Cablegate: Sri Lanka's Labor Record Merits Retaining Gsp

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A



1. (SBU) Summary: Though the GSL does need to improve its
handling of certain labor-related issues, it also has some
of the best labor conditions in the region. The AFL-CIO
petition to lift GSP privileges from Sri Lanka focuses on
the one main area - union access in the Export Processing
Zones (EPZs) - that needs attention. The current government
has begun to address this. Given the low incidence of
forced labor and child labor, the strong legal structure and
relatively good working conditions in the country, Post
believes the issue of EPZ access does not warrant the
withdrawal of the GSL's GSP benefits. Withdrawing GSP now
would also send conflicting signals to a new government
enmeshed in a fledgling peace process and major economic
reforms to which the US has pledged strong support. End

A strong labor record overall...

2. (U) Sri Lanka is a member of the ILO, has ratified seven
of eight conventions on labor standards and is in the
process of approving the eighth. Over 50 statutes cover
labor laws. There is a very active, politicized labor
movement in the country, which exercises its right to
protest and strike on a regular basis. Reftel reports on
the influence organized labor had in changing the new labor
bills recently passed in Parliament. The GSL made changes
in reaction to pressure by labor concerns, despite these
bills being viewed as a pro-business development.

3. (U) The cost of Sri Lankan labor is higher than in other
south Asian countries partially because labor standards are
higher. One expat country manager of a US garment firm says
she spends 80% of her time monitoring standards and
regulations. Another visiting representative of a US firm
said the working conditions he saw at a garment factory were
the best he had seen in the world. Even local labor
representatives have said to Laboff that the laws are good,
they just need to be enforced equally throughout the
country. USAID has been working closely with the Ministry
of Employment and Labor on a Productivity Policy. USAID
plans to support workforce training and related reforms as
the GSL attempts to create 2 million new jobs for the
unemployed (plus returning refugees). Jobs will also be
needed as the military demobilizes once peace is achieved.

...with some weaknesses

4. Post is now investigating the cases named in the AFL-
CIO's petition to USTR to withdraw Sri Lanka's GSP
privileges. The majority of the cases concern anti-union
tactics at factories inside EPZs, which are managed by the
Board of Investment (BoI). Information on the current
status of these cases will be forwarded in a separate cable.

5. Areas that need improvement include allowing unions to
form in the EPZs, and a timely move into collective
bargaining with them. Post understands that the BoI has
begun to inform potential foreign investors that union
activity in the EPZs is no longer restricted. These words
need to be supported by actions. Addressing the backlog of
labor cases, enforcing the Labor Commissioner's directives,
conducting a genuine dialogue between government, employers
and labor, and creating a social safety net are other issues
for the GSL to resolve.


6. (SBU) Sri Lanka is justifiably proud of its reputation
for high labor standards. In a region with forced labor,
child labor and sweatshops, there is good reason for this
pride: there are no sweatshops in Sri Lanka, and the child
labor that does exist is in the informal sector. There are
approximately 500 active unions, some playing a powerful
role in national debates. Problems do exist, but Post feels
they are not of the magnitude that warrant withdrawal of

7. (SBU) Comment continued: The USG has publicly committed
to stronger cooperation with and support of the Sri Lankan
government's peace and economic reform initiatives. Signing
a Trade and Investment Framework Agreement (TIFA), promoting
bilateral trade, increasing assistance levels, and
championing the GSL's peace initiatives are elements of the
new relationship. Taking away GSP privileges at this point
would send a negative and confusing signal. Post believes
that this issue would be better handled in bilateral
discussions under the TIFA framework. The desire of the GSL
to enter into a FTA with the US makes this forum a
particularly effective mechanism to foster change.


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