SRI LANKAN COMMERCE MINISTER RESPONSE TO USTR

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SUBJECT: SRI LANKAN COMMERCE MINISTER RESPONSE TO USTR
LETTER ON DOHA

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1. (SBU) Summary: Sri Lankan Commerce Minister Karunanayake's
response to Ambassador Zoellick's letter on Doha next steps
can be summed up as: "I agree...with certain considerations
for Sri Lanka." With plans underway for a meeting between
USTR Zoellick and Karunanayake in Singapore next month, Post
suggests USTR take the opportunity to push for explicit and
public GSL concurrence with the major initiatives outlined in
USTR's letter, with the hopes of influencing other developing
countries. End Summary


2. (SBU) Post received a written response to USTR Zoellick's
January 11 letter (reftel) on Doha next steps from Commerce
and Consumer Affairs Minister Ravi Karunanayake (entire text
contained in para 4 below). The following are highlights
from Karunanayake's letter:
--US leadership role important;
--Agree we should focus on core market access topics:
agriculture and goods and services;
--Agree with need for a date for elimination of export
subsidies;
--Agree with need for cap and reduction of all forms of trade
distorting domestic support, but should recognize special
needs of developing countries with low bound tariffs and who
do not distort markets (Note: Sri Lanka is a small market
with low bound tariffs and domestic ag support programs.).
--Perception exists that blended formula on tariff cutting
would lead to deeper tariff cuts for developing nations.
Need to find a methodology acceptable to the entire
membership. In principle, Sri Lanka supports capping high
tariffs.
--On non-agricultural market access (NAMA) - agree tariff
cutting should include sufficient flexibitility; sectoral
negotiations integral, should explore USTR proposal for
middle ground approach - with flexibility for developing
countries who have unilaterally undertanken substantial
tariff reductions (Note: as Sri Lanka has done).
--On services, should focus on market access components on
service negotiations; could agree to near-term goal of
meaningful offers from a majority of WTO members.
--Agree with need for pragmatic approach on Singapore Issues.
Sri Lanka supports unbundling, focusing on trade
facilitation and, if possible to reach consensus,
transparency in government procurement;
--Should break away from conventional approach to special and
differential treatment. Sri Lanka supports approach of
providing flexibility for countries who have specific
problems related to specific negotiating areas;
--Applaud US efforts, everyone needs to be flexible and
negotiate. Endorse proposal for meeting in September (sic)
in Hong Kong (Note: post presumes September was a typo and
December would be fine with the GSL).


3. (SBU) Karunanayake did not explicitly address USTR's
proposal for a developing country General Council chair, but
Post is confident such a proposal would be acceptable to the
GSL. With a potential meeting between USTR Zoellick and
Karunanayake scheduled for February 14 in Singapore, Post
believes it would be worth pressing Karunanayake for
explicit, public support of USTR's goals, in an effort to
influence other developing countries to come along. Sri
Lanka remains a strong supporter of the Doha round agenda and
would like to see progress in the WTO to help cement the
reforms it is making at home.


4. (SBU) Minister Karunanayake's letter to USTR Zoellick:

Begin Text:

Hon. Robert B. Zoellick
United States Representative
Office of the USTR
Washington.


Dear Ambassador Zoellick

I was indeed delighted to receive your letter of 11th January
2004, sharing your reflections and perspectives on where we
stand on the Doha Development Agenda and ideas on how we
might advance together to achieve our common objective of a
successful and timely conclusion of the DDA. At a time when a
majority of the membership of the WTO is resigned to
pessimism that year 2004 will be a lost year for the WTO in
the absence of injecting a sense of urgency to the
negotiations, and demonstration of constructive leadership,
your letter to the Trade Ministers of the WTO has injected
much needed momentum into the stalled two year old talks. At
this critical juncture, sending this positive message to the
membership of the WTO that the US, as a key architect of the
post world war trading system and a leader in the pursuit of
successive trade liberalization, once again prepares to play
its traditional leadership role in promoting trade
liberalization is indeed important.

On substantive issues, I share your view that we have laid
some useful foundation in Cancun and that following December
senior officials meeting, key negotiating areas have become
clearer to us. However, we need now to engage positively to
take crucial decisions, so that the framework for
negotiations as you envisage could be agreed to by mid year.

