Sri Lanka’s clothing industry has been admired for improving working conditions but it is now in crisis. Not through its own fault, but because of the Sri Lankan government’s alleged war crimes against ethnic minorities.

The European Commission is in the process of withdrawing concessionary zero-rated duty tariffs for imports from Sri Lanka. The Commission has found Sri Lankain breach of international human rights laws. Human rights activists, including Human Rights Watch, have also accused the Sri Lankan government of killing thousands of ethnic Tamils in the war against the separatist LTTE, and attacks on journalists. Sri Lankadenies these allegations.

Once the preferential trade tariff is withdrawn, garments exported from Sri Lanka will attract duty of 9.6% in Europe, making them more expensive and less competitive. Sri Lankan garment manufacturers fear that multinational brands will then move their orders to other cheaper countries.

Multinationals themselves are under attack by overseas pro-Tamil campaigners, who say sourcing from Sri Lanka amounts to supporting the Sri Lankan government’s actions. The Washington-based US Tamil Political Action Council (USTPAC) and other activists have organised protests in front of Gap and Victoria’s Secrets outlets in the past few months, demanding a Sri Lanka boycott.

USTPAC says: “Gap and Victoria’s Secret purchase and sell garments made in Sri Lanka, thus helping the Sri Lankan government fund its military.”

In the UK, similar protests have been led by Act Now, a campaign group set up by former British humanitarian aid workers in Sri Lanka. They have targeted Marks & Spencer and other retailers, asking them to stop sourcing from Sri Lanka.

Garment manufacturers in Sri Lanka say withdrawal of trade benefits and a boycott will force factories to shut down. More than 350 garment factories in Sri Lankadirectly employ 300,000 workers, while a million others indirectly depend on the industry. The garment industry is the country’s largest employer and accounts for the bulk of the nation’s foreign exchange earnings. In 2008, Sri Lanka exported $4bn worth of garments, 36% of which went to Europe.

“The government should closely work with the European Commission to address their concerns,” says S. Sukumaran, chairman of the Joint Apparel Association Forum, Sri Lanka’s leading trade body. He says the European trade tariff benefits are crucial for the survival of the industry.

Trade unions, though, have a different view. The Apparel Industry Labour Rights Movement (Alarm), a coalition of unions and NGOs campaigning for a living wage in Sri Lanka, says the EU’s concessionary tariffs – under the Generalised System of Preference – have not benefited workers.

But Sri Lankan clothing manufacturers have taken several ethical initiatives over the years. The industry last year came up with a “garments without guilt” programme, in which more than 130 factories voluntarily submitted themselves to independent audits of working conditions. The Sri Lankan garment industry also was the first to establish an eco-factory, two years ago, with help from Marks & Spencer.

“We plan to take the garments without guilt programme to the next level. We are going to encourage all our factories to adopt green initiatives and reduce [their] carbon footprint,” says Kumar Mirchandani, chairman of the Apparel Exporters Association in Sri Lanka.

European retailers are quiet on the proposed withdrawal of preferential tariffs. A key question is whether they will continue to source from Sri Lankaeven if it means the products will cost 9.6% more.

A Colombofactory owner says: “If they cut our orders because of higher tariff, we will have ethical unemployment in the country. We will have ethics but no business.”- (Ethical Corporation)