Who stands to lose? the effects of GSP+ withdrawal on Sri Lanka's export and labour force
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Date
2025-03-19
Journal Title
Journal ISSN
Volume Title
Publisher
Institute of Policy Studies of Sri Lanka
Abstract
In the absence of Generalised Scheme of Preferences Plus (GSP+) tariff preference, Sri Lanka will face
a tariff increase up to Most Favoured Nation (MFN) tariffs, likely resulting in export loss and associated
negative labour market effects. This study estimates the export loss of Sri Lanka due to a hypothetical
tariff increase from GSP+ rates to MFN rates. The labour force effect and distributional cost across
diverse labour groups resulting from preference erosion are calculated in a second–stage simulation.
Trade effects are weighted for the utilisation ratio as preference utilisation is below 100% and varies
across sectors. The tariff hike in the EU–28 will cause an export loss of United States Dollars (USD) 1.23
billion (Bn) or 36.7% of EU–28 bound exports from the base year 2019 exports. Wearing apparel and
processing fish sectors will be hit hard and face significant export losses. The fall in import demand from
the EU–28 will make 4.99% of total industrial employees in Sri Lanka vulnerable to adverse labour market
outcomes in line with the base year. This study also points to the differential effect of GSP+ preference
erosion on women and low and medium–skilled workers, who account for 65.65% of vulnerable workers.
The spatial distribution of vulnerable workforce shows a concentration of workers in rural areas with a
high poverty headcount index.