VZCZCXRO7824
OO RUEHBI RUEHCI RUEHPW
DE RUEHLM #0985/01 2960542
ZNR UUUUU ZZH
O 230542Z OCT 09
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0679
INFO RUEHNE/AMEMBASSY NEW DELHI 3407
RUEHIL/AMEMBASSY ISLAMABAD 9022
RUEHKA/AMEMBASSY DHAKA 1986
RUEHKT/AMEMBASSY KATHMANDU 7260
RUEHBI/AMCONSUL MUMBAI 6879
RUEHCI/AMCONSUL KOLKATA 0441
RUEHPW/AMCONSUL PESHAWAR 0369
RUEHKP/AMCONSUL KARACHI 2551
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 03 COLOMBO 000985 
 
SENSITIVE 
 
SIPDIS 
 
STATE PASS TO USTR 
 
AGRICULTURE PASS TO FAS 
 
COMMERCE PASS TO USPTO 
 
E.O. 12958:  DECL:  10/23/2019 
TAGS: ECON ETRD EAGR EINV ELAB KIPR KTEX CE
SUBJECT:  Sri Lanka TIFA Talks Take Incremental Steps Toward 
Resolving Issues 
 
SUMMARY 
 
¶1.  (SBU) The United States and Sri Lanka held their seventh annual 
Trade and Investment Framework Agreement (TIFA) talks in Colombo on 
October 15, which resulted in incremental advances but no 
breakthroughs.  The TIFA talks covered agricultural and government 
procurement issues, progress in the Doha round trade negotiations, 
Sri Lankan proposals for textile preferences, IPR, Sri Lanka's 
investment climate, and requests for technical assistance.  The TIFA 
talks were held in conjunction with a trade mission to Sri Lanka and 
a training program on the Generalized System of Preferences (GSP). 
Sri Lankan Minister of Export Development and International Trade 
G.L. Peiris led the Sri Lankan delegation, and their primary 
requests were for trade preferences for the country's war-affected 
northern and eastern provinces and for USG technical assistance. 
 
¶2.  (SBU) The Government of Sri Lanka offered updates on outstanding 
trade issues, including efforts to bring import tariffs and taxes 
into international compliance, a public awareness campaign on 
intellectual property rights, government procurement, and actions 
taken in certain labor rights cases.  The U.S. delegation, headed by 
Assistant U.S. Trade Representative (AUSTR) for South and Central 
Asia Michael Delaney, noted that any new trade preference 
considerations would need to be a part of the upcoming broader USG 
trade preference review.  The U.S. side raised concerns over several 
agricultural issues and pressed for the GSL to follow WTO 
notification procedures when making changes to trade-related 
regulations.  Both parties agreed there is significant room for 
expansion in overall bilateral trade, currently at $2 billion 
annually. 
 
SRI LANKA REQUESTS TRADE PREFERENCE AND TECHNICAL ASSISTANCE 
 
¶3.  (SBU) Inspired by the proposed Reconstruction Opportunity Zones 
(ROZ) for Afghanistan and Pakistan, the Government of Sri Lanka 
(GSL) requested trade preference consideration for its war-damaged 
northern and eastern provinces to spur economic development now that 
the 26-year civil war has ended.  The proposed preference program 
would focus on the garment sector, which the GSL argues would 
contribute to employment for internally displaced persons (IDPs) 
after they are resettled.  Sri Lanka's Joint Apparel Association 
Forum also made a pitch for ROZ's, noting that several apparel 
factories have moved to the East but there is the potential for much 
more.   The GSL also expressed concern over trade preference erosion 
and a hope that the WTO's Doha round, from which Sri Lanka expects 
significant benefits, will conclude soon. 
 
¶4.  (SBU) AUSTR Delaney explained that the United States would like 
to help foster economic development for the northern and eastern 
parts of the island, but that any new preference programs were 
unlikely to be established outside of the expected USG trade 
preference review or the Doha round.  In meetings on the margins 
with the GSL and private industry, econoff explained the difficulty 
of approval for ROZs, which they understood. 
 
