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Colombo may lose trade privileges: EU

A women irons clothing in a Brandix garment factory, which exports many of its products to the EU, in Colombo on Oct. 1. PHOTO: REUTERS

An EU investigation has found Sri Lanka in breach of international human rights laws, meaning it is likely to lose more than US$100 million in trade concessions for its top exports to Europe, EU sources said.

Brussels is expected to publish tomorrow the findings of the investigation launched a year ago into allegations of human rights violations and torture in the 25-year war between the Sri Lankan government and Tamil Tiger rebels.

“The evidence is very clear that Sri Lanka does not fulfill the basic human rights conditions of GSP Plus,” one EU source said on Friday, in reference to the system of preferential tariffs for the world’s poorest countries.

“I think the EU has leaked this deliberately. The motivation of the leak is to undermine Sri Lanka. The concession is a total process of economics, but the process is hijacked by politics. There is a political motive,” said Rajiva Wijesinghe, secretary of the Ministry for Human Rights and Disaster Management.

Brussels has consistently warned Sri Lanka it must meet 27 international human rights conventions to retain its Generalized System of Preferences Plus trade scheme.

“GSP Plus is not an instrument used for short-term political crisis, but is meant to provide long-term stability,” a European Commission official said.

“This is not a trade sanction. There are rules for GSP Plus and if you break the rules, then unfortunately there are consequences. They will keep basic GSP either way,” the official said.

Colombo came under heavy pressure from Western nations, including those in Europe with large Tamil populations, because of civilian deaths in the final phase of the war against the Tigers, which ended with the separatists’ defeat in May.

Last year, the government said it would neither cooperate with the EU’s investigation nor allow investigators into the country.

EU sources said its report showed evidence of police violence, torture and breaches of labor laws, notably the use of underage children.

The Sri Lankan government has repeatedly accused European countries with large and vocal Tamil populations of pandering to pro-Tamil Tiger viewpoints in exchange for electoral support.

“It is unfortunate for the Sri Lankan government that GSP Plus is so cut-and-dried. You either meet the requirements or you don’t. There is no discussion, no negotiation about it,” a Colombo-based diplomat from a developing nation said on condition of anonymity.

Last year, the EU was Sri Lanka’s largest export market, accounting for 36 percent of all exports, followed by the US with 24 percent.

TEXTILES

Suspending the preferential tariffs — which can go as low as zero — would hit Sri Lanka’s textile industry hard.

Garment exports to the EU last year reached US$3.47 billion and were its top source of foreign exchange, followed by remittances of US$3 billion and tea exports of US$1.2 billion.

Sri Lanka has seen an investment boom since the end of the war, with its stock market — one of the world’s most volatile — up 108 percent so far this year, the second best performing in the world after Peru’s.

It took advantage of this to sell its second US$500 million internationally traded bond this week to strong international demand, while ratings agency Standard and Poor’s upped its outlook to positive from stable on a stronger balance of payments picture and a US$2.6 billion IMF loan.

Many fear the loss of the EU trade terms would force big job cuts in Sri Lanka.

IMPORTERS

Major European importers, notably large British retailers such as Marks & Spencer, are concerned about possible increases in the cost of importing from one of their major hubs in the midst of the worst economic downturn in decades.

Tomorrow’s report will be discussed by the EU’s executive European Commission — which oversees trade policy for the 27-nation bloc — which must then decide by the end of next month whether to propose to member states that they temporarily suspend Sri Lanka’s GSP Plus status.

Any decision would take effect six months from the vote by EU member states.

“It would most likely take effect around June next year,” a commission official said.
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