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Cablegate: Post Recommends Not Accepting Sri Lanka Gsp

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PP RUEHBI RUEHCI RUEHLH
DE RUEHLM #0031/01 0151146
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P 151146Z JAN 10
FM AMEMBASSY COLOMBO
TO RUEHC/DEPT OF LABOR WASHDC PRIORITY
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UNCLAS SECTION 01 OF 03 COLOMBO 000031

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SIPDIS

PLEASE PASS TO USTR FOR MICHAEL DELANEY

E.O. 12958: N/A
TAGS: CE ECON ELAB ETRD
SUBJECT: POST RECOMMENDS NOT ACCEPTING SRI LANKA GSP
PETITION FOR REVIEW

REF: A. A) 2009 COLOMBO 795
B. B) 2009 COLOMBO 1037


1. (SBU) Summary. Post does not support accepting the
AFL-CIO petition to remove Sri Lanka as an eligible country
under the GSP program because Sri Lankan labor standards are
among the best in the region, the apparel industry has a
program to improve working conditions, and the political
impact of reviewing GSP eligibility would be
counterproductive. Most labor unions have not joined the GSP
petition, and even union signatories candidly admit that
their purpose is not to lose GSP but to use the review
process as leverage to gain additional labor rights. Labor
union leaders agree that Sri Lanka's labor laws are strong,
although they see serious problems in implementation. The
local office of the International Labor Organization (ILO) is
implementing a USG grant to improve labor standards. Labor
unions in the public sector and state-owned enterprises are
primarily tied to political parties, and many of their
actions are politically motivated. The apparel industry has
a 'garments without guilt' program that provides audits of
apparel factories to improve working conditions. Finally,
the timing is not right to review the petition. Since early
October, the Government of Sri Lanka (GSL) has made positive
steps on freedom of movement and facilitated returns for
internally displaced persons (IDPs), and has begun to make
progress on human rights. Accepting the GSP petition for
review now could diminish our ability to push for additional
progress on our highest priority objectives: the continued
return and resettlement of IDPs; accountability; and progress
on human rights. End Summary.

No Support for GSP Removal

2. (SBU) The GSP petition is supported by few unions in
Sri Lanka, and even these union supporters acknowledge that
their purpose is not to remove GSP benefits. The
International Labor Organization works with 17 major trade
unions which it considers representative of unions in the
country, and only four of the seventeen unions were
signatories to the GSP petition. Tine Straermose, director
of the regional ILO office, thought that Sri Lanka was moving
toward internationally recognized worker rights, and that the
GSP petition did not reflect the conditions on the ground
(see reftel A). Econoff recently met with Palitha Atukrale,
President of the Progress Union, which signed the GSP
petition. Atukrale candidly told Econoff that no one wants
the United States to actually remove Sri Lanka as a
GSP-eligible country, but the unions do not think that the
GSL is listening to them, so the GSP petition creates
leverage to force the GSL to provide additional labor
protections.

Labor Laws Are Good; Problem is Enforcement

3. (SBU) Labor conditions in Sri Lanka appear to be far
better than in many countries in the region. Anton Marcus,
head of the Free Trade Zones and General Service Employees
Union and one of the leaders of the GSP petition, thought
that Sri Lanka had good labor laws, but the problem is
enforcement. Econoff has spoken to several NGO officials who
commented that the working conditions in Sri Lankan factories
were the best in the region. Sri Lanka has also avoided
other problems. Marcus and Kumari Witharana of the
Solidarity Center both told Econoff that companies paid the
earned wages in the Export Processing Zones (EPZs), where the
GSL Board of Investment supervises the companies, although
they thought that this could be a problem outside the EPZs.
Kumar Mirchadani, an apparel industry leader, said that the
minimum wage was 6,500 Rs per month ($57 USD), but his
factory (which was representative of apparel factories) paid
8,500 Rs base pay ($74 USD), and that most of his workers
received substantial overtime. In addition, labor and
industry leaders agreed that there is no child labor in the
formal sector. Finally, Witharana of the Solidarity Center
said that the GSL was not targeting labor leaders now (as
stated in the petition), although she alleged that private

COLOMBO 00000031 002 OF 003


companies are still firing union leaders to keep their shops
union free.

