Documents considered by the Committee on 25 November 2009, including the following recommendations for debate: Security of gas supply Mutual legal assistance in criminal matters between the EU and Japan - European Scrutiny Committee Contents


9  SRI LANKA AND THE GSP+ SCHEME

(31126)

Draft Council Regulation temporarily withdrawing the special incentive arrangement
for sustainable development and good governance provided for under Council
Regulation (EC) No. 732/2008


Legal base Article 19(4) of the GSP+ Regulation (Council Regulation (EC) No 732/2008); QMV
Deposited in Parliament 17 November 2009
DepartmentInternational Development
Basis of consideration EM of 19 November 2009
Previous Committee Report None
To be discussed in Council To be determined
Committee's assessmentPolitically important
Committee's decisionCleared

Background

9.1 The EU's Generalised System of Preferences (GSP) is a trade arrangement through which the EU provides preferential access to the EU market to 176 Developing Countries and territories, in the form of reduced tariffs for their goods when entering the EU market. There is no expectation or requirement that this access be reciprocated. It is implemented by a Regulation applicable for a period of three years at a time. GSP covers three separate preference regimes:

—  the standard GSP, which provides preferences to 176 Developing Countries and Territories on over 6200 tariff lines;

—  the Everything But Arms (EBA)[24] arrangement, which provides Duty-Free, Quota-Free access for all products for the 49 Least Developed Countries (LDCs);

—  the special incentive arrangement for sustainable development and good governance, known as GSP+, which offers additional tariff reductions to support vulnerable developing countries in their ratification and implementation of international conventions in these areas.

9.2 According to the Commission, the primary objective of the GSP is to contribute to the reduction of poverty and the promotion of sustainable development and good governance; the preferential tariff rates when exporting to the EU market enabling developing countries to participate more fully in international trade and generate additional export revenue to support them in developing industry and jobs and reducing poverty. On 22 July 2008 the EU adopted a regulation applying a new GSP scheme for the period from 1 January 2009 to 31 December 2011.

9.3 For the period 2009-2011, 16 beneficiary countries have qualified to receive the additional preferences offered under the GSP+ incentive arrangement. Any GSP+ beneficiary country must be considered "vulnerable" in terms of its size or the limited diversification in its exports. Poor diversification and dependence is defined as meaning that the five largest sections of its GSP-covered imports to the Community must represent more than 75% of its total GSP-covered imports. GSP-covered imports from that country must also represent less than 1% of total EU imports under GSP.

9.4 GSP+ beneficiaries must also have ratified and effectively implemented 27 specified international conventions in the fields of human rights, core labour standards, sustainable development and good governance.[25]

The draft Council Regulation

9.5 The document sets out a proposal to remove the trade preferences (i.e. tariff reductions) that Sri Lanka receives through its membership of the GSP+ trade preference scheme.

9.6 In his Explanatory Memorandum of 19 November 2009, the Minister of State at the Department for International Development (Mr Gareth Thomas) explains that the proposal results from a year-long Commission investigation into Sri Lanka's effective implementation of three of the conventions — the International Covenant on Civil and Political Rights, the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment and the Convention on the Rights of the Child. The Minister says that, the investigation having been completed in October 2009, the Commission's final report concluded that "none of the conventions or the legislation incorporating the obligations under these Conventions had been effectively implemented during the period covered by the investigation."

9.7 The Minister goes on to explain that the Council is required to vote upon the proposal within two months of receiving it; and that, should the proposal be approved by the Council, the decision to withdraw GSP+ trade preferences from Sri Lanka will come into force six months later — a period that is laid down in the GSP Regulation. This "grace period" will, the Minister says, help give Sri Lankan and EU businesses time to adapt to the new trading circumstances; and also allows time for the Commission to propose a reversal of the decision, if significant new evidence emerges showing an improvement in the areas of concern raised in the report (with any such new proposal also having to be approved by Council).

