US embassy cable - 04COLOMBO163

UNCLAS SECTION 01 OF 03 COLOMBO 000163 
 
SIPDIS 
 
SENSITIVE 
 
DEPT PLEASE PASS TO USTR - AWILLS; TREASURY FOR ROY ADKINS; 
COMMERCE FOR ARI BENAISSA 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, CE, ECONOMICS 
SUBJECT: SRI LANKAN COMMERCE MINISTER RESPONSE TO USTR 
LETTER ON DOHA 
 
REF: SECSTATE 6662 
 
This message is Sensitive but Unclassified, please handle 
accordingly. 
 
1. (SBU) Summary: Sri Lankan Commerce Minister Karunanayake's 
response to Ambassador Zoellick's letter on Doha next steps 
can be summed up as: "I agree...with certain considerations 
for Sri Lanka."  With plans underway for a meeting between 
USTR Zoellick and Karunanayake in Singapore next month, Post 
suggests USTR take the opportunity to push for explicit and 
public GSL concurrence with the major initiatives outlined in 
USTR's letter, with the hopes of influencing other developing 
countries.  End Summary 
 
2. (SBU) Post received a written response to USTR Zoellick's 
January 11 letter (reftel) on Doha next steps from Commerce 
and Consumer Affairs Minister Ravi Karunanayake (entire text 
contained in para 4 below).  The following are highlights 
from Karunanayake's letter: 
--US leadership role important; 
--Agree we should focus on core market access topics: 
agriculture and goods and services; 
--Agree with need for a date for elimination of export 
subsidies; 
--Agree with need for cap and reduction of all forms of trade 
distorting domestic support, but should recognize special 
needs of developing countries with low bound tariffs and who 
do not distort markets (Note: Sri Lanka is a small market 
with low bound tariffs and domestic ag support programs.). 
--Perception exists that blended formula on tariff cutting 
would lead to deeper tariff cuts for developing nations. 
Need to find a methodology acceptable to the entire 
membership.  In principle, Sri Lanka supports capping high 
tariffs. 
--On non-agricultural market access (NAMA) - agree tariff 
cutting should include sufficient flexibitility; sectoral 
negotiations integral, should explore USTR proposal for 
middle ground approach  - with flexibility for developing 
countries who have unilaterally undertanken substantial 
tariff reductions (Note: as Sri Lanka has done). 
--On services, should focus on market access components on 
service negotiations; could agree to near-term goal of 
meaningful offers from a majority of WTO members. 
--Agree with need for pragmatic approach on Singapore Issues. 
 Sri Lanka supports unbundling, focusing on trade 
facilitation and, if possible to reach consensus, 
transparency in government procurement; 
--Should break away from conventional approach to special and 
differential treatment.  Sri Lanka supports approach of 
providing flexibility  for countries who have specific 
problems related to specific negotiating areas; 
--Applaud US efforts, everyone needs to be flexible and 
negotiate.  Endorse proposal for meeting in September (sic) 
in Hong Kong (Note: post presumes September was a typo and 
December would be fine with the GSL). 
 
3. (SBU) Karunanayake did not explicitly address USTR's 
proposal for a developing country General Council chair, but 
Post is confident such a proposal would be acceptable to the 
GSL. With a potential meeting between USTR Zoellick and 
Karunanayake scheduled for February 14 in Singapore, Post 
believes it would be worth pressing Karunanayake for 
explicit, public support of USTR's goals, in an effort to 
influence other developing countries to come along.  Sri 
Lanka remains a strong supporter of the Doha round agenda and 
would like to see progress in the WTO to help cement the 
reforms it is making at home. 
 
4. (SBU) Minister Karunanayake's letter to USTR Zoellick: 
 
Begin Text: 
 
Hon. Robert B. Zoellick 
United States Representative 
Office of the USTR 
Washington. 
 
 
Dear Ambassador Zoellick 
 
I was indeed delighted to receive your letter of 11th January 
2004, sharing your reflections and perspectives on where we 
stand on the Doha Development Agenda and ideas on how we 
might advance together to achieve our common objective of a 
successful and timely conclusion of the DDA. At a time when a 
majority of the membership of the WTO is resigned to 
pessimism that year 2004 will be a lost year for the WTO in 
the absence of injecting a sense of urgency to the 
negotiations, and demonstration of constructive leadership, 
your letter to the Trade Ministers of the WTO has injected 
much needed momentum into the stalled two year old talks. At 
this critical juncture, sending this positive message to the 
membership of the WTO that the US, as a key architect of the 
post world war trading system and a leader in the pursuit of 
successive trade liberalization, once again prepares to play 
its traditional leadership role in promoting trade 
liberalization is indeed important. 
 
On substantive issues, I share your view that we have laid 
some useful foundation in Cancun and that following December 
senior officials meeting, key negotiating areas have become 
clearer to us. However, we need now to engage positively to 
take crucial decisions, so that the framework for 
negotiations as you envisage could be agreed to by mid year. 
 
