| EU's Trade and Economic Co-operation with Sri lanka: Summary |
The EU is Sri Lanka’s first trading partner (20.8% of Sri Lanka’s total trade in 2005). Exports to the EU have increased steadily during the last twenty years and now account for 28.6% of the country’s exports, almost on a par with the US (31%). Garments have taken a growing place in Sri Lanka’s exports to the EU and now account for 56.7% of total (the remainder being mostly agricultural products and basic machinery). Since 1 July 2005 Sri Lanka has been benefiting from the new GSP+ preferential trade system, which offers specific incentives for countries having ratified certain conventions on sustainable development and good governance (nil-rate of duty imports on products falling under the GSP’s general arrangement and reduced duties for most others). A review of the GSP+ scheme is scheduled to take place in 2008.
The EU is also a very important source of imports (15.5%) for Sri Lanka, coming second after India. Seen from an EU perspective, trade with Sri Lanka accounts for a modest 0.1% of exports and 0.15% of imports (but 1.26% of EU textile imports).
EC-Sri Lanka economic co-operation with Sri Lanka started at the end of the 1980s and has become an integral part of EC development aid strategy. In its early stages, the programme consisted mainly of technical assistance to trade promotion in support for local export industries. The programme has now evolved towards mutually beneficial forms of co-operation. Economic co-operation aims at (i) assisting Sri Lanka in modernising its regulatory framework for trade and investment and (ii) encouraging wider EU-Sri Lanka business linkages and investment. These objectives were pursued through a trade development project (€ 1.4 million) and a small project facility promoting business linkages and investment (€ 1.6 million).