US GSP: Not out of the woods

(October 23, Colombo, Sri Lanka Guardian) Over 130 countries including Sri Lanka seeking the US Generalized System of Preferences (GSP) heaved a sigh of relief this week after Congress endorsed laws to re-approve the programme.

The GSP has been off the rack since December 2010 and was due to be approved by Congress by the first quarter of 2011. But that never happened and in Sri Lankan quarters, the delay was speculated on the US-led West’s disappointment over human rights issues, though that was not the case. Sri Lanka, like many countries, thus waited with bated breath until this week …

The GSP programme had expired for all countries and now has returned for the same group – and had nothing to do with politics.

However what many are unaware is that in a September 19 letter, the ambassadors of a group of countries calling itself the Coalition of GSP Countries made up of Fiji, Indonesia, Kosovo, Mongolia, Paraguay, the Philippines, Sri Lanka, Timor Leste, Thailand, and Uruguay wrote to the US Senate urging it to renew GSP through up to July 31, 2013.

The letter, also signed by Sri Lanka Ambassador Jaliya Wickramasuriya, emphasized the importance of continuing the GSP programme, not only to the exporting countries but also in the US.

“Overall, GSP benefits more than 3.8 billion people living in two-thirds of the world’s economies. GSP promotes democracy, especially in newly independent Kosovo and Timor Leste, and strengthens our national and regional economies while providing critical opportunities for employment in all sectors,” the letter said.

U.S. imports of GSP-eligible items in the first seven months of 2011 have decreased by more than 20 %, despite the jump in all U.S. imports by just under 17 %. It is clear that many U.S. importers, after incurring large and unexpected tariff payments, hve switched to non-GSP suppliers, the letter said.

Sri Lanka has also suffered immensely from the suspension of the programme. According to the Coalition of GSP Countries, Sri Lankan exports to the US of construction tires were “down by just under 30 % and 34 %, depending on their size; activated carbon from Sri Lanka mirrors the trend from the Philippines and is down by 17.5 %; sports gloves are down by 17.6 %; and gold jewellery has dropped by just under 41 %. Imports of porcelain or china household and kitchenware, a high-tariff item of 24 %, are down 32.7 %.”

Thankfully garments and textiles, the country’s biggest industrial export, are not eligible for GSP benefits and thus was unaffected.

The US was once Sri Lanka’s biggest garment’s buyer until the recession and the financial meltdown ate into the wallets of consumers. Europe is now the country’s biggest customer for garments, and having a trying time indeed having lost a renewal of GSP + concessions based on labour rights considerations.

The GSP provides preferential duty-free treatment for over 3,400 products from 131 beneficiary countries and territories, including Sri Lanka which benefited from GSP concessions to the tune of $116 million of goods in 2009, according to US data.

However the ‘waiting game’ of the resumption of the US GSP is not over yet. While US President Barrack Obama was due to sign the bill into law on Friday, authorizing the concessions through to July 2013, retroactively from January 1, 2011, Sri Lanka has another hurdle to overcome – the review of a petition on workers’ rights in Sri Lanka

In June 2010, the US Government accepted a petition from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), an American trade union raising concerns over workers rights in Sri Lanka, particularly freedom of association and collective bargaining.

The criteria for GSP benefits includes recognition of worker rights, right to association, prohibition of compulsory labour, acceptable working conditions and minimum wages. The public review began in Washington in August and for the next few months there were a few visits by US Trade officials to Colombo pertaining to the review.

The process however ended in December as the GSP programme was discontinued. Now that it resumes in January, the review of the petition on worker rights will also resume, meaning the Government has to be on its guard and ensure a well structured defence against the allegations.

However though the review was on the backburner this year for the above stated reasons, there has been some progress(worker rights) in the past few months and US Trade Department officials have been visiting Sri Lanka to check on this progress, the latest being the visit last month of Michael O. Donovan, International Economist of the Trade Policy and Negotiation Division of the US Trade Office.

Any negative outcome of the review could lead to a more firmer call to the Government to rectify some of the flaws. With a crucial meeting of the UN Human Rights Council due next March in Geneva, three months after GSP concessions are restored, Sri Lanka would once again be facing up to some tough human rights questions. Thus some progress on labour rights issues could help the country’s case.