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U.S., EU Ponder Trade Breaks for South Asia

Sri Lanka formally asked the U.S. for tariff breaks on apparel, while the EC agreed to consider trade breaks for Asian countries hurt by the tsunami.

Sri Lanka formally asked the U.S. State Department for tariff breaks on apparel and textiles on Tuesday to help rebuild its economy, while the European Commission agreed to consider a package of long-term relief measures that includes possible trade breaks for countries devastated by the tsunami in the Indian Ocean.

Sri Lanka’s minister of finance, Sarath Amunugama, requested in bilateral talks in Geneva with senior U.S. officials that apparel exports be granted special market access preference as part of a series of relief measures to help the island country’s devastated economy recover.

“Because of this distress, until we can get our industries up and running, we would like the preferences,” such as zero duty access and not to be penalized for importing textile fabric from third countries,” Amunugama said.

U.S. officials in Geneva confirmed the Sri Lankan minister raised the trade preference issue in talks with C. Lawrence Greenwood Jr., deputy U.S. assistant secretary of state for International Finance and Development, and other officials.

In Washington, Sri Lankan Ambassador Devinda Subasinghe said in a phone interview that he has had “active” discussions about trade relief with officials at the Office of the U.S. Trade Representative and at a briefing with House lawmakers last week. Subasinghe also is expected to give a briefing to senators on the tsunami and the country’s relief needs today.

He said Sri Lanka needs textile tariff relief to fuel the private sector’s recovery.

“We are an island nation and a trading nation,” said Subasinghe. “Approximately 70 to 80 percent of our GDP is generated by the trading sector and a very high concentration is in the apparel sector.”

He said his basic message to administration officials and U.S. lawmakers was to consider both financial assistance and trade assistance to help Sri Lanka’s private sector “keep the economy moving.”

“Exports are a prime mover and apparel is a key component,” he said, adding that Sri Lanka paid $238 million in U.S. duties on apparel in 2003. “I’m very optimistic things are moving in the right direction.”

Apparel and textile exports accounted for more than 63 percent of Sri Lanka’s $73.49 billion gross domestic product in 2003, according to the CIA World FactBook. The country shipped $1.51 billion in apparel and textile exports to the U.S. for the year ended Oct. 31.

Speaking to ministers and senior officials from more than 100 countries at a special United Nations conference on aid to the South Asian countries, Amunugama said, “We also look forward to special concessions for market access for our exports to sustain the competitiveness of our economy in the medium term.”

Andrew Natsios, administrator of the U.S. Agency for International Development, said, “I think there are all sorts of discussions going on now as to how we can help the countries that were affected by the disaster. But there’s no conclusion to those discussions, as yet.”

Meanwhile, the European Union is “actively” reviewing ways to extend trade relief to affected countries such as  Sri Lanka, Indonesia, Thailand and India, the EC said in a statement, issued after a U.N. donor conference in Strasbourg, France.

Among the trade measures the EC is considering are a possible suspension of antidumping duties against certain products from the affected countries, as well as “fast tracking” the adoption and implementation of the EU’s new Generalized System of Preferences.

The GSP program would give duty-free access to most of Sri Lanka’s exports, including textiles and apparel. India, Indonesia and Thailand would benefit from reduced duties and wider product coverage.

U.S. tariffs average about 17 percent on apparel and EU duties average about 11 percent.

President Bush would have to seek Congressional approval for a change in duty rates, which are a sensitive topic in Congress due to concerns about the impact of increased foreign imports on U.S. jobs. It’s also unclear whether the Bush administration would press to include trade breaks in a tsunami aid package for Congressional approval.