The authors are thankful to two anonymous referees for their comments and Dr Zhihong Yu, the Associate Editor of this Journal, for helpful suggestions to improve the paper. The authors are also like to thank Professor Prema-chandra Athukoral at the Australian National University and Associate Professor John Foster at Griffith University for their helpful comments and Dr Saman Kelegama, the Executive Director of the Institute of Policy Studies in Colombo, and Suwendrani Jayaratne at the same institute for helping to collect recent information on the topic.
Article first published online: 2 MAY 2014
© 2014 John Wiley & Sons Ltd
How to Cite
Bandara, J. S. and Naranpanawa, A. (2014), Garment Industry in Sri Lanka and the Removal of GSP Plus by EU. World Economy. doi: 10.1111/twec.12182
- Article first published online: 2 MAY 2014
The ready-made garment industry plays an important role in Sri Lanka both in terms of export earnings and poverty alleviation through employment generation. Following the removal of GSP Plus by EU in 2010 on the basis of alleged human right violations by the Sri Lankan government during the last stage of the civil war in 2009 and after, it currently faces serious challenges in exporting to the EU, its major market. Given the important role of the ready-made garment industry in poverty alleviation through employment generation, the impact of removal of GSP plus on the poor is examined in this paper. The empirical results of this study demonstrate that poverty and income inequality are expected to be exacerbated in Sri Lanka as a result of the removal of GSP Plus by the EU using non-economic reasons such as human rights violation. The results are also relevant for the renewed emphasis on trade preferences as a potential instrument for the Millennium Development Goals and the debate on how trade preferences are to be designed to maximise their effectiveness in stimulating a manufacturing supply response.