The future of global trade remains uncertain as President Trump’s push for reciprocal tariffs makes trade programs like the EU’s Generalised Scheme of Preferences Plus (GSP+) crucial for small exporters like Sri Lanka.
A recent EU delegation visit to assess GSP+ status highlights the potential risks of losing these tariff preferences. Without GSP+, Sri Lanka would face higher tariffs at Most Favoured Nation (MFN) levels, leading to export losses and negative labor market effects.
The Institute of Policy Studies (IPS) study, Who Stands to Lose? The Effects of GSP+ Withdrawal on Sri Lanka’s Exports and Labour Force, estimates that Sri Lanka could lose USD 1.23 billion (36.7%) in exports to the EU–28, with the apparel and fish processing sectors hit the hardest. Additionally, 4.99% of industrial employees could be vulnerable to job losses.
The study also highlights gender and skill disparities, noting that women and low-to-medium-skilled workers (65.65% of affected employees) would bear the brunt of GSP+ withdrawal. The wearing apparel sector, though not fully utilizing GSP+, could face an EU tariff increase of up to 10 percentage points, significantly impacting exports and employment.
The potential GSP+ withdrawal threatens Sri Lanka’s economic growth and export diversification, particularly in high-tech sectors like transformers. Sri Lanka must comply with agreed conventions to maintain GSP+, as losing it at the current growth stage would be a severe economic setback.
