CONTENTIOUS LABOR DISPUTE RESOLVED IN EXPORT

UNCLAS SECTION 01 OF 02 COLOMBO 001883

SIPDIS

DEPT PASS TO USTR; COMMERCE FOR ABENAISSA; LABOR FOR
ILAB:SHALEY

E.O. 12958: N/A
TAGS: ELAB ECON EAID EINV KTEX CE ECONOMICS
SUBJECT: CONTENTIOUS LABOR DISPUTE RESOLVED IN EXPORT
PROCESSING ZONE

REF: COLOMBO 1702


1. Summary: A controversial labor dispute at an export
processing zone (EPZ) garment factory producing for
international labels, which drew international attention,
was resolved recently. The US-based Free Labor Association
(FLA) and a local independent public policy institution
intervened to help the company and the trade union reach
agreement accepting the union. Post expects this
experience will help all local parties concerned to
understand the importance of accepting the workers' right
of freedom of association, organizing and collective
bargaining, especially within export processing zones. End
Summary.

Failed referendum
--------------

2. The dispute arose when a local trade union, the Free
Trade Zone Workers Union (FTZWU),sought to form a trade
union in Jaqalanka Ltd., a garment factory located in Sri
Lanka's largest export processing zone (EPZ). A subsequent
vote, in July 2003, resulted in just 17 out of a 400 strong
workforce casting their vote, with 16 voting for the FTZWU
and one vote that was flawed. FTZWU lost the election, as
they failed to muster the required 40% representation.
FTZWU alleged that the company manipulated the election and
complained of harassment and intimidation of its members
and workers in the count down to the election, which
prevented many of them from voting. Later, the company
offered to have a second referendum, which the union
rejected.

International campaign taken to ILO and Cancun
-------------- -

3. Instead, the union sought recognition without a
referendum and launched an international campaign. It made
representations to the ILO and also, through the
International Textile, Garment and Leather Workers
Federation (ITGWF),campaigned at the Cancun WTO
Ministerial. The President of the FTZWU also visited
Washington in the summer, lobbying various USG agencies and
NGOs. Thereafter, Nike and Vanity Fair, two companies
which are supplied by Jaqalanka, requested the Fair Labor
Association (FLA),a US-based organization promoting
international labor standards and conditions in apparel
factories, to investigate the matter. The FLA sought the
services of the Center for Policy Alternatives (CPA),a
well-known independent public policy organization in
Colombo, to mediate. Sri Lanka's embassies in Washington
and Brussels engaged as the case began to have an effect on
trade relations. The GSL's Washington PR firm, Sandler,
Travis and Rosenberg, was also active in prompting the GSL
to take positive action. On October 16, with the help of
the CPA, the FTZWU and Jaqalanka reached an agreement to
resolve the dispute.

Recognition of the union
--------------

4. The Company has recognized the FTZWU as a union
operating within the company. In return, the FTZWU has
agreed to cease its international campaign and suspend
complaints lodged with the ILO. Both parties have agreed
to a process of reconciliation and to work towards creating
an environment conducive to good labor practices. The
agreement also provides for training and capacity building
for both parties, and reformulation of Jaqalanka's internal
grievance procedures. They have agreed to use the dispute
resolution mechanism provided under the Industrial Dispute
Act. Progress will be reviewed in six months.


5. With the recognition of the FTZWU, Jaqalanka joins a
small band of employers that have allowed unions in their
factories in EPZs. Many other companies prefer the more
common non-union worker councils. Some of these companies
provide world-class facilities to workers and have reported
good working relations with worker councils. The Board of
Investment (BOI) in 2002 issued guidelines instructing BOI
companies to recognize trade unions.

Comment
--------------

6. Resolution of this incident in a constructive manner is
welcome, though overdue (see reftel). Sri Lanka can boast
of some of the highest standards of labor conditions in the
world, has ratified all the relevant ILO conventions and
supplies the top tier companies in the US and EU. The GSL
did not act in time to minimize the damage done to the
country's reputation by one company's actions over the past
three months. The dispute highlighted an ongoing problem
area - union access (and application of the law) to
factories in the EPZs. Officials in the BoI, which has
played an outsized role in labor issues in the EPZs, were
defensive as opposed to being proactive in seeking
resolution. Pressure from outside, and from higher levels
of the GSL finally forced a resolution with the involvement
of critical stakeholders.


7. It is not yet clear if the GSL understands the broader
systemic issue underlying this specific case - the need for
the Labor Ministry to actively protect worker rights
throughout the country. It appears they fully understand
the international implications of not resolving these
issues in a timely fashion, given the high-level
involvement of the embassies in Washington and Brussels and
Sandler-Travis. The positive resolution may offer some
encouragement to the GSL to ensure application of workers'
rights throughout the island. End comment.
ENTWISTLE