US embassy cable - 03COLOMBO1689

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 001689 
 
SIPDIS 
 
DEPT PLEASE PASS TO E, EB, SA/INS, SA/RA, DRL 
DEPT ALSO PASS TO USAID FOR BERNADETTE BUNDY - ANE/SA 
DEPT ALSO PASS USTR FOR AUSTR WILLS 
TREASURY FOR JERRY ADKINS 
DOL FOR SUDHA HALEY 
NSC FOR ELIZABETH MILLARD 
COMMERCE FOR ARIADNE BENAISSA 
 
E.O. 12958:  DECL:  ONE YEAR AFTER CONCLUSION OF US-SL FTA 
TAGS: ETRD, EAID, ECON, EFIN, KIPR, ELAB, PREL, CE, ECONOMICS 
SUBJECT:  GSL READY TO NEGOTIATE FTA BASED ON SINGAPORE AND 
CHILE MODELS 
 
Ref:  Colombo 1673 
 
1.  (U) Classified by DCM James F. Entwistle for reasons 
1.5 B and D. 
 
2.  (C) Summary:  In a meeting with GSL Advisor Jim 
Robertson, Econoffs learned that the GSL intends to provide 
USTR a draft negotiating document today (Monday, September 
29).  Reportedly, the GSL is prepared to meet most of the 
criteria outlined in the Singapore and Chile FTAs, will 
focus much of its discussion on rule of origin issues and 
would be able to accept faster phase-out timelines 
(probably 10 years maximum) than either Chile or Singapore. 
The GSL acknowledges USG concerns about the GSL's ability 
to implement the agreement, and sees that as the major 
hurdle it has to overcome.  As Post outlined in reftel, a 
US commitment to negotiate, followed by a six month review 
period, would give the GSL time to prove its mettle on this 
issue.  End Summary. 
 
3.  (C) In separate channels we have reported earlier 
information that a GSL-sponsored review of the Chile and 
Singapore FTAs would indicate GSL concerns in four areas: 
investment, national treatment, financial services and 
government procurement.  During a September 29 meeting with 
Jim Robertson, a World Bank-funded advisor to the PM and 
the Ministry of Policy Development and Implementation, 
however, we learned that the GSL believes they can adopt 
language that is very similar to the Chile and Singapore 
FTAs.  Their major questions involve rule of origin and how 
apparel will be treated.  According to Robertson, during 
meetings with USTR Zoellick and AUSTR Wills on Monday, 
September 29, Sri Lankan Ambassador to the US Devinda 
Subasinghe intends to present a draft negotiating document. 
This has been prepared by Robertson's staff, through a 
line-by-line analysis of the Singapore and Chile FTAs, and 
vetted with Sri Lanka's consulting firm Sandler, Travis and 
Rosenberg. 
 
4.  (C) According to Robertson, the GSL is able to meet the 
stringent policy requirements of the Chile or Singapore 
FTAs.  The PM is committed to liberal trade in goods and 
services and has a history of support of foreign 
investment.  Robertson said agreement on trade in goods 
could be implemented quickly and trade in services would 
take a little longer.  Exchange controls have long been 
removed (aside from some that remain in the capital 
account).  The GSL could also accept faster timelines for 
tariff phase-out than either Singapore or Chile with the 
longest phase-outs running at 10 years - mostly on basic 
agricultural commodities. 
 
5.  (C) On the rule of origin question, Robertson said the 
GSL has heard that, in the US-Morocco FTA negotiations, the 
US is pushing for standard rule of origin requirements to 
apply across the board.  The GSL, Robertson believes, could 
support such a standard.  On the garment-front, Sandler, 
Travis and Rosenberg have reportedly told the GSL they will 
face a proposed yarn-forward rule of origin clause and 
should try to come up with compromises within that 
framework to address specific GSL concerns for the garment 
industry. 
 
6.  (C) Robertson then commented that the GSL's main worry 
is whether the US believes Sri Lanka can implement the 
provisions of an agreement (note: a concern post has raised 
in reftel).  He cited the black eye the GSL received 
internationally over the labor dispute at the garment firm 
Jaqalanka, and our repeated comments regarding 
implementation of IPR enforcement mechanisms. (We are 
reporting on Labor and IPR as they relate to a FTA septel.) 
To guide implementation plans, Robertson said a review of 
existing laws and regulations would identify obstacles, 
which would need to be removed through legislation or new 
regulations. 
 
7.  (C) Comment:  This account is more positive than we had 
previously heard and presents a fairly confident attitude 
on the part of the GSL that they can meet the criteria in 
the Singapore and Chile FTAs.  Robertson mentioned that the 
GSL views its best chance for a FTA is to offer the 
prospect of quick negotiations that do not take a lot of 
USTR's negotiating time.  We were interested to learn of 
Subasinghe's meeting with Zoellick and Wills and his 
readiness to hand over a draft negotiating document.  The 
GSL is aware of our concerns over implementation but, 
through the mechanism outlined in reftel, including 
concrete steps on IPR, labor and government procurement, 
the GSL would have an opportunity to show over a six month 
period that it could deliver.  End Comment. 
 
LUNSTEAD