Cablegate: Sri Lanka: First Joint Council Meeting Under

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 COLOMBO 002196

SIPDIS

STATE PASS USTR FOR DEPUTY USTR AMBASSADOR HUNTSMAN

E.O. 12958: N/A
TAGS: ETRD ECON EINV CE USTR ECONOMICS
SUBJECT: SRI LANKA: FIRST JOINT COUNCIL MEETING UNDER
NEW TIFA

1. Summary: In the first Joint Council meeting under
the US - Sri Lanka TIFA, the GSL identified its goal as
an eventual Free Trade Agreement, and, in the interim,
stronger ties in the bilateral trade relationship and
in the WTO. The US representatives focused on the USG
commitment to closer cooperation on the global trade
agenda and in the bilateral relationship, noting that
the peace process will bring confidence, which will
lead to new opportunities for the US private sector.
End Summary.

2. The first Trade and Investment Council meeting
under the recently-signed Trade and Investment
Framework Agreement was held in Colombo on November 20,
led by Deputy USTR Ambassador Jon Huntsman and Sri
Lankan Minister of Commerce and Consumer Affairs,
Minister Ravi Karunanayake. Representatives on the US
side included Ambassador Wills, USTR Senior Director
Elena Bryan, and Embassy Economic Officers. The Sri
Lankan delegation of over 20 members included Minister
of Enterprise Development and Industrial Policy GL
Peiris, Board of Investment (BoI) Chairman Arjunna
Mahendran, Ambassador-Designate to the US Davinda
Subasinghe, the GSL representative to the WTO, KY
Weerasinghe, and many members of the Department of
Commerce.

3. Minister Karunanayake stated at the start that the
ultimate goal of the GSL was a Free Trade Agreement
with the US, as soon as possible. He outlined some
steps the GSL was taking which would make it a more
attractive FTA partner, including good governance,
pursuit of peace, closer relations with the US and
privatization. Minister Peiris emphasized the
important role of trade and economic freedom in the
current GSL peace efforts, and said Sri Lanka needs a
stronger trade relationship with the US. Ambassador
Huntsman outlined the US goals, including the desire to
strengthen ties, use the TIFA as a building block to
further shared commitments, and establish broad
cooperation on the global and bilateral trade agenda.
Ambassador Huntsman also explained his desire to bring
back a positive message to the US private sector about
new developments and opportunities in Sri Lanka.

Investment Opportunities
------------------------
4. In the overview, BoI Chairman Mahendran said Sri
Lanka is taking advantage of the high profile recently
created by the peace process and the Prime Minister's
investment promotion trip to New York. He said Sri
Lanka is fully compliant with labor best practices, and
ILO conventions. He thought new opportunities for US
investment would be found in infrastructure projects
(especially ports and airports) to make Sri Lanka a
regional logistics hub, tourism, mineral extraction,
information and communications technology, apparel and
textiles, and agriculture. When asked about
restrictions on foreign purchase of land and import of
seed varieties, Minister Karunanayake promised an
answer within two weeks.

5. Ambassador Huntsman urged the GSL to act soon in
attracting US investors, and advised that a
predictable, stable, and transparent environment would
be critical. Once the GSL had targeted specific
infrastructure needs, focused trade missions could come
from the US. While describing the President's trade
agenda, Ambassador Huntsman emphasized that the Doha
Agenda was a high priority.

IPR
---
6. Dr. Karunanratne from the GSL IPR Office briefed the
Council on new IPR legislation that is expected to be
approved by Parliament by early next year. He said it
goes beyond TRIPS, and incorporates comments submitted
by interested US parties. Karunaratne said the GSL was
progressing aggressively on enforcement problems by
planning to train lawyers, judges, and enforcement
personnel, by designating the Commercial High Court for
cases, and by conducting public outreach. He said the
GSL needed technical assistance in this area. Both
Ambassador Wills and Ambassador Huntsman promised to
examine areas for possible US assistance.
WTO
---
7. KJ Weerasinghe said that the solution to outstanding
issues is in implementation, and that Sri Lanka wants
to be constructive in accomplishing the Doha agenda.
On agriculture, he said, Sri Lanka agrees to
liberalization, but wants to protect poor, rural
farmers. On tariff and subsidy reductions, the GSL
does not have these supports, but wants flexibility to
accommodate rural farmers and to mitigate the price
increase that net food importers would experience as
the new WTO proposals are adopted. Sri Lanka does not
have any instrument, other than tariff levels, to
protect against import surges. He relayed that the EU
had asked for the GSL's support on this. He also said
the US proposal does not address special and
differentiated (S and D) treatment for LDCs.