9.8 Finally, the Minister explains that:

9.9 "Temporary withdrawal" is the only sanction allowed under the Regulation and is equivalent to a full withdrawal of GSP+:

—  Sri Lanka could potentially reapply to the GSP+ scheme at any of the next entry points (either 1 July 2010 under the current regulation, or 1 January 2012 under the next one);

—  to do so, Sri Lanka would need to convince the Commission that it was now effectively implementing the relevant international conventions; and

—  the Council and in some circumstances the Parliament could oppose the Commission's proposal to readmit Sri Lanka if it felt it did not respect the underlying principles of the GSP+ Regulation.

The Government's view

9.10 The Minister notes that the legal basis of the GSP scheme requires that all decisions on whether to withdraw preferences must be made solely on the basis of whether or not the beneficiary country has effectively implemented the 27 core conventions under the terms of the GSP Regulation, which is necessary, he says, to ensure the credibility of the scheme and parity amongst GSP+ beneficiaries:

    "Failure to act in this way would undermine all our attempts to make the regulation work effectively as a driver for improving human rights and good governance. It would reduce the incentive of the other 14 countries on the scheme, and those who aspire to join it, to improve their own human rights."

9.11 The Minister points up the Commission report's conclusion that none of the three conventions under investigation, nor the legislation incorporating the obligations under these Conventions, had been effectively implemented by Sri Lanka, and that it highlights (the Minister's underlining):

    "… widespread unlawful killing, torture and disappearances attributable to state agents, emergency laws which enable arbitrary detention without appeal and serious restrictions on freedom of movement in the camps for internally displaced people."

9.12 Given that the investigation "clearly concludes that the conventions have not been effectively implemented," the Minister believes that "the UK should also press for the temporary withdrawal of Sri Lanka's GSP+ preferences, in support of the Commission's proposal." He concludes his comments thus:

    "We do note that the withdrawal of GSP+ will have a negative effect on the economy of Sri Lanka, estimated at up to 2% of its GDP.[26] HMG in Colombo will continue to work with the Government of Sri Lanka and other international partners, including the IMF, to help ensure that the potential effects of the removal of GSP+ are managed and mitigated in ways that minimise the impact on the most vulnerable parts of society."

9.13 Finally, the Minister notes that:

—  in drafting this Explanatory Memorandum, the Department for Business, Innovation and Skills, the Department for International Development, the Foreign and Commonwealth Office and the UK Permanent Representation in Brussels have all been involved in the drafting of his Explanatory Memorandum;

—  there are no financial implications for HMG;

—  the Commission will hold a technical discussion on its draft Proposal at the GSP Expert Committee with Member State representatives on 17 November 2009, which will be followed by a first discussion in Council at the GSP Working Party on 26 November;

—  the Commission is then expected to present a formal Proposal to the Council for a Decision in December 2009;

—  the Presidency will determine the timetable for discussion within the two months that the Council has to reach a decision.

Conclusion

9.14 We are reporting this development to the House because of the widespread interest both in the human rights issues that the proposal seeks to address and in Sri Lanka.

9.15 We now clear the document.




24   Traditionally, it has been recognised that the group of least developed countries (LDCs) should receive more favourable treatment than other developing countries. Gradually, market access for products from those countries has been fully liberalised. In February 2001, the Council adopted Regulation (EC) 416/2001, the so-called "EBA Regulation" ("Everything But Arms"), granting duty-free access to imports of all products from LDCs, except arms and ammunitions, without any quantitative restrictions (with the exception of bananas, sugar and rice for a limited period). See http://ec.europa.eu/trade/wider-agenda/development/generalised-system-of-preferences/everything-but-arms/ for further information. Back

25   See http://ec.europa.eu/trade/wider-agenda/development/generalised-system-of-preferences/ for further information. Back

26   University of Sussex 2008 'An Assessment of the economic impact of the removal of Sri Lanka's trade preferences in the European Union' Back


 
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