4. (SBU) Labor union leaders thought that labor
conditions had remained the same since post's comprehensive
description last August (see reftel A). The GSL has plans to
increased the labor fines for violations of the Industrial
Disputes Act from 20,000 Rs (approximately $175 USD) to
100,000 Rs ($887 USD), but the draft regulation has not been
implemented. Similarly, the unions report that it is still
difficult to gain access to the EPZs to organize the workers
(although this is disputed by the employers). The Solidarity
Center tried to overcome these restrictions by setting up
'welfare centers' with televisions and books right outside
the EPZs to meet the workers. Similarly, labor tribunals
have not sped up, nor has the GSL changed the requirement
that 40% of the workers must support the union before the
union can apply to represent the workers.

5. (U) The International Labor Organization is preparing
work plans to implement new projects based on a $400,000 USD
USG grant. The work plans will focus on: 1) creating
stronger worker and employer organizations and other capacity
building; 2) revising labor laws to address any shortcomings
and bring them into full compliance with international labor
standards; 3) establishing mechanisms for labor and
management cooperation, including on health and safety
concerns; and 4) strengthening the labor inspection system
and improve dispute resolution capacity. The ILO will
implement these work plans over the next eighteen months.
Post will follow the progress of these work plans closely.


Politicized Unions in Government and State-Owned Enterprise
Sector

6. (SBU) The unions representing government and
state-owned enterprise workers are very different than the
private sector unions. In the public sector, unions are
controlled by political parties and several unions represent
workers at the same work place. In November, as described in
reftel B, the unions associated with the opposition UNP and
JVP parties engaged in a 'work to rule' labor action at four
utilities, but workers in the government-affiliated unions
continued to work and even protested against the labor
action. Econoff met with Leslie Devendra, Secretary General
of the government-affiliated SLNSS union, with 88,000
members, who said that the claims of the GSP petition were
'completely blown out of proportion.' The November work to
rule labor action did have some economic aims, but most
observers believe that their primary goals were political.

Garments Without Guilt Program

7. (U) Sri Lanka manufacturers are working to improve
their image and working conditions through the 'Garments
Without Guilt' program. This program advances the principles
of: 1) ethical working conditions; 2) no child labor; 3) no
forced labor; 4) no discrimination on any grounds; and 5)
freedom from sweatshop practices. The Joint Apparel
Association Forum (JAAF) has hired an international audit
company to conduct audits of their members; 130 audits have
been completed so far. The audits have overwhelmingly found
only fairly minor issues, and these companies have three
months to implement a correction plan. According to JAAF,
some companies have failed the audit, making it credible.
The Garments Without Guilt program particularly focuses on
ensuring payment of overtime. The Sri Lankan apparel
association has marketed the Garments without Guilt program
to buyers in order to establish Sri Lanka as a niche producer
of ethical manufacturing. Labor leaders such as Anton Marcus
dismiss the Garments Without Guilt program as an attempt to
avoid labor unions, and he claims that the monitors are not
independent. Nevertheless, the Garments Without Guilt
program appears to be a genuine effort by employers to police
the working conditions of their members. The local office of
the International Labor Organization thought that although
Garments Without Guilt was a marketing tool, workers in

COLOMBO 00000031 003.4 OF 003


participating companies had much better working conditions
than in some other factories.

Comment: The Time is Not Ripe to Accept the GSP Petition

8. (SBU) Comment. In post's view, there are five good
reasons for the USG not to accept the GSP petition at this
time. First, labor conditions in Sri Lanka appear to be
good, with ethical working conditions and strong
environmental standards in place and manufacturers working to
police and improve working conditions. Second, Sri Lanka
will hold a Presidential election on January 26, and any USG
announcement on GSP will immediately become a campaign issue.
The USG is neutral in the election, and is determined not to
be seen by Sri Lankans as supporting one candidate. Third,
after months of prodding, the GSL began in early October to
make positive steps on freedom of movement and facilitated
returns for internally displaced persons (IDPs), and has
begun to make progress on human rights. If the USG accepts
the GSP petition, this decision will be negatively received
by the GSL and would likely affect our effectiveness in
pushing for progress on IPD returns and resettlement, human
rights, political reconciliation and accountability for war
time incidents. Fourth, the European Commission is moving to
revoke Sri Lanka's GSP plus trade benefits (on human rights
grounds, not due to labor rights), and the public will likely
conflate the United States' GSP program with the EU's GSP
plus program. Fifth, the U.S. Department of Labor plans to
send a team to Sri Lanka and the Maldives in February to
evaluate progress on labor rights. Following the Department
of Labor visit, the USG will have more information upon which
to base the decision whether to accept the GSP petition for
review. End Comment.
BUTENIS

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