8. Ambassador Huntsman responded that it is important
to meet the March deadlines, and the US would work with
the GSL on these issues. This was the only chance to
get agriculture on an international agenda. He
continued that the US does not want a two-track system
with S and D countries, rather the same goals for all,
with the S and D treatment applying to the length of
the transition periods. If there are two tracks, he
said, one may be seen as lower quality.

9. Services: Weerasinghe said the current government
wants Sri Lanka to become a services hub and plans to
eliminate measures that would create market
impediments. It had already liberalized many sectors,
and is currently looking at a strategy to open the
tertiary education and wholesale/retail sectors and
review the GATS commitment. Both Minister Karunanayake
and Ambassador-designate Subasinghe noted that
education was a sensitive area. Under services,
Weerasinghe said the GSL wants also to look at the
movement of persons to support and provide services
outside Sri Lanka. He noted that Sri Lanka's list of
sectors to be liberalized, which would include air
transport, call/service centers and exchange controls
in the financial sector, would be ready by December.

10. Market access: Weerasinghe said the GSL was waiting
to see what proposal would be made for reduction
commitments, and that Sri Lanka would have the same
problems as with agriculture if the Swiss formula is
applied. He said there was a lack of clarity about the
removal or elimination of tariffs. Ambassador Huntsman
replied that the US plans to take a comprehensive
approach and will submit its package in early December.

11. Government procurement: Weerasinghe noted a number
of issues of concern: that it covers government but not
market aspects, the application to foreign procurement,
threshold adjustments for different size countries,
flexibility allowed for procurement objectives, and
whether a WTO decision could override a domestic
decision. He said that the GSL would comment on the US
proposal the following week. Ambassador Huntsman
conveyed his appreciation for Sri Lanka's commitment to
the process, and hoped that by the time of the Cancun
meeting differences would be resolved. He continued
that the US would like to see Sri Lanka be a leader in
this area.

12. Small Economies and Geographic Indicators:
Weerasinghe said that Sri Lanka should be included in
the group that would address problems and recommend
solutions, and that population should not be the
judgement criteria for membership. Ambassador Huntsman
said that would be a practical approach, and that the
different transition periods would address the
different needs, rather than a two-tiered system. On
Geographic Indicators, Weerasinghe said the GSL wanted
protection for items in addition to wine and spirits,
e.g., spices and tea. Ambassador Huntsman cautioned
the GSL, saying it must be careful to consider what is
already protected under TRIPS (and the US Patent
Office), and make the most of that protection. Since
the EU had tabled thousands of items for protection,
proliferation of geographic indicators could become a
nightmare for WTO.

13. SPS and TBT: On SPS and TBT Agreements, Weerasinghe
said Sri Lanka had difficulties implementing the
provisions because it lacks administrative capacity,
personnel and equipment. He requested Technical
Assistance to help Sri Lanka fulfill its obligations,
and later submitted a list outlining the GSL requests.
Ambassador Huntsman noted that the US intends to make
use of a variety of resources to assist, and that the
US team wants to hear how effective the WTO and USG
assistance is. There are many sources of help, he
said, including aid, universities, businesses, and
trade associations. He wanted to hear what worked and
what the Sri Lanka priorities are.

Conclusion
----------
14. Wrapping up, Minister Karunanayake said Sri Lanka
wants to receive the benefits of LDC status, and wants
an international partner in sectors such as phosphate
mining, tea and port building. Sri Lanka, he said,
must show its commitment to carry out reforms, and work
toward a FTA with the US. Ambassador Huntsman said
though that could be the ultimate goal, he warned
against getting ahead of the TIFA process and building
unrealistic expectations. An incremental pace of
engaging the US, including developing the interest and
trust of the private sector, generating political
support and reducing the trade deficit (currently 10:1
in Sri Lanka's favor) should be the GSL's medium term
goals. Ambassador Huntsman said that the next Council
meeting could take place in WDC in Spring 2003. He
committed to accompanying the Sri Lanka delegation to
Chambers of Commerce, and to help deepen and broaden
cooperation.

Amselem

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