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Cablegate: Sri Lanka: Scenesetter for Trade Minister Gl Peiris Visit

VZCZCXRO0370
OO RUEHBI RUEHLMC
DE RUEHLM #0873/01 1710826
ZNR UUUUU ZZH
O 200826Z JUN 07
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6300
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 1108
RUEHKA/AMEMBASSY DHAKA 0217
RUEHIL/AMEMBASSY ISLAMABAD 7200
RUEHKT/AMEMBASSY KATHMANDU 5307
RUEHKP/AMCONSUL KARACHI 2206
RUEHCG/AMCONSUL CHENNAI 7787
RUEHBI/AMCONSUL MUMBAI 5446
RUEHGV/USMISSION GENEVA 2139
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS SECTION 01 OF 03 COLOMBO 000873

SIPDIS

SENSITIVE

SIPDIS

STATE FOR A/S BOUCHER AND SCA/INS
COMMERCE FOR JONATHAN STONE AND EROL YESIN
DOL/ILAB FOR TINA MCCARTER
MCC FOR S. GROFF, D. TETER, D. NASSIRY AND E. BURKE
TREASURY FOR LESLIE HULL
GENEVA PASS USTR

E.O 12958: N/A
TAGS: ECON EINV ELAB ETRD PGOV PREL CE
SUBJECT: SRI LANKA: SCENESETTER FOR TRADE MINISTER GL PEIRIS VISIT
TO WASHINGTON JUNE 22-26

REF: A) 06 COLOMBO 2070 B) COLOMBO 848

1. (SBU) Summary: Sri Lankan Trade Minister Peiris will visit
Washington June 22-26 to meet with senior officials including
Assistant Secretary Boucher and Deputy U.S. Trade Representative
Bhatia. Peiris will be accompanied by representatives of Sri
Lanka's main garment exporter association, which aims to draw
attention to the Sri Lankan garment sector's high labor standards.
The association has been a strong partner with USAID in developing
apparel-related vocational training. It has also partnered with
North Carolina State University to begin laying the groundwork for a
college of textiles in Sri Lanka that would seek to attract students
from all over Asia.

(SBU) Summary (cont): Peiris was one of seventeen MPs who in
January "crossed over" from the opposition to the government, citing
among other reasons their intention to make a constructive
contribution toward resolving Sri Lanka's ethnic conflict. He is
one of Sri Lanka's leading constitutional experts, the GSL's chief
negotiator during the 2002-2003 negotiations, the principal drafter
of the devolution proposals submitted by President Kumaratunga in
2000 that many considered a good basis for talks, and a highly
regarded elder statesman figure who has held numerous ministries
over the last fifteen years. Washington officials should engage
Peiris both on issues related to the bilateral Trade and Investment
Framework Agreement and on the status of proposals to devolve power
from the central government as part of an effort to resolve the
conflict. End summary.

2. (SBU) Sri Lankan Minister of Export Development and International
Trade GL Peiris will visit Washington D.C. June 22-26 to discuss
both trade and political issues with senior USG officials. Minister
Peiris will be accompanied by a delegation from Sri Lanka's Joint
Apparel Association Forum (JAAF), which represents garment
exporters.

"GARMENTS WITHOUT GUILT" -- SRI LANKA'S GOOD NEWS STORY
--------------------------------------------- ----------

3. (SBU) The Joint Apparel Association Forum (JAAF) would like to
use the Washington visit to draw attention to the high labor,
environmental, and ethical standards prevalent in Sri Lanka's
garment sector. In meetings with Commerce Department, USTR, and
Congressional members and staffers, the association will highlight
its "Garments without Guilt" campaign and the sector's efforts to
maintain market share against lower cost but less ethical
competitors in countries like China and Vietnam. The association
hopes to convince lawmakers to extend tariff concessions to Sri
Lanka to help it remain competitive when U.S. safeguards on Chinese
garment exports expire in 2008. The GSL understands that they face
an uphill battle in their effort to win tariff concessions, but were
encouraged during last year's talk with USTR to undertake such a
road show and are pleased to have the opportunity to deliver some
good news about positive developments in Sri Lanka.

JAAF Public-Private Partnerships with AID
-----------------------------------------

4. (U) JAAF has been a strong partner with the US Embassy in
Colombo in USAID's vocational training effort. JAAF is providing
particular assistance to two of the nine vocational centers AID is
building: one is Sammanthurai near Ampara in the east, and one in
Kogala near Galle in the south. In both cases JAAF will develop the
curriculum for the centers, build a miniature factory floor so
trainees get first-hand experience, train the trainers for the
center, accredit the centers so they are up to an industry-wide
standard and it will hire all of the 450 graduates from each of the
two centers each year to work in its nearby garment factories.
Trainees will receive training as machine operators, mechanics,
pattern makers, cutters, quality inspectors, fabric inspectors and
supervisors.

