The report on human rights in Sri Lanka, called for by the US Congress appropriations committee, which was to be presented by the US state department to the Senate on the 21st of September, was inexplicably delayed and will be submitted only in mid-October. This is a confidential report from the US state department to the US Senate, and the appropriations committee of the Senate will have to make the decision whether this report is to be released to the public or not. Indeed it will have to decide whether they are going to even send the report to the Sri Lankan government. Whatever the final decision, it is hoped that the US State Department report won’t be like the EU’s interim report relating to GSP+. Its not often that one gets to see a travesty of justice like the EU interim report, even in the third world. What the EU interim report on Sri Lanka reminded me of, were the reports put out by president Chandrika Kumaratunga’s Kangaroo courts of the late 1990s – in particular, the report of the commission appointed to probe the assassination of Vijaya Kumaratunga where the facts were laboriously twisted to foist the blame for assassinating Vijaya not on the JVP, but on the UNP!

October is going to be a bad month for the government even if it registers a huge victory at the SPC elections. Like most PC elections, the SPC election is not generating much interest even within the southern province, and certainly not outside. In fact as far as the outside world is concerned, the man of the SPC match is Galle district UPFA candidate Nishantha Muthuhettigama who managed to do something to be noticed even if it meant getting arrested, remanded, and having his head examined on the orders of a magistrate to see whether he was bonkers! There is no chief ministerial candidate from either side, so the candidates are just a blur of faces except for Muthuhettigama, whose antics have made him a household name in Sri Lanka.

Clearly, what has greater political significance is not the result of the SPC election, but what comes after it – the US state department report on Sri Lanka to the US Senate and the European Commission’s recommendation on GSP+ which is due on the 18th of October. In an explosive article on Sri Lanka’s foreign policy last Friday, Dr Kumar Rupesinghe has referred to a ‘siege’ of Sri Lanka. And indeed that’s what it looks like. The siege will intensify next month.

Back to basics

Somebody has to sit down with a responsible bureaucrat in the European Commission, preferably the Trade Commissioner, and go over matters in a rational manner. One has to start from where it all began, with the General Agreement on Trade and Tariffs (GATT) of 1947, and work downwards from there. It should be borne in mind that the EU created the Generalised System of Preferences (GSP) from the early 1970s onwards, pursuant to a series of decisions made by the signatories of GATT. The sequence of events that led to the creation of the GSP system is as follows.

1. Sri Lanka was one of the original 24 signatories to GATT in 1947, and what Article 1 of GATT envisaged was a level playing field for everybody whereby member states would refrain from discriminating between one another and grant similar treatment to all countries. Thus the principle of ‘non-discrimination’ is the very cornerstone of GATT and its successor, the World Trade Organisation. Coupled to this was also the need to make tariff regimes for imports both ‘stable’ and ‘predictable’ across all member states so that exporters in member states will know with some certainty, what tariffs they will have to pay in the importing country. The stability as well as predictability of tariffs is essential for traders to make investment decisions. At the time they load their ships, they should know that the applicable tariff won’t be higher when the goods reach the destination.

2. Later, by the 1950s it began to be realized that developing countries required special help in order to meet their ‘development financial and trade needs’. In 1957, a special expert panel was set up by GATT signatories to examine why the trade of developing countries had failed to develop rapidly. The report of this panel of experts resulted in the GATT signatories’ declaration of 1961, on the promotion of trade of less developed countries.

3. By 1966, articles 36, 37 and 38 had been added to the GATT agreement, in favour of special trading arrangements for developing countries. Article 36 was about the need of developed nations to assist developing nations to achieve economic prosperity. Article 37 stipulated that developed nations ‘shall to the fullest extent possible’ reduce or eliminate tariffs and other barriers to market access for the developing nations. Article 38 was about joint action to be taken to help developing nations in the quest for market access.

4. On the 25th of June 1971, GATT contracting parties adopted the generalized system of preferences (GSP) system. The decision of 1971 allowed developed countries to accord special tariff preferences to developing nations for a period of ten years.

