Losing GSP Plus and Gaining Hambantota Port on the Same Day

by Thomas Johnpulle

(August 24, London, Sri Lanka Guardian) It was certainly no coincidence. Sri Lanka lost European Union’s GSP Plus trade concessions on August 15 but gained the Chinese funded Hambantota port on the very same day. Although there is a very long way to go in making Hambantota a major shipping and trade hub, passing its most important milestone signifies commitment. Coincidences of this magnitude do not happen in geopolitics. Both events were well planned in advance and all parties to the events are fully aware of the international politics involved. For Sri Lanka, it is the end of a chapter and the beginning of a new chapter of politico-economic relations. It also turns a new chapter for South East Asia and particularly for the South Asian region. It is the inevitable trend of Eastern economic powerhouses replacing the old Western block। The Western block is still the world’s largest economy but its global significance is fast giving way into the Eastern block. The old frontline was at the South East Asian region until recently and the new development is a giant leap westwards.

Politics of GSP Plus

A number of writers have pointed out the real reasons for EU action against Sri Lanka. Human rights based assessment of Sri Lanka is just an outcome of geopolitical crosscurrents. A recent article published in the Sri Lanka Guardian and in a host of other places worldwide under the caption, “USA Fears Loss of Sri Lanka” by John Stanton clearly enumerated the geopolitics behind many EU actions. (Link to John Stanton’s article).

It is not difficult to come to the same conclusion from another approach. EU allows trade concessions under various schemes. GSP, GSP Plus and EBA (Everything But Arms) are some of those schemes. In order of the benefits of these schemes, EBA comes first, GSP Plus next and GSP thereafter. A considerable number of countries receiving EBA and GSP Plus facilities have no better record than Sri Lanka in democracy, civil liberties and human rights.

The Freedom House democracy and civil liberties index is a good measure of worldwide nations as to where they rank in democratic rights, freedoms and liberties which the EU espouses to fight for. Eight (8) out of 15 countries receiving GSP Plus facilities have no better record than Sri Lanka. And over 24 countries getting the EBA trade benefits perform either in equal or worse terms than Sri Lanka in relation to the Freedom House index.

Another index is the democracy index compiled by The Economist. If compared against this, all but one nation receiving GSP Plus performs better than Sri Lanka and still the others get GSP Plus! More than 30 nations with less than Sri Lanka’s level of performance in upholding democratic values get EBA concessions. This is clear proof of EU’s use of a widely different yardstick than what appears to be used. Surely, there got to be some basis for granting preferential trade concessions to some third world nations and denying them to others. For that purpose a detailed and complex set of regulations have been developed and used. Unfortunately they are not compatible with independent assessments of the very same criteria by others.

GSP Plus has been used both as a carrot and a stick to rule Sri Lankan policy. A favourable policy towards EU’s geopolitical aims would be rewarded and by the same token a policy that is unfavourable to the EU would be punished. This is nothing new. Economic pressure has long replaced military pressure in getting things done around the world. It is cheaper than military pressure and less confrontational. It is well targeted to the specific entity than military action which means third parties’ involvement in the matter will be zero. This cannot be achieved using military action which attracts attention of global and regional powers.

Different Yardsticks of the West and the East

Most economic partnerships come with conditions and preconditions. Main exceptions are services and goods that are essential for international trade. A good example of an essential product is crude oil. While most crude oil producing countries do it tough in the democracy and human rights fronts, they are relatively free from outside pressure. Singapore is a good example of a country offering an irreplaceable service to international trade but with a not so impressive human rights and democratic record. May be these nations have cut the amount of freedoms according to their national security and economic concerns. Their degrees of freedoms are what their national security and economic concerns can sustain. Nothing more and nothing less.

Sri Lanka on the other hand established democracy first (1931) and then experimented with various economic and security models until it seems to have found the matching mix of the most nationally beneficial economic and security model. However, this model sits uncomfortably with Lanka’s democracy which is oldest in Asia. Sri Lankans have to decide on what level of democracy and freedoms are sustainable within national security and economic concerns. It is said in recruitment you don’t recruit the most qualified candidate, but the most suitable. It is the most suitable candidate who will stay with the organization and certainly not the most qualified one. It is unsustainable to hold the most qualified candidate in place as he/she has more opportunities elsewhere than the job offers. Sri Lanka needs to most suitable human rights model not the best human rights model.

The West measures nations according to Western values while the East uses Eastern values. Both the East and the West have high regard for human rights and democracy but the two value systems are not compatible. What looks draconian in the eyes of the West may well be the softest approach according to the East. Similarly, what the West considers just and fair may be seen as inhuman by the East. The clash of Western and Eastern value systems is spectacular and is vivid around the world.

As the East becomes more and more relevant, inevitably Eastern value systems gain ground. Today the economic-politico-military reach of the East and the West is at play in the Asian region. Economic compatibility, value system compatibility and democracy/freedoms compatibility come with it. Policy consistency is another very important matter the East puts higher up in the list of priorities than the West. Historical significance and relations is yet another important matter.

So it is not only the West that pushes its geopolitical agenda with trade; the East does it too. The value system of Sri Lanka will automatically reshape itself to fit into the new chapter. Some may resist it but it is inevitable. Interestingly, most Sri Lankans seem to like it. They also see the reemergence of the glories of the past that were buried by European invaders starting from 1505 AD and continued in various forms till recently. It resonates with the widely held belief that Sri Lanka was once a prosperous nation before the European invasion. It is very difficult to overcome this local belief coupled with a global phenomenon.

Compatibility with the Defence Strategy

The new chapter is more compatible with Sri Lanka’s current defence strategy. Sadly not everyone agrees with this strategy that comes with a compromise on high human rights standards. On the other hand a stringent defence plan will be required to turn the island into a regional business hub. Interestingly Singapore which has already achieved this status follows a very rigorous defence strategy even without having to face a war. Singapore’s defence spend as a percentage of the GDP is 4% which equals Sri Lanka. In other words Sri Lanka will have to sustain this high level of defence spend forever.

Sri Lanka’s sustainable security situation is sweet music to Indians. At last India has one front that is peaceful. Compare it with the highly volatile Western, Eastern, Northern, North Western and North Eastern borders of India where no peace is in sight. Its southern border is immensely important to India. Economies in southern states are growing faster than most other states. Southern states are India’s access points to the vast Indian Ocean. A number of nuclear power plants are coming up in southern states. All this means India will have less to worry about volatility in its southern border. Having ensured security in the south, India must turn more attention to Kashmir and Maoist rebels. Handling these key issues will determine regional peace. A contended India with the security situation along the border with Sri Lanka is an even bigger benefit for the island nation.

A word must be said about ‘string of pearls’. This term was introduced by a US government agency in 2005 after China concluded the feasibility study on Hambantota. It was claimed that China is building a series of ports surrounding India. This is an absurd claim. China decided to build the Hambantota port only on Sri Lanka’s insistence, after Sri Lanka decided to have a port in Hambantota and approached both India and China over it! The new port will further strengthen Sino-Indian trade which along with direct and indirect increase in trade has the potential of benefiting over 50% of the world’s ‘poor’ population.

Ending a chapter of shipping out primary goods to former colonial masters and beginning a new chapter of selling an indispensable service to the world is truly remarkable. It also goes down in history as the biggest UNP-SLFP joint-project. Previous attempts for joint-projects failed as one party would scrap the other’s plans as seen in the cases of the Mahaweli project, various highway construction projects and the garment factory expansion program. However the port project was started by the UNP and carried forward by the SLFP and the UNP. A rare case of essential collaboration between the two main political parties of Sri Lanka commanding over 90% of the vote.