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December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

Sri Lanka: SUPPORT FOR TRADE MISSIONS TO SRI LANKA

     
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Reference ID: 06COLOMBO357
Created: 2006-03-07 08:28
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED
Origin: Embassy Colombo

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UNCLAS SECTION 01 OF 02 COLOMBO 000357
 
SIPDIS
 
SIPDIS
 
E.O 12958: N/A
TAGS: BEXP ETRD KTEX ECON CE
SUBJECT:  SUPPORT FOR TRADE MISSIONS TO SRI LANKA
 
REF: USDOC 00272
 
1.  Summary:  Post, along with the American Chamber of
Commerce Sri Lanka (AmCham Sri Lanka) would welcome a trade
mission described in reftel from the American Chamber of
Commerce of India (AmCham India).  Post will work closely
with AmCham Sri Lanka on this project.  Regarding a
possible separate trade mission of US textile and yarn
manufacturers described in reftel, Post and the Sri Lankan
garment industry are also willing to host and meet with
such a mission.  Sri Lanka imports over USD 1.5 billion in
textiles annually, and there is an openness and desire on
the part of Sri Lankan garment manufacturers to purchase US
products.  But several significant impediments to increased
US textile and yarn sales exist and need surmounting to
sell a large quantity of such goods to Sri Lanka.  End
Summary.
 
AMCHAM INDIA TRADE MISSION TO SRI LANKA WELCOMED
 
2.  With the ever-increasing flow of trade between India
and Sri Lanka ($2.4 billion in 2006), as well as the
presence of the Indo-Lanka Free Trade Agreement, which has
prompted a significant increase in bilateral trade,
building on an already strong relationship between AmCham
India and AmCham Sri Lanka makes sense.  Amcham Sri Lanka
has commissioned a study to analyze which US business
sectors could most directly benefit from the Indo-Lanka
Free Trade Agreement and several US companies in Sri Lanka
are currently importing US components, adding value, and
then re-exporting to India, benefiting from duty
concessions into the enormous Indian market.
 
3.  EconOff approached Gordon Glick, Executive Director of
AmCham Sri Lanka, about a visit by AmCham India
representatives.  Glick responded that he would welcome
such a visit and would work with AmCham India to facilitate
such a trip.  He had already responded to an inquiry by the
Sri Lanka Ministry of Foreign Affairs noting that
anticipated dates for the visit are from October 25 to
November 3, 2006.  Post will also work with AmCham to
ensure that this visit will be a success.  (Comment:  Glick
has served as Executive Director of AmCham Sri Lanka since
June 2005.  During the time working with him, EconOffs have
found Glick to be highly organized and mission-oriented,
with the ability to accomplish what he sets out to do.  End
Comment.)
 
US TEXTILE MANUFACTURER TRADE MISSION TO SRI LANKA
 
4.  Sri Lanka currently imports approximately USD 1.5
billion per year in textiles for its globally competitive
garment sector.  Imports of textiles will likely grow to
over USD 2 billion in the next four years.  Post sees
potential US exports resulting from a US textile and yarn
manufacturer trade mission to Sri Lanka, and would be
pleased to work with the Department of Commerce to promote
and facilitate such a trip.  Such a visit would enable US
manufacturers to become more familiar with the level of
sophistication of their potential Sri Lankan clients and to
more fully understand the issues that they would need to
resolve with Sri Lanka garment manufacturers before
realizing increased sales to Sri Lanka.
 
5.  To ensure that Sri Lankan garment manufacturers would
be sufficiently interested in such a trade mission, EconOff
met with six leading members of the Joint Apparel
Association Forum (JAAF), a garment manufacturing interest
group, and separately with a representative of MAS
Holdings, the leading garment producer in Sri Lanka and
manufacturer of well-known high-quality brands such as
Nike, Gap and Victoria?s Secret.  Unequivocal support for
the trade mission was given at both meetings, with the
caution that some difficult issues would need to be
surmounted:  price, flexibility of manufacturers in meeting
the scheduling needs of the garment makers, and contract
terms.
 