5. This was followed by the ratification on 28 November 1979, of what has come to be known as the ‘enabling clause’ of the GATT agreements, which is a permanent arrangement ‘enabling’ developed countries to give preferential tariff treatment to developing countries. The earlier decision of 1971 was valid only for ten years, but the 1979 ‘enabling clause’ is a permanent feature that is read along with the GATT agreements. This ‘enabling clause’ has since remained the last word in granting preferential tariffs to developing nations.

6. The case filed by India against the EU in the WTO in 2002/2004, has laid down the currently valid interpretation of the ‘enabling clause’ of 1979.

We thus see an evolution in the international trade regime from a position of wanting to have a level playing field for everybody, to ‘enabling’ developed countries to accord special treatment to developing countries. Today, the World Trade Organisation, the successor of GATT, oversees these international trade arrangements. There is a common theme that runs through the evolution of these special preferences for developing countries.

* The general rule was that each country will treat every other country in exactly the same manner in trade matters.

* Deviation from this general rule was allowed only for developed countries to give special preferences for developing countries.

* Developed nations should expect nothing in return and the preferences should go only one-way from the developed to the developing, and thus should be ‘non-reciprocal’.

* The purpose of these preferences would be to help develop the less developed economies and raise their standards of living.

* These special preferences should be designed to meet the development, financial trade needs of the developing nations, and this is the sole criterion for granting these preferences.

* When granting these preferences, developed countries need not grant the same preferences to all developing nations. They can differentiate between developing nations and provide special treatment to certain developing nations over and above what was available to other developing nations. Under this provision, the poorest of the developing countries in the ‘EBA scheme’ get completely duty free access to the EU market whereas other developing nations in the standard GSP scheme have to pay a 10% duty.

Still groping around

By the time India went to the WTO against the EU, there were five EU GSP schemes in operation. There was the standard GSP scheme which allows about 170 countries to export to the EU at 10% duty, there was the EBA scheme for the least developed countries, which gave them completely duty free access to the EU market and there were three special incentive schemes for maintaining labour standards, environmental standards and for combating the production and trafficking of narcotics. It was the latter three schemes and especially the last, that came under scrutiny by India.

In the case filed in the WTO by India against the EU in late 2002, India took up the issue of differentiating between developing countries and claimed that the EUs special GSP scheme for countries affected by narcotics production was not fair. The WTO ruled in favour of India and declared that the EU’s ‘drugs arrangement’ was in fact an ‘exclusive club’ (closed list) and that nobody knew on what criteria countries were selected to benefit from this scheme. The EU did the selection themselves and the criteria were not publicly available. This was one of the reasons why India won that case. Another point raised by the WTO was that just as there had to be selection criteria, there also had to be de-selection criteria. These GSP tariff preferences cannot be granted in perpetuity. For example, countries lose the standard GSP scheme when they are no longer classified as developing nations. The least developed countries also lose their duty free preferences once they become middle-income countries. They then fall into the standard GSP category and pay the 10% duty. But the EU’s drugs arrangement had no such cut off point.

Following this ruling against the EU by the WTO, the EU scrapped the special incentives scheme for labour standards, environmental standards and for combating narcotics production and created the GSP+ scheme after 2005, which addressed the shortcomings pointed out by the WTO appellate body. This new special incentive scheme had publicly available selection criteria. In order to qualify for GSP+ applicant nations had to ratify and implement 27 international conventions, account for less than 1% of total imports into the EU, and its five main exports should account for more than 75% of its total exports (The economy should not be diversified.) The criteria have been designed to include international conventions relating to labour standards, environmental standards, and combating the drug menace, so GSP+ is essentially a combination of the previous three special incentives schemes. Now they have publicly available selection criteria, and they have met the WTO criticisms. Coupled to these selection criteria are the de-selection criteria - if recipient countries fall short of the three GSP+ criteria, they will automatically be out of the scheme.

