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Cablegate: Austr Delaney Talks Tifa, Trade in Bangladesh

VZCZCXRO2229
RR RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHKA #1005/01 3010914
ZNR UUUUU ZZH
R 280914Z OCT 09
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC 9601
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHGV/US MISSION GENEVA 0719

UNCLAS SECTION 01 OF 02 DHAKA 001005

SENSITIVE
SIPDIS

DEPT FOR SCA/INSB, EEB/TPP/BTA, EEB/TPP/MTAA, EEB/CBA
STATE PASS USTR FOR VICKY KADER

E.O. 12958: DECL: N/A
TAGS: ECON ETRD EINV BG
SUBJECT: AUSTR DELANEY TALKS TIFA, TRADE IN BANGLADESH

SUMMARY
-------

1. (U) Assistant U.S. Trade Representative (AUSTR) Michael Delaney
discussed a proposed Trade and Investment Framework Agreement
(TIFA), labor rights and economic issues with top Bangladesh
officials during an October 18-22 visit to Dhaka and Chittagong.
The Ministers of Foreign Affairs and Commerce reaffirmed their
interest in a TIFA, but voiced concern over language on labor,
environment and intellectual property rights. They also pressed for
preferential market access for Bangladesh garment exports. Delaney
touted the benefits of a TIFA and the potential for diversifying
Bangladeshi exports in speeches at AmCham and a local think tank.
During his visit to Chittagong, he observed USAID labor rights
training programs and heard labor leaders report substantial
progress in forming worker associations. Post will press for
agreement on TIFA language, encourage further progress on labor
rights, and explore programs to help Bangladesh diversify its
exports. End Summary.

U.S.- BANGLADESH TRADE INCREASING
---------------------------------

2. (SBU) The Commerce Minister told AUSTR Delaney that bilateral
trade grew by $468 million or more than 12 percent to $4.2 billion
in CY-2008, despite the U.S. recession. Although Bangladeshi
exports declined slightly in the third quarter of 2009, he predicted
that a recovering U.S. market and Bangladesh's fiscal stimulus
package would help the garment industry, which produces about 85
percent of all Bangladesh exports.

COMMERCE MINISTER AIRS TIFA CONCERNS
------------------------------------

3. (SBU) The AUSTR acknowledged the positive trend in bilateral
trade, but said "we can do better". He noted that Bangladesh and the
U.S. currently had no formal framework for bilateral economic
dialogue, and that the proposed TIFA would establish one. Delaney
emphasized that TIFAs offered a flexible framework that could be
adapted to the needs of the bilateral relationship. He cited his
recent TIFA talks in Sri Lanka, the Central Asian republics and the
signature of a new TIFA with the Maldives as evidence of how TIFAs
advanced diverse agendas.

LABOR, ENVIRONMENT AND INTELLECTUAL PROPERTY
--------------------------------------------

4. (SBU) The Commerce Minister reaffirmed the GOB's interest in a
TIFA, but raised concerns over proposed language on labor, the
environment and intellectual property rights. The AUSTR replied
that this language was aspirational, the TIFA was non-binding and it
would not affect existing international commitments in these areas.
The Minister reported he had sent the proposed TIFA draft to the
Prime Minister's office.

FOREIGN MINISTER: GOB NEEDS MORE TIME ON TIFA
---------------------------------------------

5. (SBU) AUSTR Delaney made the case for a TIFA in separate meetings
with Foreign Secretary Mijarul Quayes and Foreign Minister Dipu
Moni. The Foreign Minister reported "we are working on it", but the
GOB would "need more time". The AUSTR suggested that if Bangladesh
could not agree on TIFA language, it might consider alternative
mechanisms for a formal bilateral economic dialogue. The Foreign
Minister clarified that the GOB had not given up on the TIFA, but
she agreed to "keep our options open".

GOB WANTS LOWER TARIFFS FOR GARMENTS
------------------------------------

6. (SBU) The Commerce and Foreign Ministers each pressed for lower
U.S. tariffs on ready-made garments, which are Bangladesh's main
export to the United States. The Foreign Minister pointed out that
Bangladesh paid over $500 million annually in tariffs at an average
tariff rate of 15% on its $4 billion in exports. By comparison, she
said, Bangladesh paid France and the United Kingdom average duty
rates of 1 percent and 0.8 percent respectively. She observed that
tariff reductions could be the most effective way for the U.S. to
help boost economic growth, consolidate democracy, and improve labor
rights in Bangladesh.

