Sri Lanka is in danger of losing its duty-free access to the EU. The European Union is worried the return of Mahinda Rajapaksa as prime minister could derail the progress made toward national reconciliation. Under Generalised System of Preferences Plus status, Sri Lanka's top exports of garments and fish get lucrative concessions in the world's largest single market.
Trade is key to Sri Lanka’s economy and the EU is its biggest export market, accounting for nearly a third of exports in 2017. Sri Lanka regained the GSP plus preferential treatment in 2017. Its exports to the EU have since jumped 18 per cent. Sri Lanka had promised the EU in 2016 it would work toward reconciliation with Tamils, who mostly live in the north and east of the predominantly Buddhist nation. The country also pledged to provide justice and reparations to victims of human rights violations committed during the 26-year civil war.
The EU warning on trade is the strongest yet from western powers. On the other hand, China, which has invested billions of dollars during Rajapaksa's presidency, has called for non-interference and said Sri Lanka could tackle its own problems. Sri Lanka’s garment industry is its second biggest hard currency earner.