Advantages-
1. One single market with cohesive trade policies
2. Sri Lanka is the only country in South Asia to be awarded GSP+ status and the scheme is expected to help sustain Sri Lanka ’s garment export market in the EU, in the face of the increasing post quota price competition.
3. Less risk in regard to exchange rate fluctuations due to the single currency “EURO” of the EU market.
4. 25 nations with substantial market opportunities and with a common customs tariff.
5. Tariff reductions granted for both sensitive and non-sensitive items will boost exports.
6. Potential for further investments in export ventures and growth of the economy.
7. Opportunities for cost reductions and profit enhancement due to common standards and other requirements of EU market Countries.
8. Better focus is possible in Export market promotion and penetration.
9. Even if the country graduates over the threshold in certain sectors, exports can access the EU market and compete under the concessions available under the normal GSP Scheme.
10. Under the new GSP regime, china has already graduated 80% of its exports while the balance 20% remains under the normal concessions of the GSP. Therefore local exporters should not have a threat from China as Sri Lanka can compete on quality with China .
11. Though China produces low cost products to the EU market, tariffs are imposed by the EU. Further China is not good at producing quality goods for the EU market. However China has excellent marketing methods for the EU, where as Sri Lanka lacks such approaches.
Disadvantages-
1. China may invest in Sri Lanka using the attractive incentives and concessions offered by the BOI, with the objective of accessing the EU markets to capitalize on the concessions available to Sri Lanka because China has already graduated in certain product sectors.
2. The EU is one of the key players in the World Trade organization (WTO). This is because the EU has a common trade policy, where the European Commission negotiates on behalf of the 25 EU member countries. Therefore the question arises as to whether the developing country friendly policies will be sustained in relation to challenges under the WTO trading scenario.
3. The strict ‘Rules of Origin’ are a hindrance where the apparel sector is concerned. Under the GSP+ ‘Rules of Origin’, it is possible to use European fabrics or fabric originating from the SAARC region. But the main fabric sources for Sri Lanka are in the ASEAN bloc and not the SAARC or the EU. As a result, a majority of garment exporters may not be able to benefit from the GSP+ concessions.
4. If Sri Lanka graduates over the threshold in any product the country will have to compete under the Original GSP Scheme, where there will be vigorous market competition.
5. Under, the new GSP+ of the EU, Sanitary and Phytosanitary (SPS) standards contained in the Food and Feed regulations mean that many developing countries and least developed countries will lack the infrastructure necessary to upgrade their products in order to enter the European agricultural market.
6. The focus is more on quality than quantity on Imports to the EU.
http://www.nce.lk/?Action=Question&ID=790
