures with the Sri Lanka’s situation too.
Procedure

Table 1 below compares the procedure followed by the EC, before withdrawing the GSP concessions for Belarus and the similarities of the current status of Sri Lanka’s investigation proceedings.According to table 1, Belarus has effectively had the opportunity of enjoying GSP concessions for about three and half years after initiation of the EC investigation in December 2003.
If, Sri Lanka could engage in the same consultation procedure as Belarus did, we would be in a position to enjoy current GSP+ concession at least for another two and half years under a worse case scenario.
As for the above table, one can observe that after initiation of investigation, EC had taken nearly one and half year to justify the withdrawal of GSP concession from Belarus. The respective official Journals of the EC shows that Belarus has effectively engaged by way of responding to EC concerns during this period, and effectively and legitimately delayed the withdrawal decision process of the EC.

Notwithstanding that, Belarus had agreed to an EC’s monitoring mechanism in August 2005 and again extended their withdrawal decision for another one year. However, finally, Belarus lost her battle and was de-listed as a GSP beneficiary country.

If, one can synthesise the Belarus case with Sri Lanka, there are some common characteristics as well some divergences. The investigations for both countries were instantiated based on the third party submissions/information made available to the EC on violation of some Human Right conventions. In both cases, adequate time had been provided to represent interests of the various groups, including respective governments pertaining to the investigation.The next procedural step to be adopted in regard to the EC’s investigation specially in regard to Sri Lanka, is the justification of withdrawal of the concession.


This is the crux of the matter. At this stage, as explained earlier, Belarus had extensively engaged in consultations with EC responding to their concerns.
Strategy

Given the current context of EC investigations in respect of Sri Lanka, the strategy adopted by Sri Lanka before this justification proceedings will determine whether we are going to get it! Or to what extent we can enjoy this concession, if the justification decision goes against Sri Lanka. Ironically, the status of play in Sri Lanka at this crucial juncture is still blurred. It is said that there was an ‘Expert Report’ (ER) issued to GOSL on investigation findings, where Sri Lankan Government has to respond accordingly.

The only visible out-come of this report is that, the Secretary of Export Development and International Trade had commented on some of the contents of the ER and got voluntary retirement a few weeks later. The status is not so far clear whether Sri Lanka has responded to this ER or not. What we seen in the ground is that the President is confident that Sri Lanka can survive without this concession and at the same time Prof. G.L Peries, Minster in charge of the subject, is ‘engaged’ in consultation with the EC on this matter.After this ‘engagement’ and consultations, EC GSP Committee will surely submit its recommendations to the European Commission for their final verdict sooner rather than later. The time is still available for Sri Lanka to act in a positive manner to secure this important concession before EC takes the final decision, if this has not done yet.
Option

Another option that Sri Lanka is contemplating is to take EC to WTO, in case they deny the GSP+ concession for Sri Lanka after their investigation. As an option, this is going to be a worthless exercise as far as Sri Lanka is concerned. The avenue of challenging the GSP+ schemes as a whole in the WTO will not bring any benefit for Sri Lanka, since the possible as well as a very remote out come would be withdrawal of whole GSP+ scheme by the EC, which will not bring additional benefits to Sri Lanka. The other option is to challenge the EC at the WTO on discriminatory grounds and get a ruling from the WTO to re-instate Sri Lanka as GSP+ beneficiary country.

According to the writer’s point of view, getting EC to WTO on discriminatory grounds either would not help at all. One of the fundamental reasons for the above presumption is: on what grounds are we going to prove EC’s discrimination against Sri Lanka? This is going to be an egg and chicken case! To prove a discrimination, a particular member of the WTO has to convince the panel of judges that a member (i.e EC in this case) has treated differently another member (i.e Sri Lanka in this case) to other countries or groups of countries, (i.e other GSP+ beneficiaries in this case) where ‘same conditions’ prevailed.

This is the tricky point. The question is, what is Sri Lanka going to prove as the ‘same conditions’? Are we contemplating to prove at the WTO that not only Sri Lanka has violated human rights, but other GSP+ beneficiaries has also violated human rights and therefore, every body is having the same (bad) conditions?

If somebody advocates this approach, it would be a mistake. This is simply not acceptable on moral and ethical grounds. This approach would have a detrimental impact on political relations of this country too.The other dimension, which is a more realistic and practical approach to prove discrimination is that the Sri Lanka can argue that same conditions prevailed in Sri Lanka as well as in other GSP+ beneficiary countries, which still needed to be addressed by granting GSP+ concessions and not withdrawing it. These conditions would be either explicit or implied. The condition of ‘economic vulnerability’ still prevails in Sri Lanka as well as other GSP+ beneficiary countries.
The need of protecting human rights, environment and good governance still prevails and is felt by Sri Lanka as well as the other GSP+ beneficiaries too. The requirements of receiving of GSP+ concessions for Sri Lanka and other beneficiaries therefore, are same and should be treated these countries and Sri Lanka equally.As an argument, it feels that the second approach have some merits than first approach. However, the sustainability of second argument too is questionable.

The conditions of vulnerability as well as the need for other development aspects such as human rights, environment and good governance is not applicable only to GSP+ beneficiaries, but also these are common needs of the most of the developing countries in the world today.

If, Sri Lanka can sustain this argument in the WTO, lot of other countries who are out side the current GSP+ also can defend the same conditions and could ask for GSP+ concessions. Surely, this won’t be the intention of carefully drafted EC legislation on GSP. On top of these all reasons, can we really take a case to WTO? Have we got previous exposure / capacity to take a case under WTO Dispute Settlements? Have we ever considered the cost and the time that we have to spend on these litigations?

In concluding, it is clear that Sri Lanka is at cross-road at this juncture in negotiating her GSP+ concessions. It is advisable, without pre-judging the perceptions of various parties and the possible out come or end result, the need of the hour is to engage in consultations with the EC as long as it is permitted. If, in case EC withdraws these concessions, Sri Lanka has to carefully assess her case before thinking of WTO involvement in this case.The writer can be reached via TradePolicyLKA@gmail.com


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