US embassy cable - 03COLOMBO1883

UNCLAS SECTION 01 OF 02 COLOMBO 001883 
 
SIPDIS 
 
DEPT PASS TO USTR; COMMERCE FOR ABENAISSA; LABOR FOR 
ILAB:SHALEY 
 
E.O. 12958: N/A 
TAGS: ELAB, ECON, EAID, EINV, KTEX, CE, ECONOMICS 
SUBJECT:  CONTENTIOUS LABOR DISPUTE RESOLVED IN EXPORT 
PROCESSING ZONE 
 
REF: COLOMBO 1702 
 
1.  Summary:  A controversial labor dispute at an export 
processing zone (EPZ) garment factory producing for 
international labels, which drew international attention, 
was resolved recently.  The US-based Free Labor Association 
(FLA) and a local independent public policy institution 
intervened to help the company and the trade union reach 
agreement accepting the union.  Post expects this 
experience will help all local parties concerned to 
understand the importance of accepting the workers' right 
of freedom of association, organizing and collective 
bargaining, especially within export processing zones.  End 
Summary. 
 
Failed referendum 
----------------- 
2.  The dispute arose when a local trade union, the Free 
Trade Zone Workers Union (FTZWU), sought to form a trade 
union in Jaqalanka Ltd., a garment factory located in Sri 
Lanka's largest export processing zone (EPZ).  A subsequent 
vote, in July 2003, resulted in just 17 out of a 400 strong 
workforce casting their vote, with 16 voting for the FTZWU 
and one vote that was flawed.  FTZWU lost the election, as 
they failed to muster the required 40% representation. 
FTZWU alleged that the company manipulated the election and 
complained of harassment and intimidation of its members 
and workers in the count down to the election, which 
prevented many of them from voting.  Later, the company 
offered to have a second referendum, which the union 
rejected. 
 
International campaign taken to ILO and Cancun 
--------------------------------------------- - 
3.  Instead, the union sought recognition without a 
referendum and launched an international campaign.  It made 
representations to the ILO and also, through the 
International Textile, Garment and Leather Workers 
Federation (ITGWF), campaigned at the Cancun WTO 
Ministerial.  The President of the FTZWU also visited 
Washington in the summer, lobbying various USG agencies and 
NGOs.  Thereafter, Nike and Vanity Fair, two companies 
which are supplied by Jaqalanka, requested the Fair Labor 
Association (FLA), a US-based organization promoting 
international labor standards and conditions in apparel 
factories, to investigate the matter.  The FLA sought the 
services of the Center for Policy Alternatives (CPA), a 
well-known independent public policy organization in 
Colombo, to mediate.  Sri Lanka's embassies in Washington 
and Brussels engaged as the case began to have an effect on 
trade relations.  The GSL's Washington PR firm, Sandler, 
Travis and Rosenberg, was also active in prompting the GSL 
to take positive action.  On October 16, with the help of 
the CPA, the FTZWU and Jaqalanka reached an agreement to 
resolve the dispute. 
 
Recognition of the union 
------------------------ 
4.  The Company has recognized the FTZWU as a union 
operating within the company.  In return, the FTZWU has 
agreed to cease its international campaign and suspend 
complaints lodged with the ILO.  Both parties have agreed 
to a process of reconciliation and to work towards creating 
an environment conducive to good labor practices.  The 
agreement also provides for training and capacity building 
for both parties, and reformulation of Jaqalanka's internal 
grievance procedures.  They have agreed to use the dispute 
resolution mechanism provided under the Industrial Dispute 
Act.  Progress will be reviewed in six months. 
 
5.  With the recognition of the FTZWU, Jaqalanka joins a 
small band of employers that have allowed unions in their 
factories in EPZs.  Many other companies prefer the more 
common non-union worker councils.  Some of these companies 
provide world-class facilities to workers and have reported 
good working relations with worker councils.  The Board of 
Investment (BOI) in 2002 issued guidelines instructing BOI 
companies to recognize trade unions. 
 
Comment 
------- 
6.  Resolution of this incident in a constructive manner is 
welcome, though overdue (see reftel).  Sri Lanka can boast 
of some of the highest standards of labor conditions in the 
world, has ratified all the relevant ILO conventions and 
supplies the top tier companies in the US and EU.  The GSL 
did not act in time to minimize the damage done to the 
country's reputation by one company's actions over the past 
three months.  The dispute highlighted an ongoing problem 
area - union access (and application of the law) to 
factories in the EPZs.  Officials in the BoI, which has 
played an outsized role in labor issues in the EPZs, were 
defensive as opposed to being proactive in seeking 
resolution.  Pressure from outside, and from higher levels 
of the GSL finally forced a resolution with the involvement 
of critical stakeholders. 
 
7.  It is not yet clear if the GSL understands the broader 
systemic issue underlying this specific case - the need for 
the Labor Ministry to actively protect worker rights 
throughout the country.  It appears they fully understand 
the international implications of not resolving these 
issues in a timely fashion, given the high-level 
involvement of the embassies in Washington and Brussels and 
Sandler-Travis.  The positive resolution may offer some 
encouragement to the GSL to ensure application of workers' 
rights throughout the island.  End comment. 
ENTWISTLE