GSL READY TO NEGOTIATE FTA BASED ON SINGAPORE AND

C O N F I D E N T I A L SECTION 01 OF 02 COLOMBO 001689

SIPDIS

DEPT PLEASE PASS TO E, EB, SA/INS, SA/RA, DRL
DEPT ALSO PASS TO USAID FOR BERNADETTE BUNDY - ANE/SA
DEPT ALSO PASS USTR FOR AUSTR WILLS
TREASURY FOR JERRY ADKINS
DOL FOR SUDHA HALEY
NSC FOR ELIZABETH MILLARD
COMMERCE FOR ARIADNE BENAISSA

E.O. 12958: DECL: ONE YEAR AFTER CONCLUSION OF US-SL FTA
TAGS: ETRD EAID ECON EFIN KIPR ELAB PREL CE ECONOMICS
SUBJECT: GSL READY TO NEGOTIATE FTA BASED ON SINGAPORE AND
CHILE MODELS

Ref: Colombo 1673


1. (U) Classified by DCM James F. Entwistle for reasons
1.5 B and D.


2. (C) Summary: In a meeting with GSL Advisor Jim
Robertson, Econoffs learned that the GSL intends to provide
USTR a draft negotiating document today (Monday, September
29). Reportedly, the GSL is prepared to meet most of the
criteria outlined in the Singapore and Chile FTAs, will
focus much of its discussion on rule of origin issues and
would be able to accept faster phase-out timelines
(probably 10 years maximum) than either Chile or Singapore.
The GSL acknowledges USG concerns about the GSL's ability
to implement the agreement, and sees that as the major
hurdle it has to overcome. As Post outlined in reftel, a
US commitment to negotiate, followed by a six month review
period, would give the GSL time to prove its mettle on this
issue. End Summary.


3. (C) In separate channels we have reported earlier
information that a GSL-sponsored review of the Chile and
Singapore FTAs would indicate GSL concerns in four areas:
investment, national treatment, financial services and
government procurement. During a September 29 meeting with
Jim Robertson, a World Bank-funded advisor to the PM and
the Ministry of Policy Development and Implementation,
however, we learned that the GSL believes they can adopt
language that is very similar to the Chile and Singapore
FTAs. Their major questions involve rule of origin and how
apparel will be treated. According to Robertson, during
meetings with USTR Zoellick and AUSTR Wills on Monday,
September 29, Sri Lankan Ambassador to the US Devinda
Subasinghe intends to present a draft negotiating document.
This has been prepared by Robertson's staff, through a
line-by-line analysis of the Singapore and Chile FTAs, and
vetted with Sri Lanka's consulting firm Sandler, Travis and
Rosenberg.


4. (C) According to Robertson, the GSL is able to meet the
stringent policy requirements of the Chile or Singapore
FTAs. The PM is committed to liberal trade in goods and
services and has a history of support of foreign
investment. Robertson said agreement on trade in goods
could be implemented quickly and trade in services would
take a little longer. Exchange controls have long been
removed (aside from some that remain in the capital
account). The GSL could also accept faster timelines for
tariff phase-out than either Singapore or Chile with the
longest phase-outs running at 10 years - mostly on basic
agricultural commodities.


5. (C) On the rule of origin question, Robertson said the
GSL has heard that, in the US-Morocco FTA negotiations, the
US is pushing for standard rule of origin requirements to
apply across the board. The GSL, Robertson believes, could
support such a standard. On the garment-front, Sandler,
Travis and Rosenberg have reportedly told the GSL they will
face a proposed yarn-forward rule of origin clause and
should try to come up with compromises within that
framework to address specific GSL concerns for the garment
industry.


6. (C) Robertson then commented that the GSL's main worry
is whether the US believes Sri Lanka can implement the
provisions of an agreement (note: a concern post has raised
in reftel). He cited the black eye the GSL received
internationally over the labor dispute at the garment firm
Jaqalanka, and our repeated comments regarding
implementation of IPR enforcement mechanisms. (We are
reporting on Labor and IPR as they relate to a FTA septel.)
To guide implementation plans, Robertson said a review of
existing laws and regulations would identify obstacles,
which would need to be removed through legislation or new
regulations.


7. (C) Comment: This account is more positive than we had
previously heard and presents a fairly confident attitude
on the part of the GSL that they can meet the criteria in
the Singapore and Chile FTAs. Robertson mentioned that the
GSL views its best chance for a FTA is to offer the
prospect of quick negotiations that do not take a lot of
USTR's negotiating time. We were interested to learn of
Subasinghe's meeting with Zoellick and Wills and his
readiness to hand over a draft negotiating document. The
GSL is aware of our concerns over implementation but,
through the mechanism outlined in reftel, including
concrete steps on IPR, labor and government procurement,
the GSL would have an opportunity to show over a six month
period that it could deliver. End Comment.

LUNSTEAD