I share your perception that we are most likely to succeed in 
our common pursuit if we focus our work on the core market 
access topics viz: agriculture, goods and services as these 
areas offer the most significant gains for the world economy 
in general and to developing countries in particular by 
providing improved market access opportunities. I also agree 
that a high level of ambition in these areas could also 
contribute to stimulate growth and contribute to alleviating 
poverty in developing countries. Ambitious results in 
agriculture are essential for the DDA to proceed and succeed. 
I share your view that without achieving concrete results and 
a breakthrough in agriculture, we cannot progress in overall 
negotiations to lower  trade barriers across the board. We 
need to agree in principle, on a date for elimination of 
export subsidies although a target date could be left until a 
latter stage of negotiations. We also need to agree to cap 
and reduce all forms of trade distorting domestic support, 
and should give due recognition in the framework to be agreed 
to allow a reasonable number of products for certain 
developing countries in particular for those who have low 
bound tariffs and who do not distort markets. On the more 
difficult issue on tariff cutting formula, there appears to 
be genuine apprehension in developing countries on the 
proposed blended formula as the proposed approach could lead 
to an inequitable outcome in that developing countries would 
be undertaking deeper tariff cuts. We therefore, need to work 
on a methodology acceptable to the entire membership. Sri 
Lanka, however, supports the principle of capping on high 
tariffs to create a basis for true market access in all 
markets. 
 
On non-agriculture market access, Sri Lanka has always 
recognized that application of a non-linear tariff cutting 
formula and sectoral approach are essential components to 
achieve the high level of aspiration of the DDA. However, I 
agree with you that ambitious formula for tariff cutting 
should include sufficient flexibility so that the methodology 
will work for all. While we share your view that sectoral 
negotiations remain integral to our overall results of NAMA, 
the solution to dispute over "mandatory" sectoral approach 
vs. "voluntary" on sectoral negotiations, we need to explore 
the middle ground you have proposed defining an approach to 
"critical mass" participation for sectorals. We also need to 
provide flexibility for developing countries specially those 
disadvantaged developing countries who have undertaken 
substantial tariff reduction on autonomous basis. 
 
On services, Sri Lanka always maintained the position that 
liberalization of services in particular infrastructural 
services could contribute to growth and development 
strategies including international competition in 
manufacturing and agricultural sectors. We ourselves have 
already submitted initial offers and intend to submit revised 
offers as negotiations progress. We need to focus more on 
market access components on service negotiations and as you 
have suggested could agree for a near-term goal of meaningful 
offers from a majority of WTO members. 
 
On Singapore issues, which led to a breakdown of negotiations 
in Cancun, we need a pragmatic approach. Hence, I share your 
view that we should first concentrate on most useful and 
least divisive issues. If not, reaching a consensus on these 
issues will remain elusive. As you would recall, Sri Lanka, 
in the pre- Cancun process as well as in Cancun, supported 
un-bundling of the four issues and commencing negotiations on 
trade facilitation and transparency in government 
procurement. However, since many developing countries seem to 
have taken a strong opposition to commencing negotiations on 
all four issues, your suggestion to progress by agreeing to 
negotiations, firstly on trade facilitation and if it is 
possible to reach consensus to support further work on 
transparency in government procurement, perhaps is the most 
pragmatic way to move the process forward and to break the 
current deadlock. Sri Lanka would support this approach and 
will be flexible on investment and competition either to drop 
them all together or to refer them to working groups for 
further reflection. 
 
On the issue concerning special and differential treatment, I 
believe that we have come to a point, where we need to break 
away from conventional approach to S & D treatment in the 
WTO. Automatic application of every provision to all WTO 
membership has become outmoded; aS you have suggested, we 
need to design flexibilities for countries who have specific 
problems related to specific negotiating areas Sri Lanka 
supports this approach. 
 
Let me conclude by applauding you for the constructive 
leadership that you have shown to re-start the DDA. However, 
willingness of others to move forward by signaling 
preparedness to undertake commitments, exercising flexibility 
to find compromised solutions, US-EU partnership and 
constructive leadership by both leading trade nations in 
developed and developing countries are critical to our 
progress. Sri Lanka in Pre-Cancun and at Cancun supported 
your initiatives. We stand ready to support your new 
initiative. I agree with you that the year 2004 should be a 
result oriented year and should not be a lost year. I totally 
endorse your proposal that we agree to meet in September in 
Hong Kong to take critical decisions to conclude the Doha 
round in time. 
 
I have had the pleasure of attending the International 
Conference on Global economic governance and challenges of 
multilateralism held in Dhaka recently. This was a most 
useful opportunity for me to exchange views with my 
counterparts from the South & East Asian region on the 
multilateral trade regime in post-Cancun perspective as well 
as strongly urge for the advancement of the DDA by the WTO 
membership. (Copy of my speech delivered at the Conference is 
attached.) I will also be closely monitoring the progress 
that we make on the DDA and my team - Director General of 
Commerce, and my Ambassador, PR to WTO in Geneva will work 
very closely with your team to extend support wherever 
possible to realize our shared vision to conclude the Doha 
round on time. 
 
Yours sincerely, 
Ravi Karunanayake 
Minister of Commerce & Consumer Affairs 
 
End Text 
 
LUNSTEAD