UK retailers warn about EU threat to remove Sri Lanka tax incentive on garments

The British Retail Consortium says it is concerned about the threat by EU member countries to take away Sri Lanka's GSP+ tax concessions.

UK retailers have called on the European Union not to penalise Sri Lanka or it's impoverished women who depend greatly on the garment industry.

Retail Week

Alastair Gray of the British Retail Consortium said: “We do not want to get involved in the political issues, but we are saying that whatever the human rights concerns, any response has to be balanced.

“Otherwise, if the preferential access deal is withdrawn by the Commission, business in Sri Lanka could close.

“Sri Lanka has many very good textile factories, but profit margins are small, and if they lose their current import arrangements, there are textiles manufacturers in Bangladesh, Vietnam, and Thailand who will be ready to compete hard.”

An estimated 250,000 workers employed in textile factories could lose their jobs with manufacturers forced to move or increase wholesale rates, leading to price increase of possibly 10% on popular Sri Lankan-made clothes in UK shops including Next and Marks & Spencer.
Sri Lankan garments are still a very 'guilt free' option when compared with labour standards in other Asian countries, where many workers are deprived of their basic rights. In Sri Lanka, factory workers earn a substantial wage, which has improved the quality of life among the poor.

Some major retailers also claim the end product from Sri Lanka is of significantly better quality compared to other competing markets. British retailers and shoppers too will feel a significant pinch in pricing if the EU was to decide on doing away with the tax arrangement.

Despite the usual sensationalism from the Times of London, there will be no ban on Sri Lanka clothing. The EU is only considering a move to remove a tax concession which allowed Sri Lankan garments to be imported into the EU for 10% less.

The 10% margin may not seem as much, but the difference will effectively mean that Sri Lankan exports will be less competitive, and as such, big name buyers like Marks & Spencer would be forced to go looking for a cheaper alternative.

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