CROATIA SEEKS "BREATHING SPACE" IN

UNCLAS ZAGREB 000350 SIPDIS STATE PASS USTR E.O. 12958: N/A TAGS: ETRD HR WTO SUBJECT: CROATIA SEEKS "BREATHING SPACE" IN NON-AGRICULTURAL MARKET ACCESS NEGOTIATIONS AS NEWLY ACCEDING MEMBER OF WTO REF: A. 2002 STATE 243208 ¶B. 2003 STATE 19378 ¶1. IN RESPONSE TO OUR DEMARCHE LAST FALL (REF A),THE MINISTRY OF ECONOMY SHARED WITH US THE STATEMENT THAT IT SUBMITTED TO THE NEGOTIATING GROUP ON MARKET ACCESS (NOVEMBER UNCLASSIFIED PAGE 02 ZAGREB 00350 141058Z 4-6, 2002),IN WHICH THE GOC ARGUED THAT CROATIA, ALONG WITH OTHER COUNTRIES WHICH HAD NEWLY ACCEDED TO THE WTO, NEEDED SOME "BREATHING ROOM" BEFORE IT COULD BE EXPECTED TO TAKE ON ANY ADDITIONAL REDUCTIONS IN TARIFFS. ¶2. REF B FOLLOW-UP WAS FORWARDED TO OLGICA SPEVEC, ASSISTANT MINISTER FOR TRADE AT THE MINISTRY OF ECONOMY ON JANUARY 27TH, BUT SHE WAS UNABLE TO MEET WITH US UNTIL FEBRUARY 11. SPEVEC AND HER ASSISTANT FOR INTERNATIONAL TRADE, VESNA FOCHT, REITERATED THE POSITION LAID OUT IN CROATIA'S NOVEMBER STATEMENT. SPEVEC REPORTED THAT IN THE PREVIOUS WEEK'S MEETINGS IN GENEVA, CROATIA HAD SPOKEN ON BEHALF OF A GROUP OF "NEWLY-ACCEDED" COUNTRIES, INCLUDING OTHER CENTRAL AND EASTERN EUROPEAN COUNTRIES AND JORDAN. THESE COUNTRIES AGREED THAT THEY WERE BUSY ADJUSTING TO THE VERY AMBITIOUS COMMITMENTS THEY HAD TAKEN ON AND WERE NOT READY TO MOVE IMMEDIATELY TO THE VIRTUAL ELIMINATION OF TARIFFS. ¶3. SPEVEC ADDED THAT IN THE CASE OF CROATIA, IT WAS ALREADY AMONG THE MOST OPEN COUNTRIES IN THE WORLD, IN TERMS OF ITS COMPLETE BINDING OF TARIFF LEVELS. ITS AVERAGE BOUND RATE TARIFFS LEVEL FOR NON-AGRICULTURAL PRODUCTS WAS 5 PERCENT, WITH OVER 99 PERCENT OF ITS TARIFFS BOUND BELOW OR AT 14 PERCENT. IT WAS TIME FOR THE REST OF THE WORLD TO CATCH UP WITH CROATIA. SHE ALSO NOTED THAT MOST OF CROATIA'S NEIGHBORS, ASIDE FROM SLOVAKIA AND THE CZECH REPUBLIC, HAD HIGHER TARIFFS. WHILE SHE RECOGNIZED THE MANY BENEFITS THAT LOWER TARIFFS HAD BROUGHT CROATIA (WHICH IS EXPERIENCING A CREDIT AND CONSUMER-LED BOOMLET),THERE WAS ALSO A CONCERN ABOUT BALLOONING TRADE DEFICITS. ROSSIN UNCLASSIFIED PAGE 03 ZAGREB 00350 141058Z UNCLASSIFIED >