It should be understood that the European Commission is still groping its way forward in terms of setting up and implementing these special incentive schemes. The GSP+ system needs to be fine tuned, and this spat with Sri Lanka is an ideal opportunity for the EU to address certain shortcomings in this scheme. The most important consideration is for the GSP+ scheme to be implemented according to both the letter and the sprit of the GATT agreement of 1947, articles 36 to 38 of the amended GATT agreement, the GSP decision of 1971, the ‘Enabling clause’ of 1979 and indeed even the ruling against the EU by the appellate body of the WTO. Throughout this whole body of international trade law, the single most important objective was meeting the ‘development, financial and trade needs’

of the developing nations. In terms of the WTO law, a special incentive scheme for developing nations that runs counter to this objective cannot exist.

Bitchy implementation

A particularly ‘wooden’ way of interpreting the conditions set out for countries to qualify for GSP+ will not be helpful to achieve the core aim of the GSP scheme evolved by GATT/WTO over the past several decades. For example, El Salvador and Venezuela have been placed on hold because of mere formalities. Venezuela has by an oversight failed to ratify one of the 27 conventions - the convention on corruption, and in El Salvador, the supreme court has decided that some ILO conventions do not apply in local law. Both Venezuela and El Salvador have both been booted out of the GSP+ scheme temporarily because of this. Yet just three to four years ago, the EU was arguing strenuously in the WTO, in favour of giving totally unconditional, duty free access to the EU for all eternity to both El Salvador and Venezuela among others! So where’s the rationality in the way the EU has treated these two countries? The way a law is implemented, has to accord with commonsense first.

It’s the WTO that said that such unconditional and perpetual preferential arrangements were unacceptable and wanted selection and de-selection criteria. The EU seems to be implementing the GSP+ scheme in such a way as to spite the WTO for ruling against them. It’s almost as if they want to say "You want de-selection criteria? Well we’ll give you de-selection criteria!!". The EU has swung from one extreme of having no de-selection criteria at all for the drug production affected countries, to de-selecting nations at the drop of a hat! In Sri Lanka’s case, it’s not the ratification of the 27 conventions that is at issue but the implementation. The EU is trying to boot Sri Lanka out of the GSP+ scheme on the grounds that she is in violation of the International Covenant on Civil and Political Rights, the Convention against Torture and the Convention on the Rights of the Child.

However, the point is that even when withdrawing a trade concession given to developing nations, the withdrawal has to be consistent with the ‘development, financial and trade needs’ of the country in question. The WTO appellate body did insist on de-selection criteria for GSP schemes but anyone reading the appellate body ruling will see that what the WTO had in mind were de-selection criteria in keeping with the ‘development, financial and trade needs’ of the recipient country. Examples of this would be the de-selection criteria for the standard GSP scheme and the EBA scheme for the least developed countries. Countries cease to qualify for these schemes only after they have attained a certain economic level ie., after their ‘development, financial and trade needs’ have been met. The WTO never envisaged a GSP scheme where countries could be booted out at the drop of a hat. That would be contrary to one of the cornerstones of the WTO – the requirement for stability and predictability in tariff regimes.

The EU’s GSP+ as implemented at present is the GSP scheme from hell – going contrary to all the basic principles of the WTO. The sudden booting out of countries from the scheme will wreak havoc in those economies – a situation which is not in keeping with the ‘development, financial and trade needs’ of the victimized nations. Once selected for GSP+, recipients should not be booted out for technicalities or for political reasons. Article 3(c) of the ‘Enabling clause’ of 1979, stipulates that when developed countries provide special preference schemes for developing countries, such schemes should be designed and if necessary modified to respond positively to the development, financial and trade needs of the developing countries. This in fact is what is needed in terms of the implementation of GSP+ - a modification of current EU practice.An ‘unfair dismissal’ suit has not yet been brought before the WTO, and Sri Lanka’s case will be the first. This will be an opportunity for the EU to align the GSP+ scheme with the original letter and spirit of the GATT/WTO provisions for developing countries, evolved over the past forty years or more. Of course if the EU refuses to fall in line with the WTO, that would result in an EU special GSP scheme being shot down by the WTO for the second time in less than five years – not a good reflection on the bureaucrats handling the matter. If the WTO does not shoot down this practice of booting countries out of GSP schemes at the drop of a hat, the entire WTO will soon have to close shop and go home. It is unlikely that those in the corridors of power in the WTO will fail to comprehend the implications of allowing developed countries to boot developing countries out of GSP schemes on technicalities or for political reasons. Once a precedent is established, the contagion is going to spread, and the WTO will soon be rendered redundant as the developed nations will be doing just as they please as in the colonial era.

