By Uditha Jayasinghe

COLOMBO (Reuters) – Sri Lanka’s preferential trade access to the European Union, which is the biggest market for its $5 billion apparel industry, is in doubt with an investigation into the island country’s human rights and governance concerns set to start on Monday.

Mid-June saw the European Parliament adopt a resolution urging the EU not to grant Sri Lanka access. This was in response to “deep concern” over Sri Lanka’s human rights situation.

The five-member delegation, which includes representatives from the United Nations, government officials, and trade union leaders, will visit Sri Lanka over a seven-day period. It will submit a report, which will then be presented to European Parliament in 2022.

“The monitoring will focus on Sri Lanka’s compliance with 27 international conventions related to GSP+ (Generalised Scheme of Preferences Plus) covering human rights, labour, environment and governance to which Sri Lanka has acceded,” Colombo EU Delegation Chargé d’affairs Thorsten Bargfrede told Reuters.

Sri Lanka’s exports of apparel to the EU increased by $2.2 billion from last year, reaching 45% or $2.7 Billion.

GSP+ is the EU’s most lucrative foreign exchange earning concession. It provides a cost advantage of 9.5% and 60% of apparel exports from Sri Lanka to Europe.

GSP+ is crucial for the apparel sector, which was hard hit by closings and lower sales in the wake of the pandemic. It will help it attract foreign investment, and to achieve its $8 billion goal by 2026. This represents a 60% increase over current levels.

Sources in the industry claim that while the government pledges to continue GSP+, stakeholders are estimating a $600 million loss if it is removed.

The facility was previously withdrawn from Sri Lanka in 2005 when it first gained GSP+ access.

In 2010, the EU pulled the facility from Sri Lanka, citing insufficient attempts by Sri Lankans to resolve human rights and reconcile issues after a 27-year civil conflict. However, it was reinstated in 2017.

Joint Apparel Association Forum, (JAAF), is concerned by the possibility of factory closings. This concern includes small and medium producers that have 350,000 employees and 700,000.

The trade agreement must be in place to ensure that we have access to the market, are competitive and grow our market share. A. Sukumaran (JAAF Chairman) stated that while we are optimistic that GSP+ will continue, if it ends investment will be questioned in this sector.