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Wednesday, February 17, 2010
Getting stitched
By Dr Patrick Basham
A young Sri Lankan woman doesn’t earn much making lingerie for high street shoppers in the UK. But what she earns makes all the difference between a chance at a decent life and the hopelessness that is the lot of so many in the developing world.
But if the EU has its way later this month, life will change for the worse for roughly 1.2 million Sri Lankans, mostly women, who are directly and indirectly employed in Sri Lanka’s garment industry. That’s because the EU plans to withdraw Sri Lanka’s Generalised System of Preference Plus (GSP+) trade benefits.
The EU argues Sri Lanka has not ‘effectively implemented’ international conventions on civil and political rights, against torture, and on the rights of the child. The fact remains, however, that Sri Lanka is hugely dependent on its garment exports, both for foreign exchange earnings and as a source of employment. And this at a time when the island is finally recovering from more than a quarter century of war with Tamil Tiger terrorists.Over the past 25 years, the garment industry expanded at almost 20% per year, and garment exports became the country’s largest source of foreign exchange earnings. About 30% of garments manufactured on the island go the EU, leaving it highly vulnerable to EU trade sanctions.
Furthermore, at the stroke of a pen sanctions would render non-competitive an array of new, growing, and potential industries covered by the GSP+ concession, such as fisheries, agriculture, and footwear.
There are three compelling reasons why the EU should rethink its decision to withdraw Sri Lanka’s GSP+ benefits.
First, such a move has enormous implications for the poorest people. Sri Lanka’s EU exports are worth about $2.8 billion a year and make up 37% of the country’s total exports. By eliminating the GSP+ benefits, the EU guarantees not only substantial problems for the Sri Lankan economy in general, but significant economic hardship for the country’s poorest citizens.
In effect, the EU proposes a form of economic terrorism against the most vulnerable segment of a developing country’s population in order to bend Sri Lankan policy to its wishes. While the EU may profess noble principles, it is the poor of Sri Lankan who pay the price for Brussels’ arbitrary dose of social conscience.
The EU is engaged in nothing more than selective protectionism against Sri Lanka, given Brussels’ willingness to look the other way when alleged human rights abuses are committed by nations more economically powerful and politically important than Sri Lanka.
Second, the EU’s move will produce perverse, unintended consequences. Trade sanctions will not only cause significant economic hardships for those least able to cope, it will also punish those who are completely blameless in the actions that the EU believes are wrong. What the EU is proposing is effectively a form of collective punishment to be imposed on those who by their very place in society cannot effect the changes that the EU demands.
Is it right for the EU to knowingly punish Sri Lanka’s poor through loss of jobs and worse when they bear no responsibility for the alleged wrongs that so vex the EU?
Collective punishments in which sanctions are divorced from responsibility, epitomised by the EU’s threatened withdrawal of GSP+ benefits, are morally repugnant.
Third, the EU trade sanctions will not work. In fact, they will simply make the Sri Lankan government both more isolated and less favourable towards Europe. In his New Year’s Message, Sri Lankan President Mahinda Rajapakse dismissed the EU threats, saying that his government would resist foreign ‘strategic interference’.
President Rajapakse certainly has a strong case. Surely, the EU wouldn’t stoop to point an economic gun at the head of the Sri Lankan voter? Furthermore, how would the EU elite respond to a foreign multinational body meddling in its own democratic process?
And Sri Lanka won’t be isolated for long. The diplomatic rumour mill is rife with unofficial entreaties towards Colombo from the Iranians and the Chinese. Incentivising Sri Lanka to move even closer to either country and giving potentially both countries more influence in the South Asia region clearly does not further European foreign policy.
The international record on the effectiveness of economic sanctions is quite clear. In a review of the use of sanctions in 115 cases from 1914 to 1990, Professor Hufbauer and his colleagues found failure in two-thirds of all cases. Dr Robert Pape is even more dismissive, finding that of those 40 alleged successes, only five stand up to close scrutiny.
The EU is pursuing a policy without an economic or a moral foundation. At the end of the day, all of this underserved misery for poor, especially female, Sri Lankans, will fail to achieve its dubious goal: dictating internal policy to a foreign government.
Dr Basham directs the Democracy Institute, a London and Washington based economic research organisation, and is a Cato Institute adjunct scholar.
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