NEPAL REQUESTS USG LENIENCY FOR WTO ACCESSION

UNCLAS SECTION 01 OF 02 KATHMANDU 000702

SIPDIS

SENSITIVE

STATE FOR SA/INS AND INL/AAE
STATE PLEASE ALSO PASS USTR - LEVINE
GENEVA FOR USTR - GREENIDGE

E.O. 12958: N/A
TAGS: ETRD PREL SNAR NP
SUBJECT: NEPAL REQUESTS USG LENIENCY FOR WTO ACCESSION

REF: A. (A) STATE 91517


B. (B) 4/15 LAUTERBACH-WELBORNE E-MAIL

C. (C) 02 KATHMANDU 2263

D. (D) 00 GENEVA 3607

E. (E) 00 KATHMANDU 1643

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SUMMARY
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1. (SBU) Summary and Action Request: In an April 16 meeting
with the Ambassador, Commerce Secretary Lawa Prasad Devkota
requested that the USG show greater flexibility in accepting
Nepal's revised WTO offers. As a long-time development
partner, it is "kind of incumbent" upon the US to assist
Nepal in its efforts to accede to WTO, Devkota said. The
Secretary also reiterated long-standing requests for the USG

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to provide Nepal with technical assistance in customs
valuation. Nepal expects to provide the WTO Secretariat with
a consolidated response to all Working Party members'
reactions to their revised offers by the end of April. In
separate meetings with the Ambassador on April 15 and with
econoff on April 16, two visiting officials from the WTO
Secretariat similarly urged that the USG moderate its

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reaction to Nepal's revised offers. Action Request: INL has
apparently decided not to fund our FY 03 proposal to provide
technical assistance in customs valuation to Nepal. The
Embassy urges INL to reconsider this decision. End summary.

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COMMERCE ASKS FOR GREATER LEEWAY
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2. (SBU) In an April 16 meeting with the Ambassador,
Commerce Secretary Lawa Prasad Devkota asked that the USG
demonstrate greater flexibility in its reactions to Nepal's
revised WTO offers (Reftel). The Government of Nepal (GON)
is committed to meeting all requirements to accede, Devkota
stressed. Citing the history of cordial bilateral
cooperation between the two governments, Devkota said he
regards it as "kind of incumbent" upon all of Nepal's
development partners to support the process. He said he
found it surprising that two of Nepal's most munificent
bilateral donors--the U.S. and Japan--were the two countries
with the most stringent reactions to Nepal's revised offers.
Devkota also raised the GON's outstanding request for
technical assistance on customs valuation from the USG. The
EU has already agreed to provide assistance on sanitary and
phytosanitary measures, while Australia has agreed in
principle to assist in complying with TRIPS regulations.


3. (SBU) Joint Secretary Prachanda Man Shrestha raised USG
requests on binding tariffs and financial services market
access as areas of particular concern. The GON will be
unable to accommodate the USG request on binding tariffs
because applied rates have not stabilized, he said. Instead,
the GON has proposed binding tariffs at an average of between
30 and 45 percent. The GON will be unable to compromise much
more than that, he indicated. With respect to financial
services, Shrestha noted that the GON has offered to open up
60 subsectors--more than any other LDC has offered. The GON
has already agreed to assess zero percent duty on information
technology, Shrestha observed, but needs a certain amount of
"transition time" to absorb this change.


4. (SBU) The Ambassador responded that the USG would like to
assist Nepal to accede to the WTO. With no Parliament, Nepal
is an unusual situation, he observed, and there is concern in
some quarters about whether ordinances passed during this
interim period will survive as binding legislation once
Parliament resumes. He noted that officials from the WTO
Secretariat now in Kathmandu seem fairly optimistic about

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Nepal's prospects. That said, the GON will have to work
quickly to ensure that its responses to each of the Working
Party members' reactions are ready by the end of April.
Joint Secretary Shrestha said that the GON will provide the
WTO Secretariat with a consolidated response to all Working
Party members' reactions before the next Working Party
meeting at the end of April.

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WTO Secretariat in Nepal
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5. (SBU) The Ambassador met with Hector Millan and Arif
Hussain, Director of the Accessions Division, of the WTO
Secretariat on April 15. During their brief exchange, the

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Secretariat officers reiterated the GON's complaints and

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called for the USG to "step back" from its latest negotiating
position. On April 16, Millan presed econoff again,
criticizing the demands of the USG. Specifically, he saw the
demand to bind tariffs on industrial goods as out of step
with the regional tariff structure and beyond the standards
of other developing countries already members of the WTO.
Millan also dismissed USG requests for preferences, including
chemical harmonization and information technology items. In
terms of trade in services, Millan commented that the USG
demands were "out of step." (Comment: Despite Millan's
vehement opposition to the USG position, he was ignorant of
Nepal's blacklist of industries, regulatory barriers to
foreign investment (let alone the barriers in practice),and
of the negotiation stance taken by the GON on binding rates.
End comment.)

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COMMENT
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6. (SBU) Our exchanges in Kathmandu indicate that the GON
will likely stress its status as an LDC to justify requests
for more lenient treatment. Based on the comments made by
the two officials visiting from Geneva, it also seems likely
that the Secretariat is encouraging this position. The
Embassy supports the GON's request for technical assistance
in customs valuation, which, apparently, the USG committed to
provide at the first Working Party meeting in Geneva in 2000
(Ref D). So far, however, we have been unable to identify a
source of funding for such assistance. We understand that
our request for INL funding to support the customs valuation
training appears unlikely to be granted (Refs B and C). We
urge INL to reconsider its apparent decision not to fund
customs valuation assistance for Nepal.
MALINOWSKI