US embassy cable - 05QUITO385

UNCLAS SECTION 01 OF 02 QUITO 000385 
 
SIPDIS 
 
SENSITIVE 
 
PLEASE PASS TO USTR FOR BUD CLATANOFF, BENNETT HARMON, AND 
VIONDETTE LOPEZ; DEPARTMENT OF LABOR FOR ILAB:JORGE 
PEREZ-LOPEZ AND CARLOS ROMERO, DEPARTMENT FOR DRL/IL, 
WHA/AND, WHA/PPC, DRL/IL AND EB 
 
E.O. 12958: N/A 
TAGS: ELAB, PGOV, EC, FTA, Economy 
SUBJECT: GOE FTA TEAM GETS USG MESSAGE ON LABOR REFORM, 
FINALLY 
 
 
1.  (SBU) Summary:  Trade Minister Ivonne Baki expressed 
newfound GOE commitment to ILO-consistent labor reform to the 
Ambassador after returning from the recent Cartagena FTA 
round.  In subsequent meetings with the GOE's negotiators, we 
were encouraged by the GOE's willingness to explore reform 
possibilities and modalities.  Next steps involve 
coordination between the GOE's FTA negotiating team and the 
Labor Ministry, followed by an invitation from the GOE to the 
ILO.  We appreciate USTR's willingness to contribute to the 
advancement of labor rights by accepting the Labor Minister's 
invitation to visit, but now believe this visit should be 
postponed until the GOE makes further progress.  End Summary. 
 
Baki "Gets It" 
-------------- 
 
2.  (SBU) In a meeting on February 14, the Ambassador asked 
Minister Baki for her impressions from the Cartagena round 
and raised the urgent need for movement on labor reform. 
Baki said that she had received A/USTR Vargo's message on the 
need for labor reforms, delivered in Cartagena, "loud and 
clear."  The GOE understands the need for ILO involvement in 
a tripartite process to diagnose and address deficiencies in 
the law, and is prepared to seek it.  She would work closely 
with Labor Minister Raul Izurieta to see that these steps are 
taken, and welcomed Embassy collaboration with her FTA 
negotiating team to clarify next steps.  Baki said President 
Gutierrez was coming under "great pressure" from organized 
labor to add a question on the FTA to his referendum 
proposal, which she suggested the Ambassador to weigh in 
against.  The Ambassador urged Baki to move ahead on labor 
reform and continue to rally allies in the Cabinet to oppose 
the referendum idea. 
 
Espinosa Mulling Modalities 
--------------------------- 
 
3.  (SBU) EconCouns, PolChief and USAIDOffs met on February 
15 with Christian Espinosa, Ecuador's FTA negotiator, and 
members of his team to discuss opportunities for labor 
reform.  EconCouns conveyed the importance of achieving 
progress on labor to the FTA's prospects in the U.S Congress; 
 a necessary first step would be for the GOE to formally 
invite the ILO to become involved in a tripartite process to 
discuss reforms.  The ILO could help by diagnosing 
deficiencies in the current labor code.  A tripartite 
dialogue would explore what is politically feasible.  Any 
resulting reform proposals must be ILO-consistent.  The USG 
would support a GOE request for ILO assistance. 
 
4.  (SBU) Espinosa advisor Mauricio Pinto raised the need for 
labor reforms to make the Ecuadorian labor market more 
flexible, "to make the FTA work for Ecuador."  Otherwise, 
Ecuador would lose investment to its neighbors.  EconCouns 
agreed, saying the FTA provides an opportunity for Ecuador to 
address difficult labor challenges by better protecting 
fundamental rights and simultaneously exploring ways to make 
Ecuador more competitive, through dialogue.  Espinosa said to 
get labor and management to the table would require a neutral 
facilitator.  The ILO would not be perceived as such.  He 
mentioned several civil society groups and think tanks not 
associated with support for an FTA as possibilities. 
 
5.  (SBU) Asked whether a visit by USTR at this time could 
help spur reforms, Espinosa said he thought not.  Any visit 
by USTR to press our labor agenda would link the two and 
unhelpfully boost the existing impression of outside 
pressure.  To prosper, dialogue on labor should ideally be 
de-linked from the FTA negotiations. 
 
6.  (SBU) PolChief warned that the perception in Washington 
is that political will to address labor reform here is low. 
The GOE would need to consider its strategy to include 
Congress in the reform debate.  It is essential that any 
proposed reforms resulting from tripartite dialogue be 
ILO-consistent, address freedom of association deficiencies, 
and be politically viable.  On the US role, the link between 
labor reform and the FTA had already been made on the front 
pages of national newspapers--Espinosa had himself publicly 
acknowledged USG interest in the issue.  Pinto countered that 
a caution was necessary or the tripartite dialogue process 
would be less likely to flourish. 
 
Embassy Comment and Recommendations 
----------------------------------- 
 
7.  (SBU) We are encouraged by Baki's new religion on labor, 
and hopeful that it will lead to progress in the medium term. 
 In light of these new developments, we believe we should 
give the GOE more time to coordinate (first between the Trade 
and Labor ministries) and show its good faith by inviting the 
ILO to help.  ILO involvement could help change prospects for 
reform, and at the least will give the GOE a menu of 
deficiencies to work on.  The Embassy therefore recommends 
that the upcoming visit by the A/USTR for Labor be postponed 
until the GOE advances to a point where outside intervention 
can be supportive of a process the Ecuadorians lead. 
Kenney