Sign in Subscribe
European Union

Sri Lanka Faces New Challenges in Accessing EU Market Due to Deforestation and Forced Labour Regulations

Strategic Insights

— 2 min read

Sri Lanka, already facing headwinds in its export growth due to US tariffs and GSP+, is now poised to encounter further challenges in accessing the European Union market due to new laws, including the EU deforestation regulation and the EU forced labour regulation. According to Markus Loning, an expert on human rights and responsible business, these regulations will come into effect after 2027, requiring companies to demonstrate that their goods have not contributed to deforestation and have not been made with forced labour.

Key Takeaways:

  • The EU deforestation regulation will require companies to demonstrate that their goods have not contributed to deforestation, with a baseline of a couple of years back, using geo-location data and documents to prove that the plot of land where the material comes from has not been deforested recently.
  • The EU forced labour regulation will require companies to show credible evidence that no forced labour is involved in the production of their goods, with the burden of proof on the authorities to demonstrate suspicion and evidence.
  • Sri Lanka has very good labour laws in place, but companies must set up a human-rights due-diligence system to monitor high-risk suppliers and ensure that their operations meet legal standards-health, safety, wages, and working conditions.
  • There is a clear business opportunity for Sri Lankan companies as an alternative production base, especially in textiles and apparel, rubber-based and agricultural goods, which benefit from GSP+ low tariffs.
  • IT and business services have strong potential to grow in the EU market, even though they are not covered by GSP+, as this applies to all business with Europe.
  • The regulations will come into effect after 2027, giving companies time to adapt and prepare for the new requirements.

Statistics:

  • At least two of the regulations mentioned by Loning (EU deforestation regulation and EU forced Labour regulation) are relevant to Sri Lanka.
  • By 2027, companies will need to demonstrate that their goods have not contributed to deforestation or have not been made with forced labour.
  • Sri Lanka has already benefited from GSP+ low tariffs, with textiles and apparel being one of the sectors that can take advantage of this.
  • IT and business services have strong potential to grow in the EU market, but are not covered by GSP+.

Sources:

  • Markus Loning, an expert on human rights and responsible business, cited in "New laws to challenge Sri Lanka's EU export aspirations" (Source: German expert)
  • Sri Lanka's labour laws, as mentioned by Markus Loning, cited in "Good Labour laws of Sri Lanka" (Source: Sri Lanka government)

Read more