I share your perception that we are most likely to succeed in
our common pursuit if we focus our work on the core market
access topics viz: agriculture, goods and services as these
areas offer the most significant gains for the world economy
in general and to developing countries in particular by
providing improved market access opportunities. I also agree
that a high level of ambition in these areas could also
contribute to stimulate growth and contribute to alleviating
poverty in developing countries. Ambitious results in
agriculture are essential for the DDA to proceed and succeed.
I share your view that without achieving concrete results and
a breakthrough in agriculture, we cannot progress in overall
negotiations to lower trade barriers across the board. We
need to agree in principle, on a date for elimination of
export subsidies although a target date could be left until a
latter stage of negotiations. We also need to agree to cap
and reduce all forms of trade distorting domestic support,
and should give due recognition in the framework to be agreed
to allow a reasonable number of products for certain
developing countries in particular for those who have low
bound tariffs and who do not distort markets. On the more
difficult issue on tariff cutting formula, there appears to
be genuine apprehension in developing countries on the
proposed blended formula as the proposed approach could lead
to an inequitable outcome in that developing countries would
be undertaking deeper tariff cuts. We therefore, need to work
on a methodology acceptable to the entire membership. Sri
Lanka, however, supports the principle of capping on high
tariffs to create a basis for true market access in all
markets.

On non-agriculture market access, Sri Lanka has always
recognized that application of a non-linear tariff cutting
formula and sectoral approach are essential components to
achieve the high level of aspiration of the DDA. However, I
agree with you that ambitious formula for tariff cutting
should include sufficient flexibility so that the methodology
will work for all. While we share your view that sectoral
negotiations remain integral to our overall results of NAMA,
the solution to dispute over "mandatory" sectoral approach
vs. "voluntary" on sectoral negotiations, we need to explore
the middle ground you have proposed defining an approach to
"critical mass" participation for sectorals. We also need to
provide flexibility for developing countries specially those
disadvantaged developing countries who have undertaken
substantial tariff reduction on autonomous basis.

On services, Sri Lanka always maintained the position that
liberalization of services in particular infrastructural
services could contribute to growth and development
strategies including international competition in
manufacturing and agricultural sectors. We ourselves have
already submitted initial offers and intend to submit revised
offers as negotiations progress. We need to focus more on
market access components on service negotiations and as you
have suggested could agree for a near-term goal of meaningful
offers from a majority of WTO members.

On Singapore issues, which led to a breakdown of negotiations
in Cancun, we need a pragmatic approach. Hence, I share your
view that we should first concentrate on most useful and
least divisive issues. If not, reaching a consensus on these
issues will remain elusive. As you would recall, Sri Lanka,
in the pre- Cancun process as well as in Cancun, supported
un-bundling of the four issues and commencing negotiations on
trade facilitation and transparency in government
procurement. However, since many developing countries seem to
have taken a strong opposition to commencing negotiations on
all four issues, your suggestion to progress by agreeing to
negotiations, firstly on trade facilitation and if it is
possible to reach consensus to support further work on
transparency in government procurement, perhaps is the most
pragmatic way to move the process forward and to break the
current deadlock. Sri Lanka would support this approach and
will be flexible on investment and competition either to drop
them all together or to refer them to working groups for
further reflection.

On the issue concerning special and differential treatment, I
believe that we have come to a point, where we need to break
away from conventional approach to S & D treatment in the
WTO. Automatic application of every provision to all WTO
membership has become outmoded; aS you have suggested, we
need to design flexibilities for countries who have specific
problems related to specific negotiating areas Sri Lanka
supports this approach.

Let me conclude by applauding you for the constructive
leadership that you have shown to re-start the DDA. However,
willingness of others to move forward by signaling
preparedness to undertake commitments, exercising flexibility
to find compromised solutions, US-EU partnership and
constructive leadership by both leading trade nations in
developed and developing countries are critical to our
progress. Sri Lanka in Pre-Cancun and at Cancun supported
your initiatives. We stand ready to support your new
initiative. I agree with you that the year 2004 should be a
result oriented year and should not be a lost year. I totally
endorse your proposal that we agree to meet in September in
Hong Kong to take critical decisions to conclude the Doha
round in time.

I have had the pleasure of attending the International
Conference on Global economic governance and challenges of
multilateralism held in Dhaka recently. This was a most
useful opportunity for me to exchange views with my
counterparts from the South & East Asian region on the
multilateral trade regime in post-Cancun perspective as well
as strongly urge for the advancement of the DDA by the WTO
membership. (Copy of my speech delivered at the Conference is
attached.) I will also be closely monitoring the progress
that we make on the DDA and my team - Director General of
Commerce, and my Ambassador, PR to WTO in Geneva will work
very closely with your team to extend support wherever
possible to realize our shared vision to conclude the Doha
round on time.

Yours sincerely,
Ravi Karunanayake
Minister of Commerce & Consumer Affairs

End Text

LUNSTEAD