GSP+ Removal and the Apparel Industry in Sri Lanka

Abstract

The withdrawal of GSP+ concessions granted by the European Union in August 2010 could bring about important implications for Sri Lanka’s apparel industry, which is heavily dependent on the European market for its exports. A particular concern is the lack of an international level-playing field, with many of Sri Lanka’s competitors having preferential access to European countries. In this context, the study analyzes the current impact of GSP+ withdrawal on the Sri Lankan apparel industry, possible future impacts and means of mitigating negative impacts and moving forward. An empirical analysis indicates that the GSP+ scheme has been central for apparel exports in penetrating the EU market, with the utilization rate averaging at 72 per cent over the 2005–2010 period and declining thereafter. While interviews carried out with stakeholders in the apparel industry reveal diverse viewpoints, the study concludes that the apparel industry remains highly vulnerable to the loss of GSP+ concessions and proposes several strategies in moving forward.