US embassy cable - 03COLOMBO106

UNCLAS SECTION 01 OF 02 COLOMBO 000106 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS USTR FOR BSTILLMAN 
DOC FOR ASTERN; ABENAISSA 
 
E.O. 12958: N/A 
TAGS: ELAB, ECON, EINV, CE, USTR, ECONOMICS 
SUBJECT:  SRI LANKA'S LABOR RECORD MERITS RETAINING GSP 
 
REF: COLOMBO 53 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY 
 
1. (SBU) Summary: Though the GSL does need to improve its 
handling of certain labor-related issues, it also has some 
of the best labor conditions in the region.  The AFL-CIO 
petition to lift GSP privileges from Sri Lanka focuses on 
the one main area - union access in the Export Processing 
Zones (EPZs) - that needs attention.  The current government 
has begun to address this.  Given the low incidence of 
forced labor and child labor, the strong legal structure and 
relatively good working conditions in the country, Post 
believes the issue of EPZ access does not warrant the 
withdrawal of the GSL's GSP benefits.  Withdrawing GSP now 
would also send conflicting signals to a new government 
enmeshed in a fledgling peace process and major economic 
reforms to which the US has pledged strong support.  End 
summary. 
 
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A strong labor record overall... 
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2. (U) Sri Lanka is a member of the ILO, has ratified seven 
of eight conventions on labor standards and is in the 
process of approving the eighth.  Over 50 statutes cover 
labor laws.   There is a very active, politicized labor 
movement in the country, which exercises its right to 
protest and strike on a regular basis.   Reftel reports on 
the influence organized labor had in changing the new labor 
bills recently passed in Parliament.  The GSL made changes 
in reaction to pressure by labor concerns, despite these 
bills being viewed as a pro-business development. 
 
3. (U) The cost of Sri Lankan labor is higher than in other 
south Asian countries partially because labor standards are 
higher.  One expat country manager of a US garment firm says 
she spends 80% of her time monitoring standards and 
regulations.  Another visiting representative of a US firm 
said the working conditions he saw at a garment factory were 
the best he had seen in the world.  Even local labor 
representatives have said to Laboff that the laws are good, 
they just need to be enforced equally throughout the 
country.  USAID has been working closely with the Ministry 
of Employment and Labor on a Productivity Policy.  USAID 
plans to support workforce training and related reforms as 
the GSL attempts to create 2 million new jobs for the 
unemployed (plus returning refugees).  Jobs will also be 
needed as the military demobilizes once peace is achieved. 
 
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...with some weaknesses 
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4. Post is now investigating the cases named in the AFL- 
CIO's petition to USTR to withdraw Sri Lanka's GSP 
privileges.  The majority of the cases concern anti-union 
tactics at factories inside EPZs, which are managed by the 
Board of Investment (BoI).  Information on the current 
status of these cases will be forwarded in a separate cable. 
 
5. Areas that need improvement include allowing unions to 
form in the EPZs, and a timely move into collective 
bargaining with them.  Post understands that the BoI has 
begun to inform potential foreign investors that union 
activity in the EPZs is no longer restricted.  These words 
need to be supported by actions.  Addressing the backlog of 
labor cases, enforcing the Labor Commissioner's directives, 
conducting a genuine dialogue between government, employers 
and labor, and creating a social safety net are other issues 
for the GSL to resolve. 
 
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Comment 
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6. (SBU) Sri Lanka is justifiably proud of its reputation 
for high labor standards.  In a region with forced labor, 
child labor and sweatshops, there is good reason for this 
pride: there are no sweatshops in Sri Lanka, and the child 
labor that does exist is in the informal sector.  There are 
approximately 500 active unions, some playing a powerful 
role in national debates.  Problems do exist, but Post feels 
they are not of the magnitude that warrant withdrawal of 
GSP. 
 
7. (SBU) Comment continued: The USG has publicly committed 
to stronger cooperation with and support of the Sri Lankan 
government's peace and economic reform initiatives.  Signing 
a Trade and Investment Framework Agreement (TIFA), promoting 
bilateral trade, increasing assistance levels, and 
championing the GSL's peace initiatives are elements of the 
new relationship.  Taking away GSP privileges at this point 
would send a negative and confusing signal.  Post believes 
that this issue would be better handled in bilateral 
discussions under the TIFA framework.  The desire of the GSL 
to enter into a FTA with the US makes this forum a 
particularly effective mechanism to foster change. 
 
Amselem