📈 Sri Lanka Faces Post-GSP+ Trade Challenge After Upper-Middle-Income Upgrade

• Overall Classification & Economic Context: Sri Lanka has regained upper-middle-income status, as recognized by the World Bank, marking macroeconomic stabilization since the 2022 economic collapse. However, maintaining this classification for 3 consecutive years will disqualify the nation from EU GSP+ tariff concessions under the current rules. • Key Sectors & Market Vulnerabilities: The EU remains Sri Lanka's single most critical export market. Duty-free GSP+ access is crucial to maintaining the competitiveness of key industries, particularly apparel & textiles, which risk exposure to higher tariffs against regional competitors. • Strategic Action Plan & Alternatives: • Task Force: The government must form a high-level task force comprising officials, trade experts, diplomats, and private sector leaders to formulate a contingency strategy. • Structural Competitiveness: Shift export strategy away from tariff reliance toward productivity, technology, quality, logistics, skill development, and sustainability. • Alternative Agreements: Formal diplomatic engagement must begin immediately to negotiate a comprehensive Free Trade Agreement (FTA) or Preferential Trade Agreement (PTA) with the EU. • Institutional Readiness: Strengthen key institutions, specifically the Department of Commerce and the Sri Lankan Embassy in Brussels, with specialized competence.