GOI PROPOSES PROTECTING AGRO-PRODUCTS UNDER

C O N F I D E N T I A L BAGHDAD 002892

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR
STATE PLEASE PASS DEPT OF AGRICULTURE

E.O. 12958: DECL: 08/08/2016
TAGS: EAID ECON ETRD IZ
SUBJECT: GOI PROPOSES PROTECTING AGRO-PRODUCTS UNDER
COMPREHENSIVE TARIFF REVAMP


Classified By: Econ MinCouns Tom Delare for reasons 1.4 (b) and (d)


1. (C) Summary. The GOI,s Tariff Steering Committee is
drafting a comprehensive tariff schedule that calls for an
average tariff on agricultural products of 16.9 percent; some
products have been targeted for higher duties to stimulate
sectoral growth. A preliminary assessment suggests that
tariffs on non-agricultural products will be low or zero.
The proposal is a significant departure from the GOI,s
Stand-By Arrangement (SBA) with the International Monetary
Fund that assumes the current 5 percent reconstruction levy
would be converted to a uniform 10 percent import duty. The
GOI proposal moves directly to implementation of a
comprehensive schedule when it is completed. In the interim,
the 5 percent reconstruction levy remains in force, despite
its expiration earlier this year. End summary.

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Agricultural Tariffs Average 16.9 Percent
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2. (C) A USAID consultant working closely with Iraqi
ministries on the groundwork for Iraq,s accession to the
World Trade Organizatiom recently reported the GOI,s Tariff
Steering Committee is drafting a comprehensive tariff
schedule. The proposal calls for an average tariff on
agricultural products of 16.9 percent, with tariffs on some
products significantly higher. For example, the proposal
allows for higher tariffs to protect established export
industries (dates),to nurture potential export industries
(fresh vegetables) and restore traditional or nascent
agricultural industries (fish farming),and to protect basic
inputs into domestic industry (wool and leather). (Note:
preliminary reporting estimated the average agricultural
tariffs at 20-21 percent, but this figure has been revised
down. End note.) According to the consultant, the Ministry
of Agriculture has also agreed "in principle" to apply a
system of ad valorum duties in lieu of the current system,
but how this would be implemented remains unclear.


3. (C) The consultant noted that at this point the
Committee envisions low or zero tariffs on non-agricultural
products. The Tariff Steering Committee continues to make
changes to the proposal and so the Committee,s position
could change in the future.

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New Schedule in Lieu of Expected Uniform 10 Percent
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4. (C) The proposal is a significant departure from the
GOI,s previously indicated course on tariffs. The Coalition
Provisional Authority (CPA) set a 5 percent reconstruction
levy across-the-board on imported goods. The GOI declared
its intention to move to a uniform 10 percent import duty to
as a way to increase non-oil revenue, but the proposal
appears to have stalled in the Council of Ministers. While
not a specific requirement under the SBA the GOI reached with
the IMF, the SBA assumed the 5 percent reconstruction levy
would be converted to a uniform 10 percent import duty.


5. (C) When Finance Minister Bayan Jabr took office he
reportedly abandoned the plan for the 10 percent uniform
import duty in favor of the proposed comprehensive tariff
schedule. With the work of the Tariff Steering Committee
on-going, the MOF claims that the 5 percent reconstruction
levy continues to be applied, despite its legal expiration
earlier this year. Provincial customs offices, which enforce
customs rules and collect tariffs, continue to collect this
levy, as well as, in some cases, local tariffs. Jabr set an
ambitious goal of mid-October 2006 for completion of the new
tariff schedule. While the work may not be complete by this
time, the Tariff Steering Committee continues to work
actively to complete the schedule. The final tariff schedule
will require approval by the National Assembly before
adoption. The Trade Minister reports that he was unaware of
the proposal, and will look into it.

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Products Classified Under WCO Harmonized Schedule
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6. (C) The USAID consultant emphasized that his team is not
advocating on behalf on any specific tariff rates, but rather
is focused on helping Iraq develop the legal and regulatory

framework necessary for WTO accession. They believe a
comprehensive tariff schedule, with the products classified
according to the World Custom,s Organization (WCO)
Harmonized Schedule, is an important step toward WTO
accession. The GOI hopes the WTO will hold the first working
party meeting for Iraq,s accession in Geneva in December

2006. The consultant also stressed that his colleagues were
careful not to communicate to the GOI that WTO and WCO
guidelines justify the increase in tariffs as long as they
conform to the WTO and WCO standards.
KHALILZAD