UK lays out wider export pathway for Sri Lanka, offering lenient rules and zero duty

The United Kingdom’s new ‘developing country trading scheme’, expected to come into force next month, will see Sri Lanka receive generous trading preferences for a wider range of duty-free exports.

Sri Lanka is already a beneficiary of the UK's extensive trade preferences, generating duty savings. Now, thousands more products are set to be covered with new export categories, such as pet food, strawberries, tomato, cucumber, olive oil and garlic, will open up.

In line with the UK Government’s new International Development Strategy, the scheme will help bolster free trade with developing countries by reducing or removing duty rates on UK’s imports. Estimates suggest import costs of British business will also drop by more than £750 million a year.

Rules of origin which dictate the proportion of a product that should be made in a country of origin, are being simplified. Administrative costs are said to drop. The British Retail Consortium expects the scheme to come into force next month.

Sri Lanka’s trade with the UK is relatively small and what is foreseen is a minimal effect on trading patterns. Some presentations have been held by the British High Commission in Colombo to brief exporters.

Sri Lanka is categorised under the ‘enhanced framework’ for trade preferences and nearly 85% of tariff lines will be dutyfree under this. But more countries, including

Sri Lanka's leading exporter to the UK, the garments sector, is expected to benefit further. Apparel companies already get trade preferences for clothes for infants, vests, and T-shirts. Under enhanced preferences, the 12% UK Global Tariff rate for cotton T-shirts is expected to drop to 0%.

Pakistan, Nigeria, and Philippines, are added, taking the total to 16 countries.

It is the second-most ideal preferential regime and applies to countries classified by the World Bank as low-income and lowermiddle income. Under enhanced preferences, 156 tariff lines have been added and 132 will be zero-duty.

Although it is unclear how compliance is monitored, countries must also implement 27 conventions such as the International Covenant on Civil and Political Rights, Convention concerning Freedom of Association and Protection of the Right to Organise, No. 87, Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, No. 98, human and labour rights, and good governance.

The UK retains the power to suspend preferences for serious and systematic violations of human rights and labour rights based on international conventions. The list has been expanded to include the United Nations Convention against Corruption, Climate Change, and the Environment.

This new scheme will replace the Generalised Scheme of Preferences, effective from January 2021, and which mirrors the European Union’s GSP, which itself was improved in December. The initiatives come in the wake of the UK taking control over trade policy since leaving the EU.

Sri Lanka's leading exporter to the UK, the garments sector, is expected to benefit further. Apparel companies already get trade preferences for clothes for infants, vests, and T-shirts. Under enhanced preferences, the 12% UK Global Tariff rate for cotton T-shirts is expected to drop to 0%.

UK’s Minister of State, Foreign, Commonwealth and Development Office, Andrew Mitchell, told Parliament that more than 80% of products will be duty-free under the new ‘developing country trading scheme’.

Mr. Mitchell spoke about widening market access during a debate on May 11 on economic aid to Sri Lanka, nearly a month after the maiden UK-Sri Lanka strategic dialogue in London. On April 18, talks were held at which further support for economic recovery was discussed.

So far, the UK Government has provided £3 million (Rs 1.12 billion) of targeted support for Sri Lankans most severely affected by the economic calamity. Mr. Mitchell told Parliament this was directed through the UN and the Red Cross and includes food for schoolchildren, hygiene kits for girls, and multi-purpose cash grants for poor and vulnerable families for their essentials such as food.

“That complements UK support provided through multilateral agencies, such as the United Nations Central Emergency Response Fund. The UK is the largest donor to the fund, having contributed more than US$1.7 billion (Rs 514.2bn) since its inception in 2006, and has already provided US$5 million (Rs 151.2bn) to Sri Lanka.’’

Mr. Mitchell said the UK’s Conflict, Stability and Security Fund Programme is supporting parliamentary committees on managing public debt. “We look forward to working with the Sri Lankan Government on their proposed reform agenda, including their ambition to build back greener.’’