¶5.   (U) In the 2008 TIFA talks, the GSL requested training on the 
GSP program.  Marideth Sandler, USTR's executive director of the GSP 
program, fulfilled the USG commitment:  she came to Colombo, holding 
a seminar and numerous meetings with private industry to provide a 
detailed roadmap how to receive GSP tariff benefits.  The GSL 
expressed extensive appreciation for the GSP training. 
 
¶6.  (SBU) The GSL also requested USG technical assistance on 
agricultural packaging and Food and Drug Administration labeling 
requirements.  The GSL is interested in designating "Ceylon" tea as 
an exclusive geographic indication, and further intellectual 
property training would assist police and customs officials. 
 
LABOR ACTIONS AND PLANS 
 
¶7.  (SBU) The GSL has made some advances on labor issues.  The GSL 
handed over to USTR a report of actions taken in several of the 
labor rights cases outlined in the AFL-CIO's petition to revoke Sri 
Lanka's GSP benefits.  A representative from the Ministry of Labor 
 
COLOMBO 00000985  002 OF 003 
 
 
Relations and Manpower said that the GSL, in conjunction with local 
trade and labor unions, is developing an action plan for compliance 
with International Labor Organization (ILO) standards.  The GSL 
expects formal approval of the action plan by the end of October. 
Post will meet further with the ILO, unions and the government to 
assess Sri Lanka's progress on labor rights. 
 
INVESTMENT CLIMATE:  TARIFFS, TAXES, AND GOVERNMENT PROCUREMENT 
 
¶8.  (SBU) In response to U.S. business concerns that combined 
tariffs, levies and taxes greatly exceed Sri Lanka's bound rates for 
many imports, the GSL explained that it had established a 
Presidential Tariff Commission to simplify its tax and tariff 
structure and to bring it into compliance with international 
agreements.  The Presidential Tax Commission, which is scheduled to 
issue its report in several months, also seeks to meet the IMF 
target of raising tax collection by 2% of GDP by 2011.  The GSL 
outlined improvements in the transparency of its government 
procurement process, including an appeal process and expanded use of 
the court system.  The USG noted its concern that the GSL had 
eliminated its government procurement agency.  Finally, the GSL has 
no plans to join the WTO Government Procurement Agreement beyond its 
current observer status. 
 
INTELLECTUAL PROPERTY:  SEVERAL STEPS FORWARD 
 
¶9.  (SBU) As agreed in the 2008 TIFA talks, the USG has sponsored 
several training programs on IPR, including with judges and customs 
officials.  The GSL described its public awareness campaign to 
promote intellectual property rights, including programs for 
prosecutors and magistrates and TV shows for the general public. 
The GSL is also drafting laws for the protection of plant varieties 
and traditional knowledge.  The GSL is currently accepting comments 
on the traditional knowledge law, which the U.S. Patent and 
Trademark Office has provided.  The GSL's Customs recordation system 
has been completed but technical difficulties prevent Customs and 
the National Intellectual Property Office (NIPO, under the Ministry 
of Commerce) from sharing data.  They hope to have a workaround 
within months.  The NIPO Director General has offered to follow-up 
with specific dates.  On software piracy, which is rampant even in 
government offices, NIPO has sent letters to other government 
agencies explaining the need to use properly licensed software.  The 
U.S. side noted industry's stated interest in negotiating 
concessional pricing for government agencies that convert to 
legitimate software.  The GOSL described a three-step software 
piracy program (education, warning, and arrest) that its police 
officers had started in two large cities.  Post will investigate and 
report on whether real progress is being made on these IPR issues. 
 
 
AGRICULTURE - AGREE TO DISAGREE AND KEEP TALKING 
 
¶10.  (SBU) The TIFA talks offered little progress on several 
agricultural concerns, though the two sides agreed to continue 
technical-level discussions.  USDA representative Thom Wright 
explained that there was no justification for Sri Lanka to continue 
its ban against U.S. beef exports now that the mad cow problem is 
under control.  Minister Peiris pushed his technical experts to make 
some movement to open the market.  Both sides realized that there is 
an extremely limited commercial market for U.S. beef, but the USG 
would like to see movement from Sri Lanka as a gesture that it was 
taking its commitments to the WTO and the World Organization for 
Animal Health seriously. 
 