WTO: DISPROPORTIONATELY AFFECTED COUNTRIES
------------------------------------------

7. (SBU) Both Ministers raised concerns over a proposal in the World
Trade Organization (WTO) Doha round negotiations to offer
preferential market access to "disproportionately affected

DHAKA 00001005 002 OF 002


countries" including Pakistan and Sri Lanka. The Ministers warned
this proposal would erode the competitiveness of the Bangladesh's
garment sector. If the proposal moved forward, they argued,
Bangladesh should be included as a country disproportionately
affected by climate change. Dr. Moni commented that Bangladesh was
a responsible member of the international community that "hasn't
caused problems" for neighbors, but it received little reward for
good citizenship.

U.S. GSP SYSTEM UNDER REVIEW
----------------------------

8. (SBU) Delaney assured both Ministers the USG would take
Bangladesh's views into account. He noted India had recently hosted
a productive meeting that built consensus on a roadmap for Doha
round negotiations, but the timetable and outcome of these talks
remained uncertain. The U.S. Congress wanted to review U.S. trade
preference programs, including the Generalized System of Preferences
(GSP) which was due to expire at the end of 2009, though competing
legislative priorities could delay this review. AUSTR Delaney
suggested Congress might be receptive to new ideas as it tried to
make U.S. trade preference programs more consistent.

PUBLIC OUTREACH EVENTS
----------------------

9. (U) In speeches at the American Chamber of Commerce and a local
think tank, the Policy Research Institute (PRI), AUSTR Delaney
discussed commercial trends, export diversification, and the
benefits of a TIFA. While acknowledging Bangladesh's interest in
expanding market access for garment exports, he underscored
opportunities under the GSP program to diversify the country's
exports. Delaney encouraged public debate about a TIFA but pointed
out that the experience of more than 30 TIFAs between the United
States and other nations and groupings had not resulted in any
problems in the areas where the GOB and others had voiced concern.


PROGRESS ON WORKER RIGHTS
-------------------------

10. (SBU) AUSTR Delaney discussed progress and challenges in
improving labor rights with GOB officials, businessmen and labor
representatives. The Commerce Minister said Bangladesh's Cabinet
had approved a draft amendment to Bangladesh's Export Processing
Zone (EPZ) Law to protect worker rights in EPZs. He assured the
AUSTR that Parliament (where the Government has a large majority)
would pass the law by early November. Faruk reported that 75
percent of factories in EPZs had formed worker associations and the
remainder would follow by the end of 2009. AUSTR Delaney
acknowledged progress on labor issues identified in the GSP Petition
filed by the AFL-CIO and signaled that sustained progress would
strengthen the case for the continuation of GSP benefits.

U.S. SUPPORT FOR LABOR RIGHTS
-----------------------------

11. (SBU) During the AUSTR's visit to Chittagong, labor leaders
reported significant progress in forming worker groups in EPZs. The
leaders praised U.S. funded labor rights programs administered by
the Solidarity Center (an affiliate of the AFL-CIO) for giving
workers the ability to express their concerns to management.
Solidarity Center staff reported problems with delays by the GOB
bureaucracy's in approving plans to continue USG-funded labor rights
projects. Delaney commended the contribution of the Solidarity
Center and USAID labor rights programs and indicated his desire to
support their efforts through USTR's handling of the GSP petition.
Solidarity Center staff underscored the importance of sustained U.S.
pressure to further improve labor rights in Bangladesh.

COMMENT:
-------

12. (SBU) The Foreign Minister's comments reflect the GOB's effort
to reach a consensus on how to reply to the proposed TIFA draft.
The AUSTR's meetings and public outreach events generated
constructive discussion of the need for Bangladesh to diversify its
exports and reduce its reliance on the ready-made garment sector.
Post will follow up to encourage agreement on TIFA language, explore
potential avenues for promoting export diversification, and press
for continued progress on labor issues.

13. (U) AUSTR Delaney cleared this cable.

MORIARTY

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