Sri Lanka says no to EU rights probe for trade deal

By Shihar Aneez

COLOMBO (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.