GSP programme expires tomorrow

The Unites States Congress has decided not to re-authorize the Generalized System of Preferences (GSP) programme, which is set to expire on December 31, 2017.

Close to 27.5 percent of Sri Lanka’s exports go to the US market.

The last time Sri Lanka had the US GSP renewed was on June 29, 2015, by former US President Barack Obama, almost two years after it had expired.

According to the Institute for Policy Studies (IPS), “There have been many renewals (six so far since year 2000)” but this would be the ninth time in a period of 32 years that the scheme expired without being renewed. The United States Embassy in a media release yesterday explained that Sri Lanka and other GSP beneficiary countries and territories “would be subject to non-preferential duties’, beginning January 1, 2018.

The Embassy also highlighted that in 2016, Sri Lanka exported USD 2.8 billion worth (Global Trade Atlas) of goods to the US, making it the largest export market for Sri Lanka.

“The United States is proud to serve as the top export market for Sri Lanka”, they further noted.

A study done on the importance of the US GSP Plus to Sri Lankan exports in 2015 however showed that it only had a ‘marginal’ benefit to Lankan exporters.

“The US scheme only provided duty-free access to about 3500 products (8-digit tariff lines) for beneficiary developing countries like Sri Lanka”.

They highlighted that, “In 2012, only 7% of Sri Lanka’s total exports to US received GSP concessions (United States International Trade Commission, 2015).Of the apparel products only 0.11% of the total apparel exports to US were eligible for GSP in 2012, and the potential coverage of apparel after the revival of the GSP will be about 0.16% based on 2014 trade data. About 17% of the rubber exports to US were exported under the GSP scheme and the potential coverage under the new programme will be about 25%”.

Furthermore, “products such as textiles and footwear are prohibited from receiving GSP treatment. In addition, watches, work gloves and other leather apparel are not eligible for GSP concessions. However, products which were deemed ‘import sensitive items’ such as certain handbags, luggage, and flat goods and were previously excluded from receiving GSP concessions are now allowed to be considered for duty-free treatment under 2015 GSP programme”.

Apparel, our biggest export to the US has only 0.2 percent eligible to receive GSP concessions whilst rubber, our second largest export only has about a quarter covered under GSP.

No significant impact on trade with U.S. - Rishard

What is important to understand is that this non-renewal of US GSP does not affect our trade with the United States in a significant way, Industry and Commerce Minister Rishard Bathiudeen said yesterday.

“It only has a marginal impact, the minister continued as he stressed that Sri Lanka’s trade with US showed a positive trend this year in comparison to 2015 and 2016.

“The GSP entitlement for Sri Lanka and other beneficiary countries could be renewed and returned as soon as the US Congress re-authorises it at any time,” he further stated.

Minister Bathiudeen was clarifying on Sri Lanka’s US GSP expiration during a meeting with top officials at his Ministry offices in Colombo 3.

Total US-Sri Lanka bilateral trade from January to November in 2017 has increased to US $ 3.41 billion in comparison to 2016’s entire annual trade total of $3.3 billion. Of this year’s $3.41 billion trade with US (to November), $2.64 billion consists of exports from Sri Lanka.

“Only one fifth of our exports to the United States could be temporarily impacted by this routine event,” Minister Bathiudeen said.

“The expiration is not only for Sri Lanka but includes many other countries, taking place at the same time. Sri Lanka has one of the highest US GSP utilisation rates among other US GSP beneficiaries -at around 85%,” the Minister said. Department of Commerce sources confirmed that despite the expiration, the issuance of US GSP entitlement certificates by the Department will continue as usual and with changes to the present procedure. It was also revealed that this GSP expiration appears to be another regular event since the US GSP is routinely reauthorized every year and “the expiration takes place before reauthorisation that arrives a few weeks later.”

The direct beneficiaries of US GSP are US manufacturers who can avail input material for their productions at low or no duties, indirect beneficiaries being Lankan exporters. Once the reauthorisation takes place, the US importers who applied for the Certificates from Colombo and earned it, can submit their claims and collect benefits at their end retroactively. 


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