COLOMBO, Oct 20 (Reuters) - Sri Lanka said on Monday it will not allow a European Union investigation into rights abuses before renewing a trade preference that has helped boost the Indian Ocean nation's garment industry.
The Sri Lankan government also said it would provide a $150 million support scheme to offset any shock the loss of the concession may cause in an industry that in 2007 was its top foreign exchange source.
The European bloc has, since July, repeatedly warned it may not renew the "GSP Plus" trade scheme after it expires in December because of continuing human rights abuses stemming from Sri Lanka's civil war with the separatist Tamil Tigers.
"What the cabinet has decided is not to agree with investigations that are required by the EU to renew GSP Plus," Minister of Export Development and International Trade G.L. Peiris told reporters.
The European Union had asked to send an investigating team to ensure Sri Lanka was complying with human rights standards.
"The investigation will enable the Commission to determine whether Sri Lanka is fulfilling its obligations under the GSP+ in the area of human rights and whether any temporary withdrawal of GSP+ benefits would be called for," the EU said in a statement. The Generalised System of Preferences, or GSP Plus, is an EU trade concession that has helped Sri Lanka's garment industry boost export revenue since mid-2005.
Many in the island's garment and textile industry, which employs around 1 million people who are mostly from impoverished rural areas, fear a downturn if the special trade terms are axed.
But Peiris said the effect would be limited.
"We only get $150 million from GSP Plus. We are not ready to betray our country through this investigating," he said. Central Bank Governor Ajith Nivard Cabraal said the government would provide $150 million to the garment industry in 2009 to offset any potential shocks from losing the preference.
"Our garment industry has a 30-year history and GSP Plus has been only for three years. We should not depend on trade concessions always. We should get rid of this dependency syndrome," he said.
Industry players said the government support scheme would provide temporary relief.
"This gives us confidence," Ajith Dias, president of the Joint Apparel Association Forum told Reuters. "The industry will have to work out ... how we can ensure sustainability after one year."
Garments last year were the country's top source of foreign exchange, followed by remittances of $2.5 billion and tea export earnings, which brought in $1 billion. The trade scheme helped Sri Lanka net a record $2.9 billion from EU markets last year.
In July, the European body said Sri Lanka's failure to address human rights concerns, including a "frightening" number of abductions, could cost it the lucrative concession.
Rights groups have reported hundreds of abductions, disappearances and killings blamed on government security forces and Tamil Tiger rebels since a ceasefire in the 25-year-old civil war evaporated in 2006.
The government has admitted there are rights abuses and that it is working hard on addressing them. (Additional reporting by David Ennis in Brussels; Writing by Bryson Hull; Editing by Alex Richardson)