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DE RUEHLM #0873/01 1710826
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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