A recent study conducted by the Institute for Policy Studies (IPS) has revealed that Sri Lanka could face a potential economic loss of approximately US$ 1.23 billion if the European Union’s GSP+ (Generalized System of Preferences Plus) trade concession is withdrawn.
The report warns that losing the GSP+ facility would subject Sri Lanka to Most Favoured Nation (MFN) tariffs in its trade transactions with the European Union. As a consequence, the country could see a decline of up to 36.7 percent in its exports to the EU.
Titled “Who Will Suffer the Loss?”, the study explores the broader implications of losing the GSP+ concession on Sri Lanka’s export industries and labor market. The report was authored by IPS researchers Dr. Asanka Wijesinghe, Chaya Dissanayake, and Rashmi Anupama, and offers a data-driven analysis of sectoral vulnerabilities and employment impacts.
The European Union serves as a key market for Sri Lankan high-tech goods such as electrical transformers. In 2019, 50 percent of Sri Lanka’s transformer exports were directed to the EU. The report notes that the loss of GSP+ could result in a 10 percent drop in transformer exports alone.
The apparel sector, although not fully utilizing GSP+ benefits, is expected to be particularly hard-hit by an estimated 10 percent increase in tariffs. Such a shift could significantly disrupt exports and labor conditions in this crucial industry.
The projected decline in exports also presents severe repercussions for employment. According to the report, around 4.99 percent of Sri Lanka’s industrial workforce could face job insecurity due to decreased demand from the EU.
Furthermore, 13.47 percent of employees in the country’s garment industry are at risk of losing their jobs if the GSP+ concession is revoked.
In total, the report estimates that 73,574 workers could be directly affected by the shift to MFN tariffs. Among them, approximately 65.65 percent are women and consist largely of low- and medium-skilled laborers. The study emphasizes that these workers represent the most vulnerable demographic in the face of a potential downturn in EU trade.
The findings underscore the importance of retaining the GSP+ status, not only for trade competitiveness but also for safeguarding jobs and economic stability in Sri Lanka’s export sectors.