6.  PRICE AND LACK OF TRADE CONCESSIONS FOR US CONTENT:
JAAF members said that while many US textiles and yarns may
not be price competitive, there were some possibilities,
especially in US gray cloth, standard cloth, some yarns,
and high-tech textiles and yarns.  In addition to the
standard issue of higher US costs, JAAF members emphasized
that the lack of US trade concessions for US content in Sri
 
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Lankan garments damages US competitiveness in the market.
They contrasted this with some other major buying nations
where tariffs for Sri Lankan garments were reduced in
proportion to the garment?s content sourced from the buying
nation.  (Comment:  Although garment industry
representatives do not anticipate that this trade mission
would directly lead to establishment of such trade
concessions, they recognize that the textile and yarn
manufacturers could become their strongest US advocates for
such concessions.  End Comment.)
 
7.  SCHEDULING:  Some textile and yarn buyers expressed
concern about the time required for shipping goods from the
US to Sri Lanka in comparison to some of their regional
sources.  Several said that the timelines could be
workable, but may require greater flexibility or customer
service on the part of US manufacturers.  One
representative who has tried to source some products from
the US described situations where US manufacturers were
perceived to dictate delivery times, and showed no interest
in seeing whether their pro forma timelines could be
slightly reduced.  (Comment:  In light of the extra time
required to ship products from the US instead of China or
other nearer producers, a demonstrated interest on the part
of US manufacturers to work with their potential Sri Lankan
buyers would be highly encouraged.  End Comment.)
 
8.  CONTRACT TERMS AND TREATMENT AS VALUED CUSTOMERS:  In
2004, a delegation of Sri Lankan garment manufacturers
traveled to Georgia and South Carolina to meet with US
textile manufacturers and yarn spinners.  At both meetings
conducted in preparation of this cable, garment
manufacturers lamented the visit?s disappointing results.
One manufacturer returning from the visit resolved to test
the functionality of sourcing from the US.  He requested
that a container of goods be shipped to Sri Lanka.  He was
surprised to receive the US company?s response, including
stringent shipping terms, in light of the garment
manufacturer?s global reputation.  The terms were far
stricter than those imposed by other suppliers.   The Sri
Lankan manufacturer requested that the shipping terms be
renegotiated, but the US vendor refused.  The sale never
occurred.  (Comment:  Unfortunately, this US company missed
an opportunity.  Sri Lankan manufacturers partner with
their garment buyers at almost all stages of the garment
production process ? including the design level for some
brands.  They know that their US garment buyers expect a
high level of service, flexibility and respect, and Sri
Lankan companies will expect the same from their suppliers.
End Comment.)
 
9.  ADDITIONAL WAYS OF GRABBING THE SRI LANKA MARKET:
Industry members also articulated several methodologies for
US investment/sales to Sri Lanka beyond shipping from a US
mill.  These included the warehousing of basic textiles in
Sri Lanka to drastically reduce shipping times, as well as
setting up textile manufacturing operations on this island.
 
10.  COMMENT:  Both AmCham India and the US textile and
yarn trade mission to Sri Lanka could provide a substantial
increase in exports by US companies to Sri Lanka.  We
anticipate that the AmCham India delegation will have
already been sufficiently exposed to the capabilities of
garment manufacturers in Sri Lanka.  We urge that US
manufacturers of textiles and yarn be recruited for a
mission to Sri Lanka if they truly want to remain globally
competitive and source to an increasingly dominant garment
producing nation.
 
11.  Comment, cont:  We note that the Office of Textile and
Apparel in the US Import Administration believes that such
a trade mission would be unlikely to attract interested
participants, given the perception of a poor cost-benefit
equation.  As described above, well-funded, growing, high-
end manufacturers in Sri Lanka have already visited the US
and observed minimal interest on the part of US
manufacturers in supplying a portion of Sri Lanka?s $1.5
billion textile demand.  Until US manufacturers display
some interest (perhaps traveling to potential customers in
Sri Lanka would be a start) the Sri Lanka garment industry
will continue to look elsewhere for its textile and yarn
needs.
 
LUNSTEAD

 
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