Sri Lanka to Get Special Trade Concession from US
[February 11, 2005]

Daya Gamage – Reporting to Asian Tribune

Senator Gordon Smith, introducing the bill in the Senate said:

Washington, 11 February, (Asiantribune.com): A bill now before the United States Senate, presented in late January by Republican Senator Gordon Smith, a member of the Senate’s influential Finance Committee, would cut tariff rates to zero on textile imports to the United States from tsunami-affected Sri Lanka.

While the United States global foreign assistance program is in place to benefit most developing countries such as Sri Lanka and Least- Developed Countries (LDCs), the Senate bill is an unusual development to earmark Sri Lanka as a recipient of a significant trade concession.

One source, familiar with foreign economic assistance told “Asian Tribune” that such concessions are generally extended by the United States Congress to LDCs and not to developing nations such as Sri Lanka.

The U.S. recognized the benefit of trade to LDCs by enacting the Generalized System of Preferences in 1999 that are currently easing economic burdens in the Caribbean, Andean, and sub-Saharan African nations. Since Sri Lanka, in the overall assessment of the United States, does not belong to the category of the LDCs but instead to the group of nations known as developing nations, the Senate move to facilitate Sri Lanka is very unusual as Sri Lanka benefits from the foreign economic assistance program, this source told Asian Tribune.

The Bush Administration’s budget, now before the United States Congress, has proposed a 14 percent increase than the current $16.2 billion for foreign economic assistance in which Sri Lanka is always included as a beneficiary. Last year, Sri Lanka was selected by the Department of State as one of the recipients of the 14 countries to benefit from the newly established Millennium Challenge Account (MCA), which the Bush budget has proposed to increase from current $1.5 billion to $3 billion in the new fiscal year, which commences in October 2005.

The Senate bill also included 14 other countries that belonged to the LDC category to offset the losses incurred by the expiration of the Multi-Fiber Arrangement on January 1, 2005.

Senator Gordon Smith, introducing the bill in the Senate said, “United States trade preference introduces the hope of a competitive economy to countries facing calamitous situations. The U.S. has achieved miraculous feats by fostering the spirit of free enterprise, and this bill extends that same opportunity to countries in dire need.”

As much as the State Department’s decision in selecting Sri Lanka for economic assistance under the MCA was primarily led because of Sri Lanka’s commitment to free trade and investment, improvement of human rights practices and rule of law, and its strong belief in good governance, the Senate bill, while acknowledging the recipient countries’ commitment for good governance as a criterion for enhanced economic assistance, singled out Sri Lanka “a developing nation, not within the definition of ‘Least Developed’ is also eligible to provide economic emergency relief after tsunami.”

The Smith bill, which is most likely to be ratified by a full senate and become law after the president puts his signature of approval, will “grant duty-free treatment, without any quantitative limitation, to textile and apparel articles imported (to the United States)” from Sri Lanka.

The Bill authorizes the President to designate beneficiary countries eligible to receive duty-free treatment for certain articles that are the growth, product, or manufacture of such country, if the President determines that it:

(1) has established, or is making continual progress toward establishing, a market-based economy, rule of law, the elimination of barriers to the United States trade and investment, economic policies to reduce poverty, a system to combat corruption and bribery, and protection of internationally recognized worker rights;

(2) does not engage in activities that undermine U.S. national security or foreign policy interests and

(3) does not engage in gross violation of internationally recognized human rights or provide support for acts of international terrorism.

Under the above stated policies of the United States, Sri Lanka qualified as a recipient of the Millennium Challenge Account last year.

The Bill amends the Trade Act of 1974 authorize the President to designate an eligible country as a beneficiary country eligible to receive duty-free treatment, from January 1, 2005 through December 31, 2014 for any non-import-sensitive article that is growth, product or manufacture of such country.

While emphasizing the economic assistance needs, the Senate Bill singles out Sri Lanka saying, “the destruction caused by the tsunami in Sri Lanka was devastating and included the loss of an estimated 30,000 people and physical damage that will cost an amount equal to 6.5 percent of annual economy of Sri Lanka to repair.

“The effects of the lost businesses and reconstruction costs caused by the tsunami damage will result in a drop in the economic growth of Sri Lanka.

“Duty preferences that assist Sri Lanka in the United States market will help Sri Lanka rebuild and overcome the economic destruction caused by the tsunami.”

For the readers benefit, Asian Tribune exclusively carries the following Article of the Senate Bill that covers the textile and apparel industry:

“(A) The preferential treatment relating to textile and apparel article described in section 112(a) and (b)(1) and (2) of the African Growth and Opportunity Act shall apply to textile and apparel articles imported directly into the custom territory of the United States from a beneficiary TRADE Act of 2005 country and such section shall be applied for purpose of this subparagraph by substituting ‘TRADE Act of 2005 country’ and ‘TRADE Act of 2005 countries’ for ‘sub-Saharan African country’ and ‘sub-Saharan African countries’, respectively, each place such terms appear.

“(B) Apparel articles assembled from regional and other fabric – In applying such section 112, apparel articles wholly assembled in one or more beneficiary Trade Act of 2005 countries or former beneficiary Trade Act of 2005 countries, or both, from fabric wholly formed in one or more beneficiary Trade Act of 2005 countries or former beneficiary Trade Act of 2005 countries or both, from yarn originating either in the United States or one or more beneficiary TradeE Act of 2005 countries or former beneficiary Trade Act of 2005 countries or both (including fabrics not formed from yarns, if such fabrics are classifiable under heading 5602 or 5603 of the Harmonized Tariff Schedule of the United States and are wholly formed and cut in the United States, one or more beneficiary Trade Act of 2005 countries or former beneficiary Trade Act of 2005 countries, or any combination thereof), whether or not the apparel articles are also made from any of the fabrics, fabric components formed, or components knit-to-shape described in section 112(b)(1) or (2) of the African Growth and Opportunity Act.

“Preferential treatment shall be extended through December 31, 2011, for apparel articles wholly assembled in one or more beneficiary Trade Act of 2005 countries or former beneficiary Trade Act of 2005 countries, or both, regardless of the country of origin of the yarn or fabric used to make such articles.”

The "Asian Tribune" learnt that the Senate bill was introduced to cushion garment industries in Asian countries such as Sri Lanka from the potential Chinese foothold in the United States that will affect those countries economies and textile importers.

A recent World Bank study concluded that China’s share of the $495 billion annual global textile and apparel trade will sore to 50% from around 17% in the next four years, following the end of the quota system on January 1 this year.

Meanwhile President Bush this week requested the Congress to increase the United States assistance to tsunami affected Asian region by $800 million making the total U.S. contribution to $935 million.

- Asian Tribune -

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Last Updated Date: February 03, 2005 .