¶11.  (SBU)  On chicken, the GSL admitted that it intends to protect 
local chicken farmers by limiting import licenses, but felt these 
measures are justified through a WTO safeguard mechanism.  AUSTR 
Delaney responded that if this is the case, then Sri Lanka must 
actually notify the WTO of this position and register the safeguard 
through formal channels.  Additionally, Director General for Animal 
Production and Health Herath pointed out that on a commercial level, 
the chicken issue is insignificant because an exception is made for 
hotels, restaurants and airlines.  When pushed to explain how an 
importer could go about obtaining an import license to service these 
 
COLOMBO 00000985  003 OF 003 
 
 
markets, Dr. Herath was unclear. 
 
¶12.  (SBU)  The GSL showed little flexibility in its bias against 
genetically modified (GM) food products.  USDA asserted that their 
technical committee for approving imports of GM products lacked the 
technical capacity to carry out risk assessments, resulting in Sri 
Lanka's de facto denial of permission for GM grain imports.  GSL 
replied that in the example incident cited (a cancelled GM corn 
shipment), the shipment was refused on the basis of an incomplete 
application.  On the issue of mandatory GM labeling, the Ministry of 
Health cited the precautionary principle and stated that consumers 
have a right to know.  The Ministry of Health further pointed out 
that they would follow CODEX guidelines on GM food labeling, and 
noted that CODEX had not yet ruled on this matter.  Both Minister 
Peiris and Director General of Commerce Senadhira were concerned by 
the fact that, if fully implemented, 50%-80% of agricultural imports 
from the United States would stop.  Sri Lankan GM regulatory 
officials did not appear concerned by this. 
 
¶13.  (SBU)  The GSL promised to provide its regulations and 
procedures for meat imports, including microbiological testing, in 
writing.  The GSL also promised to collaborate with USDA to look 
further into the new prohibition on artificial beverage flavorings. 
The U.S. delegation emphasized that all agricultural import 
procedures and protection of local industries by a developing 
country must be undertaken in line with international agreements 
which require notification of trading partners. 
 
PROGRESS ON SEVERAL BUSINESS DISPUTES 
 
¶14.  (SBU)  USTR officials raised two U.S. corporate business issues 
with the GSL.  In one case, USTR requested Minister Peiris to ask 
the Ceylon Electricity Board to bring payments to AES current and to 
issue the remaining balance on the lines of credit.   A CEB official 
disagreed with the status of the AES accounts, including the lines 
of credit, and indicated that they were both current.  USTR said 
that there is a difference of opinion between CEB and AES officials 
with regard to accounting issues and asked that the two sides 
reconcile the differences and resolve the matter.  Minister Peiris 
asked the CEB official to look into the matter and resolve it. 
Regarding the second issue, AUSTR Delaney relayed Coca Cola's 
concerns regarding the ban on coloring ingredients used in drinks, 
particularly coloring in orange drinks.  This ban has dampened Coca 
Cola's interest in expanding its investment in Sri Lanka.  Delaney 
said that the ingredient is allowed in over 100 countries but not in 
Sri Lanka. The U.S. contingent asked the GSL to comply with 
international standards when making decisions on such matters.  GSL 
indicated that they would look into this matter and get back with 
us. 
 
COMMENT 
 
¶15.  (SBU) While the TIFA talks did not lead to any dramatic 
breakthroughs, the U.S. delegation made clear that a number of areas 
hinder U.S. investment and bilateral trade between the two 
countries.  During the post-conflict period, and amid ongoing 
tensions on critical political issues, the TIFA talks (and other 
TIFA-related opportunities throughout the week) provided an 
opportunity to demonstrate interest in enhanced bilateral relations. 
 Post will follow up with the GSL to encourage adherence to the IPR 
regime, liberalize agricultural imports, and improve transparency in 
government procurement.   End Comment. 
 
BUTENIS