WTO - KENYA'S PROTECTIONIST TAKE ON HONG KONG

UNCLAS SECTION 01 OF 02 NAIROBI 005030

SIPDIS

SENSITIVE

SIPDIS

DEPT PLEASE PASS USTR FOR WJACKSON

E.O. 12958: N/A
TAGS: ETRD ECON EAGR EAID PREL PGOV WTRO KE
SUBJECT: WTO - KENYA'S PROTECTIONIST TAKE ON HONG KONG

REF: A. USTR/BJACKSON-NAIROBI/HOOVER/BAIN 12/02/05 E-MAIL


B. NAIROBI 4983

C. NAIROBI 4949 (NOTAL)

Sensitive-but-unclassified. Not for release outside USG
channels.


1. (SBU) SUMMARY: As Kenyan Trade officials prepare to
depart for the WTO Ministerial in Hong Kong, it is clear
that their main goal, and perhaps for most African
countries, is to promote "flexibility" in market access,
protect existing preferences (through new compensation
measures),and ensure continued safeguards. It is
therefore unlikely that Kenya at least, will push for a
stronger EU offer on agriculture, or be forward-thinking
on NAMA issues. The Kenyan officials were positive on
better interaction between their WTO working groups and
U.S. officials in the future. End summary.


2. (U) Econ/C and Econoff met with WTO experts from
Kenya's Ministry of Trade and Industry on December 5 to
present ref A points and follow-up the November 30
meeting with the Ministry's Permanent Secretary (ref B).
Representing Kenya was Elijah Manyara, Director for
External Trade, and Trade Officers James Kuru (who covers
Agriculture) and Michael Otieno (who covers NAMA issues).
All three officials will likely be included in Kenya's
Hong Kong delegation, which Manyara speculates will be 50-
60 strong.

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THOUGHTS ON AGRICULTURE
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3. (SBU) Manyara conceded that the EU's proposal on
market access in agriculture is not ambitious enough and
that the possible exemption of up to eight percent of
product lines from tariff cuts was potentially
problematic for African exporters. He also agreed that
the EU was trying to divert attention from Ag to NAMA
issues. He was, however, quite reluctant to speculate on
how strongly Kenya or the Africa Group would publicly
call for a better offer from the EU. Manyara said that
Kenya's priorities are for "policy space" and
"flexibility" on agriculture market access, because
Kenyan tariffs on ag products are already 100% bound.
According to Manyara, the Africa Group has submitted
proposals on its three "priority areas": preferences,
flexibility, and safeguards.


4. (SBU) Expanding on what Manyara claims is the Africa
Group's position, Kuru said that developing countries
should have 20% of agriculture tariff lines available for
protection as "special products." He added that the
current situation is not flexible enough, and that even
100% tariff rates are not enough of a "cushion" for some
products, citing sugar, wheat, dairy, and sorghum as
possible targets for special protection. As for the U.S.
proposal, Kura said that he would like to see USTR
produce a report projecting the added value of exports
for developing countries from significantly liberalized
agriculture trade.

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ON NAMA
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5. (SBU) For Kenya, there is on-going concern about
proposals requiring significant binding of tariffs for
paragraph 6 countries, again because of a potential lack
of flexibility. According to Otieno, Kenya's current
average bound non-agricultural tariff rate is 58.4%, and
the paragraph 6 requirement of 27.5% is too ambitious.
[Note: Otieno speculated that USTR's assessment that
Kenya has a 35% bound tariff rate most likely refers to
applied tariffs. End note.]


6. (SBU) Otieno also asserted that the sectoral
elimination proposals are problematic, noting in
particular Kenya's concerns about textiles, footwear,
fish, and electronics. He added that Kenya would like to
have flexibility to identify its own list of possible
sectors for elimination (zero rating),but that

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currently, the paragraph 16 text does not permit such
flexibility. According to Manyara, Kenya would also like
to see more flexibility on addressing non-tariff barriers
(NTBs),but did not elaborate on this point.


7. (SBU) Expanding on Kenya's thoughts regarding
"compensation," Manyara speculated that in order to
maintain successful preferences programs for LDCs, there
should be a new formula for applying "corrective
coefficients" where lowering global tariffs weaken such
preferences.

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WORKING WITH TECHNICAL COMMITTEES
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8. (U) When asked about Kenya's technical committees for
WTO issues, Manyara explained that Kenya has a National
Committee on WTO, with government officials and some
private sector and academic representatives
participating. Below the national committee are 14
topical subgroups, headed by Ministry of Trade officials,
which include participation by civil society as well.
Manyara added that that it is the Ministry's goal to have
the subgroups become a better conduit of information and
exchanges of ideas. He was positive about Econ/C's
suggestion that in the future Embassy officers meet with
the subgroups and on the idea that the Embassy might host
DVCs between select subgroups and experts in the U.S.
Manyara also requested U.S.-assistance to increase the
subgroups' technical capacity.

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COMMENT
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9. (SBU) Former Trade Minister Kituyi has been an
excellent interlocutor for the Embassy, and it is good
news that he has agreed to lead the Hong Kong agriculture
negotiations as a "Friend of the Chair," regardless of
his Ministerial status in the coming days.


10. (SBU) However, based on our recent meetings with
Ministry officials, we believe that Kenya, perhaps like
most of Africa, will be unwilling to push aggressively
(if at all) for the EU to improve its offer on
agriculture because they still see freer trade in
agriculture as more of a threat to domestic producers
rather than as an opportunity for expanded exports.
Kenya, and likely most African countries, is also
concerned that lowered global tariffs will harm current
access under U.S., EU, and other preference systems.
Simply put, unless Kituyi can somehow change the dynamic,
Kenya will go into Hong Kong fearful of - and resistant
to - the kind of deep liberalization embodied in the U.S.
agriculture proposal. It will therefore favor a lesser
outcome, unless the deal struck somehow insulates it from
all the risks inherent in trade liberalization. End
Comment.

BELLAMY