UKRAINE MAKES PROGRESS ON WTO LEGISLATION

UNCLAS KYIV 004183

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E.O. 129588: N/A
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: UKRAINE MAKES PROGRESS ON WTO LEGISLATION

REF: A) YARNELL-WOLF EMAIL OF 11/2
B) KASPER-KLEIN EMAIL OF 10/27
C) KYIV 4104
D) KIEV 3670
E) KIEV 3569
F) KIEV 2587


1. Summary: Ukraine's Parliament adopted on November 2 two
laws identified as required for WTO accession. Parliament
made further progress on legislation November 2-3, passing
another eight WTO-related laws in the first reading, with
significantly large majorities. Parliamentary "hearings"
on November 1 revealed a growing sense of inevitability
among MPs regarding WTO accession. This Parliamentary
activity follows the October 27 informal meeting of
Ukraine's WTO Working Party, which stressed the need for
speedy progress on the legislative fron
t. Despite concerns
in some quarters regarding the authenticity of the
Yanukovych government's professed commitment to WTO
accession, it delivered impressively in this first round of
voting. Difficult issues remain, however, and the next
tests will be whether Parliament is as positive on the more
controversial laws, and whether it can avoid the temptation
to make WTO-inconsistent changes to the drafts between the
first and second readings. End Summary.

Parliament Adopts Two WTO-required Laws
--------------


2. Parliament adopted two laws identified as required for
WTO accession -- an amendment to the law "On Publishing"
(to eliminate foreign capital restrictions, with a 5 year
transition period) and an amendment to the law "On
Protection of Rights for Indications of Origins of Goods"
(to ensure national treatment and MFN for GIs) -- on
November 2. Parliament adopted these two laws under an
accelerated procedure, allowed only if no MPs object,
skipping the second reading usually required. (Note: Ref A
incorrectly reported that the two laws passed only in the
first reading. End Note.) The voting proceeded as
follows:

Publishing law - 375 votes for, 0 against, 62 not voting;
GIs law - 390 for, 0 against, 47 not voting.


3. These were the first WTO-related laws adopted by
Parliament since the March general elections. Ukraine's
WTO Working Party will now have the opportunity to examine
these laws to ensure that they properly address the
concerns and requests of WTO members.

Eight Laws Pass in First Reading
--------------


4. During November 2-3, Parliament also passed, in the
first reading, eight other legislative amendments
identified as required for WTO accession:
-- to the law "On Advocacy" (to enable foreign attorneys to
operate in Ukraine);
-- to the law "On the Export Duty for Live Animals and
Skins" (to reduce export duty rates);
-- to the law "On Amending Some Legislative Acts" (to
adjust the license fee for production of spirits, alcohol
and tobacco products);
-- to the Customs Code (to grant customs officials "Ex
Officio" rights in the IPR field);
-- to the law "On Banks and Banking Activity" (to allow
foreign banks to open subsidiaries in Ukraine);
-- to the law "On Foreign Economic Activity" (to amend non-
tariff regulation of imports);
-- to the law "On Insurance" (to eliminate restrictions on
agreements with foreign insurers and to provide permit for
re-insurance of risks);
-- to the law "On Medicinal Drugs" (to protect undisclosed
information in the registration of medicinal drugs).


5. These laws all passed by huge margins, generally with
nearly 400 MPs voting for and around 20, primarily
Communists, voting against, and a few more abstaining. An
amendment to the law "On Veterinary Medicine," passed the
first reading on October 11 with similarly overwhelming
support. This draft, submitted by an MP rather than by the
government, may fall short of WTO norms, however.


6. From this summer's list of 21 laws needed for
accession, Parliament has now successfully adopted two, and
passed nine in the first reading. (Note: This includes the
Veterinary Medicine law passed on October 11. End note.)

