NEPAL: RATIFIES ITS MEMBERSHIP WITHIN WTO

C O N F I D E N T I A L SECTION 01 OF 03 KATHMANDU 000584

SIPDIS

STATE FOR SA/INS
STATE PLEASE PASS TO USTR
STATE PLEASE ALSO PASS TO USAID
STATE PLEASE ALSO PASS TO CUSTOMS

E.O. 12958: DECL: 03/28/2014
TAGS: ECON NP WTO
SUBJECT: NEPAL: RATIFIES ITS MEMBERSHIP WITHIN WTO

Classified By: Deputy Chief of Mission Robert K. Boggs for reasons 1.5
(B, D)

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SUMMARY
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1. (SBU) On March 24, the Government of Nepal (GON)
officially accepted and ratified its membership within the
World Trade Organization and will become the 147th member of
the organization as of April 23. Nepal is the first least
developed country (LDC) to qualify and accede on its own
merits without being grandfathered into the WTO. There was
much domestic debate surrounding the modality the GON used
for ratification. In the absence of a sitting Parliament,
the Nepalese cabinet amended the Nepal Treaties Act of 1990
to shift ratification authority from the Parliament to the
Cabinet. There are remaining hurdles to overcome prior the
December 31, 2006 deadline, specifically in the area of
intellectual property rights, sanitary and phyto-sanitary
matters, customs and technical barriers to trade. A GON
official indicated that the Government will need substantial
donor assistance, including from the U.S., to meet its
committments. The official also asked that the USG review a
draft Customs Act before its final release. END SUMMARY.

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Nepal Ratifies Its WTO Membership
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2. (U) The Government of Nepal (GON) officially accepted
and ratified its membership within the World Trade
Organization (WTO) on March 24. On April 23, Nepal will
become the 147th member of the WTO and the first least
developed country (LDC) to accede to the WTO on its own
merits without being grandfathered into the organization.


3. (U) According to the Nepal Treaties Act of 1990, the
authority to ratify trade agreements and treaties lies with
the Parliament. (NOTE: King Gyanendra, on the recommendation
of then-Prime Minister Sher Bahadur Deuba, dissolved
Parliament in May 2002. End Note.) In the absence of
Parliament, the Cabinet amended the Treaties Act by
Cabinet-level ordinance to shift the ratification authority
from the Parliament to the Cabinet. The King signed this
ordinance on March 17, which opened the door to the GON
ratifying Nepal's WTO membership seven days later, on March

24.


4. (SBU) There was much open debate on the modalities that
the GON used to ratify Nepal's membership. Some commentators
speculate that if the Cabinet can amend the Trade Treaties
Act, the next step could be amendment of Nepal's
Constitution. During a meeting with Emboff on 26 March,
Prachanda Man Shrestha, Joint Secretary for Commerce,
Industries and Supplies (and the GON official in charge of
Nepal's WTO cell),said there were no other options
available. Nepal agreed to the terms in September 2003,
knowing the dilemma the lack of a sitting Parliament would
pose. He added that the GON coordinated with stakeholders,
including political party leaders, prior to ratifying the
agreement (through meetings, seminars, informal
conversations). Shrestha said that the ordinance amending
the Nepal Trade Treaties Act of 1990, although it does not
specifically mention the WTO, limits the Cabinet's authority
to "multilateral international organizations" (and not
regional or bilateral organizations/trade agreements, like
SAARC or BIMSTEC). It also limits the validity of the
ordinance until a general election date has been declared.
Within seven days of Parliament's first session, all
documents pertaining to Nepal's WTO membership must be
presented by the GON.

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INTERNATIONAL ASSISTANCE TO MEET COMMITMENTS
===========================================


5. (SBU) Shrestha told Emboff that Nepal's successful
membership and standing within the WTO requires not only the
commitment of the GON, but also commitment from the
international donor community. He explained that many
countries promised technical assistance during Nepal's
accession negotiations, but that there has been "little
follow through" by the international community.


6. (C) For example, the Government of Australia offered
assistance in the area of intellectual property rights and in
August 2003 funded an Australian consultancy group's review
of Nepal's IPR needs. Following this visit, he indicated
that the group submitted a report for GON comments and
consideration. Since then, however, no further assistance has
been forthcoming. Shrestha admitted that the delay did not
necessarily translate into a lack of commitment and might
actually be due to the Australian budget cycle.


7. (C) According to Shrestha, the Europeans' "empty promises
are more troublesome." The GON requested EU assistance in
the areas of Sanitary and Phyto-sanitary (SPS) and technical
barriers to trade. Following the Cancun meeting, the
Europeans made an ambitious "4 million Euro technical
assistance program" commitment (2 million Euros for
legislative review, GON capacity building; 2 million Euros
for private sector development) that included a deadline of
January 2004 for consultancy team review and March 2004 for
implementation of the team's review. Shrestha stated that
nothing has been done to date, and he mentioned that Foreign
Minister Bekh Bahadur Thapa was told during his recent
meetings in Europe that "there were political problems" with
European assistance, "specifically with regard to how the GON
handles the Maoists."

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REQUEST FOR USG ASSISTANCE
==========================


8. (C) Emboff told Shrestha that the USG is committed to
helping Nepal become a valuable member of the WTO and is now
developing a technical assistance program in customs
valuation, tailored specifically to meet Nepal's immense
needs. (NOTE: A U.S. Customs Team visited Nepal in 2000.
Additional Note: USAID recently secured approximately USD
500,000 funding to develop its initial assistance program.
END NOTES.) Shrestha mentioned that the GON has drafted a
revised "Customs Act," which the GON would like U.S. Customs
to review before it is released. Emboff requested a copy of
the draft Customs Act and will forward it to appropriate USG
contacts once it is available. Shrestha also requested that
U.S. Customs send a team of agents to Nepal to provide a
quick "hands on" training seminar at Nepal's five main ports
of entry (approximately 20 Nepalese customs agents at each
port of entry). Shrestha indicated that Nepal has until July
2004 to meet its initial WTO customs deadline for having
legislation in place.



9. (U) In addition to technical assistance, USTR-USAID, in
coordination with the Embassy, will offer a training course
to government officials and major exporters from South Asia's
Least Developed Countries (LDC): Nepal, Afghanistan and
Bangladesh. This training is tentatively scheduled for late
May and will focus on how to meet U.S. regulations (in areas
like customs, GSP, SPS, rules of origin, ISO and private
sector grades and standards),how to attract foreign
investment and how to compete in the global trading arena.
Shrestha mentioned that this "hands on" training program will
greatly assist Nepal and looked forward to participating in
the program.

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COMMENT
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10. (C) Although many hurdles remain, the GON appears to be
committed to meeting its WTO obligations as best it can.
Nepalese interlocutors express a perception that the GON has
abandoned by the donor community following the Cancun Round
and that there is a lack of international commitment to
helping Nepal to be a viable player within the WTO. USG
willingness to assist Nepal provides an opportunity for us to
reinforce our commitment to Nepal and to help strengthen this
struggling economy.





MALINOWSKI