Sri Lanka Apparel Sector Urged to Act as New EU GSP+ Rules Loom 📈

• Key Sector Impact: Apparel & textiles is Sri Lanka’s largest export earner, generating over $5 Bn annually, employing 350,000+ workers, and contributing 40–45% of total exports and 6–7% of GDP. • New EU GSP+ Scheme (2027): The EU adopted revised rules on May 22, 2026, introducing stricter requirements on disability rights, labor standards, environment, and governance. Sri Lanka must formally reapply in 2027 with a credible, evidence-based action plan. Current benefits expire at end-2028. • Key Operational & Economic Risks: • Low Utilisation: Only 49%–59% of eligible exports use GSP+ due to restrictive EU rules-of-origin requiring yarn-stage domestic fabric. • Upper-Middle-Income Risk: World Bank reclassified Sri Lanka to Upper-Middle-Income (GNI $4,670) in July 2026. Maintaining UMI status for 3 consecutive years leads to GSP+ exclusion, making early 2027 reapplication critical to avoid MFN tariffs by mid-2029. • Priority Actions Needed: • Legislative & Reform: Repeal/replace PTA to meet international standards; strengthen human rights, labor, climate, and anti-illicit controls. • Industry Upgrades: Invest in domestic fabric manufacturing, secure regional cumulation agreements, and negotiate rules-of-origin flexibility with the EU.