The ordure has to hit the fan for people to stand up and take notice. The EU got away with the GSP (drugs arrangement) for years until India challenged it in the WTO. Likewise, Sri Lanka’s role in this matter will be to make the implementation of the GSP+ scheme, compatible with GATT/WTO.

Sodomy Issues

The EU has pushed Sri Lanka to the position where she has no alternative but to mount a challenge in the WTO. When it does that, the EU’s interim report, will be the strangest document ever tabled at the GATT/WTO secretariat since it was founded over six decades ago. First, the EU paid local NGOs to make representations to itself to the effect that Sri Lanka was not in compliance with the International Covenant on Civil and Political Rights. Then they paid another committee of experts to examine the documents they had paid for earlier. And Sri Lanka is to be drawn and quartered at the end of a procedure like that. This in itself, is going to raise eyebrows in the WTO. Nobody knows who made submissions to this three member committee of experts appointed by the European Commission. Even Ranil Wickremesinghe, the Sri Lankan leader of the opposition is under the impression that the names of those who made submissions and the details thereof were sent to the government along with the EU interim report. Last week, Wickremesinghe called upon the government to table this list in Parliament. It’s natural that Wickremesinghe expects the EU to have sent the list of submissions to the government, as that would be standard practice here. However, the EU has not submitted any such list to the government and therefore it cannot be tabled in parliament. They have also not responded to the letters sent by this newspaper asking for copies of the submissions received by the EU investigating committee.

We have already examined how cockeyed the EU interim report itself is – full of anecdotes, and inaccurate hearsay, but very short of hard facts. All in all, its an odd document. One of the grounds on which it has found Sri Lanka to be in violation of the International Covenant on Civil and Political Rights is because consensual sex between adult members of the same sex is still a criminal offence in Sri Lanka (Page 116). This has reference to articles 365 and 365A of the colonial era penal code of 1883, that Sri Lanka still has. Homosexuality was never a criminal office in Sri Lanka until the European colonial powers criminalised it. Now the very people responsible for criminalizing it want us to decriminalise it on pain of facing economic ruin! Technically, this Sodomy issue alone is sufficient to deprive Sri Lanka of GSP+ leaving aside all other issues. The EU is going on the basis that even the slightest infraction of the hundreds of provisions in the 27 international conventions is sufficient to deprive Sri Lanka or any other country of GSP+. No objective benchmarks have been established yet as to what can be overlooked and what cannot be overlooked.

Another reason given in the EU report as to why, Sri Lanka is in violation of the ICCPR is because Islamic personal law is in force in Sri Lanka in relation to the Muslim population. The EU has taken exception to the fact that under Muslim personal law, there is no minimum age of marriage, polygamy is recognized, men could divorce without giving a reason or compensation whereas women had to prove fault, and that Muslim women could not be appointed as family court judges or registrars of marriage. Muslims in Sri Lanka, jealously guard their rights in terms of regulating family life, and regard it as essential to maintain their identity as Muslims. They are still unaware of what the EU has said on page 115, of their interim report, or tongues would have been wagging not just in the mosques in Sri Lanka but throughout the Middle East as well, that the EU was trying to use GSP+ to undermine Islamic family institutions throughout the globe, by making trade conditional on Muslims being forced to accept western concepts of sex and family life. No government in Sri Lanka is going to interfere in Muslim personal law just to get GSP+. That would set off ethnic riots here.