COLOMBO 00000873 002 OF 003


JAAF has also been a pioneer in an effort to "take the work to the
worker". Whereas in the past governments sought to establish
industrial zones near major cities, thereby spawning urban
migration, separation of families and other familiar ills, JAAF has
sought to locate factories around the country so that workers can
commute from their villages, families remain together and the income
they earn helps to develop a host of new service industries in their
villages.

5. (U) JAAF has also been a pioneer in establishing a Memorandum of
Understanding with North Carolina State University with the eventual
goal of partnering with the University to establish a college of
textiles in Sri Lanka which would seek to attract students from all
over Asia. Students would receive degrees in industrial
engineering, supply chain management, product design and other
textile related skills.

6. (U) The following provides additional background and points for
discussions with Minister Peiris on trade issues.

TRADE ISSUES
------------

7. (U) In 2006, Sri Lanka's exports to the United States, its
largest market, totaled $2.1 billion, or nearly a third of total
exports. Apparel continued to dominate U.S.-bound exports, but grew
by only two percent to $1.7 billion. Other major exports from Sri
Lanka to the United States were, in order, rubber, gems, tea, and
spices. United States exports to Sri Lanka in 2006 were worth $237
million. Major U.S. exports were machinery, yarn and fabric,
medical equipment, paper, and computers and related equipment. 2007
statistics for the first quarter show the U.S. trade deficit with
Sri Lanka narrowing somewhat.

8. (SBU) In December 2006 Trade and Investment Framework Agreement
(TIFA) talks (ref A), U.S interests focused on the following:

-- gaining market access for U.S. seed potatoes, which Sri Lanka had
blocked for spurious phytosanitary reasons;
-- reducing Sri Lanka's high tariffs and para-tariffs;
-- improving transparency of Sri Lankan government procurement;
-- improving contract sanctity in Sri Lanka;
-- avoiding potential non-tariff barriers that could impede U.S.
exports of pharmaceuticals and genetically modified foods.

9. (SBU) Sri Lanka's interests focused on:

-- obtaining preferential tariffs for apparel;
-- receiving U.S. trade capacity building assistance in GSP
utilization, anti-dumping/countervailing duties, and IPR
enforcement;
-- attracting increased U.S. investment;
-- securing a Millennium Challenge Account Compact.

10. (SBU) Following are some specific points Washington
interlocutors may wish to draw on:

o Glad Sri Lanka recently agreed to permit access to U.S. seed
potatoes.

o Urge Sri Lanka to permit access of genetically modified feed
maize.

o High tariffs and paratiffs, in addition to reducing trade,
contribute to the high cost of living for average Sri Lankans.

o We have not seen progress on transparency of government
procurement.

o Contract sanctity has not improved. For example, Ceylon
Electricity Board's failure to issue letters of credit to U.S. power

COLOMBO 00000873 003 OF 003


producer AES three years after required to do so by the power
purchase agreement is egregious. (Note: See ref B for more cases.)

o Important to improve contract sanctity and procurement
transparency as Sri Lanka tries to attract global oil investors.

o We are glad to see increased fines being levied on IPR violators.

o We maintain our offers of capacity building assistance in GSP
utilization, anti-dumping/
countervailing duties, and IPR enforcement.

POLITICAL ISSUES
----------------

11. (SBU) In addition to his trade portfolio, Peiris occupies a
unique position as a close advisor of President Rajapaksa. Peiris
was one of the UNP Members of Parliament who crossed over earlier in
the year to join the Rajapaksa government. The crossovers released
their own devolution proposal on May 22. Peiris himself drafted
this proposal as a means to build on the 13th Amendment which made
the province the unit of devolution. Although he was the drafter,
Peiris parted company with his colleagues when they decided to go
public with the proposal. Peiris had advocated that the group try
to work privately with the President to help shape the SLFP
proposal.

12. (SBU) The Minister continues to be a constructive but quiet
advocate within the Cabinet for a strong devolution proposal that
will meet the needs of the Tamil people. As the former chief
negotiator for the government during the 2002-2003 negotiations, and
as the principal drafter of the devolution proposals submitted by
President Kumaratunga in 2000 that many considered a good basis for
talks, Peiris is uniquely qualified to provide the President with
good advice. In a meeting with the Ambassador before his departure
for the US, he agreed that the President must personally embrace a
strong devolution proposal if it is to have any hope of success.
But he also expressed understanding for the President's concern that
he faces a substantial political risk if he endorses a strong
devolution proposal only to have the LTTE refuse to negotiate,
thereby leaving the President exposed to criticism from his southern
base. Peiris looks forward to a candid discussion of these matters
with A/S Boucher.

BLAKE

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