Parliamentary Hearings Clear the Air
--------------


7. Parliament held public hearings on WTO accession on
November 1. These "hearings," attended by observers and
diplomats, including Ambassador, consisted essentially of a
series of general speeches on the topic of Ukraine's
accession, with little substantive discussion of specific
legislation. Minister of Economy Volodymyr Makukha briefed
MPs on accession progress and made a plea for speedy
passage of outstanding legislation. Makukha was backed up
by several prominent Our Ukraine MPs, including Foreign
Minister Borys Tarasyuk, as well as deputy head of the
Presidential Secretariat Arseniy Yatsenyuk.


8. A few MPs from the governing coalition raised concerns
about how accession would affect certain industries, and
urged more extensive deliberations on how to help these
industries. Of most concern appeared to be the
agricultural sector, highlighted by Minister of Agriculture
Yuriy Melnyk's warnings that accession would lead to "mass
closures" of smaller producers and dramatic increases in
rural unemployment. Overall, a growing sense of
inevitability regarding WTO accession seemed to emerge from
the hearings. One speaker from a local university tried to
capture this sentiment, arguing that the question was no
longer "whether" Ukraine will join the WTO, but rather
"when and how."

Non-WTO Law Slips Through
--------------


9. Parliament on November 2 also adopted an amendment to
the law "On Protection of Rights on Plant Varieties."
(Note: Ref A also incorrectly reported this law as being
passed only in the first reading, whereas it too was
adopted under the accelerated procedure. End Note.) This
plant varieties law was not among the 21 laws identified as
required for WTO accession, although there appeared to be
some confusion among MPs on this issue. The law, now
passed by Parliament, in fact contains a problematic
provision which authorizes the government to use
discriminatory measures that would be inconsistent with WTO
rules. A draft Cabinet of Ministers Resolution, one of six
identified by the GOU as necessary for accession but not
yet issued, will essentially have the opposite effect by
preventing the government from using such discriminatory
measures.

Ukraine's Working Party Urges Legislative Action
-------------- ---


10. Action in Parliament came on the heels of an October
27 informal meeting of Ukraine's WTO Working Party in
Geneva (ref B),where Ukraine's lead WTO negotiator Valeriy
Pyatnitskiy reviewed the outstanding legislation.
Pyatnitskiy told Working Party members that he was
confident Parliament would adopt much of the legislation
within three weeks. Members expressed concern that some of
the draft laws under consideration may differ from what was
previously agreed. The U.S. delegation and others also
noted a lack a progress on several problem areas, such as
SPS measures, discriminatory tax treatment for agricultural
products, restrictions on grain exports, and agricultural
support.


11. The Chairman suggested a tentative date of mid-
December for the next Working Party meeting, although
members stressed that substantive progress on the report
would only be possible following Parliament's adoption of
legislation. The Chairman also called for Ukraine and its
partners to conclude negotiations on bilateral Market
Access Agreements as soon as possible. (Note: Bilateral
agreements with Taiwan and Kyrgyzstan remain to be signed.
End Note.) Likely in response to Ukrainian complaints
about the Kyrgyz negotiating position (Ref F),the Chairman
cautioned that "any demands on Ukraine should be in line
with the WTO framework."

Comment: Yanukovych Government Steps Up to the Plate
-------------- --------------


12. Much has been made of the Yanukoych's government early
dithering on WTO accession and of possible back-room deals
to synchronize e Ukraine's accession with that of Russia
(Refs C-E). Although none of the laws voted on so far in
Parliament were among the most controversial (e.g. laws
affecting the agricultural sector or scrap metal export
restrictions),the government has come through impressively
in its first chance at bat, garnering a huge majority of
coalition and opposition MPs in support. These first
rounds of voting are a positive signal for the prospects of
significant, speedy progress on the WTO-related
legislation. The next tests will be whether the Rada is as
positive on the more controversial laws, and whether it can
avoid the temptation to make WTO-inconsistent changes to
the drafts between the first and second readings.

TAYLOR