Sri Lanka could face losses of up to US$ 1.23 billion if it loses its Generalised Scheme of Preferences Plus (GSP+) trade benefits with the European Union (EU), according to a study by the Institute of Policy Studies (IPS).
The report highlights that without GSP+, Sri Lanka’s exports to the EU could face a tariff hike, potentially leading to a 36.7% reduction in exports. Industries such as high-tech manufacturing and apparel are expected to be hit the hardest. The wearing apparel sector alone could see a significant decline, with nearly 10% tariff increases, affecting employment and economic stability.
Furthermore, the study estimates that around 73,574 workers, mainly women and low-to-medium-skilled employees, could be at risk of job losses due to reduced EU demand. While Sri Lanka may eventually phase out GSP+ eligibility as its economy grows, losing it prematurely could have severe economic consequences. The study stresses the need for Sri Lanka to comply with GSP+ conditions to sustain its preferential trade benefits.