Identifier
Created
Classification
Origin
06KYIV4531
2006-12-08 16:33:00
CONFIDENTIAL
Embassy Kyiv
Cable title:  

12/8 UKRAINE WTO UPDATE

Tags:  ETRD WTRO ECON PGOV UP 
pdf how-to read a cable
VZCZCXRO0528
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHKV #4531/01 3421633
ZNY CCCCC ZZH
P 081633Z DEC 06
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 0673
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHGV/USMISSION GENEVA 0022
C O N F I D E N T I A L SECTION 01 OF 02 KYIV 004531 

SIPDIS

SIPDIS

GENEVA FOR USTR
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA

E.O. 12958: DECL: 12/07/2016
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: 12/8 UKRAINE WTO UPDATE

REF: A. YARNELL-MOLNAR EMAIL OF 12/5

B. KYIV 4415

C. KYIV 4315

D. KYIV 4304

E. KYIV 4237

Classified By: ACTING DEPUTY CHIEF OF MISSION DOUGLAS
KRAMER, FOR REASONS 1.4 (B) AND (D)

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 004531

SIPDIS

SIPDIS

GENEVA FOR USTR
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA

E.O. 12958: DECL: 12/07/2016
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: 12/8 UKRAINE WTO UPDATE

REF: A. YARNELL-MOLNAR EMAIL OF 12/5

B. KYIV 4415

C. KYIV 4315

D. KYIV 4304

E. KYIV 4237

Classified By: ACTING DEPUTY CHIEF OF MISSION DOUGLAS
KRAMER, FOR REASONS 1.4 (B) AND (D)


1. (SBU) Summary: While Prime Minister Yanukovych and
Ukrainian trade negotiators held talks with USTR during a
visit to Washington, Dec 4-7 Ukraine's Rada (parliament)
passed one more WTO-related law. This brings the total
number of laws adopted to 18 out of the proposed 21. One more
law remains on the Rada's docket, while the final two are
moving more slowly. Legislative experts praise the Rada
impressive progress, but note that several of the adopted
laws are not perfect and will likely require careful review
by the Working Party. Domestic auto producers, meanwhile,
continue to chip away at the GOU's commitments in the sector.
The GOU hopes to sign its bilateral agreement with Taiwan on
December 15, while negotiations with holdout Kyrgyzstan
continue. The GOU also needs to reach agreement on domestic
support for agriculture; key Rada deputies have told us they
were eager to find a WTO-compliant solution. End Summary.


2. (U) This latest edition of a series of regular update
cables regarding the status of Ukraine's WTO accession (refs
B-E) covers the period December 1-8.

Outstanding WTO-related Legislation: Used Car Imports
-------------- --------------


3. (U) The Rada adopted (in final reading) one more
WTO-related law on December 6, bringing the total number of
WTO-related laws adopted to 18 of the 21 pieces of
legislation thought necessary for accession. The Rada passed
the new law, "On the Registration of Transportation
Vehicles," to address Ukraine's commitment to abolish the age
restriction for imports of used cars. The text of this law
as passed, however, was substantially different from previous
versions. The law contains language to eliminate the ban on

imports of used cars over five years old, but it also
introduces registration requirements that could restrict
imports. In particular, it will create a registration tax
that is based on engine size and is significantly higher for
older cars; in at least one category the tax is up to 100
times steeper when the vehicle is more than eight years old.
Regions MP Dmitriy Svyatash, author of the law, told Econoff
he believed the bill to be WTO consistent and hoped the
President would sign it into law.


4. (SBU). One draft law -- "On the Export Duty on Scrap of
Ferrous and Non-Ferrous Metals and Alloyed Steel" (to replace
the export ban on scrap metals with an export duty) -- has
passed only it first reading in the Rada. An additional
draft law -- "On Value Added Tax (regarding taxation of
agricultural enterprises)" -- has been submitted but has not
gone to a vote. The bill, which would eliminate the
discriminatory application of the VAT, was pulled from the
Rada's agenda on November 3. One expert familiar with
Ukraine's WTO accession efforts told EconOff on December 6
that this law was a "non-starter" among MPs who believed the
issue can be resolved through further consultations in Geneva
or a separate tax law currently under Rada consideration.
Some GOU officials have pointed to a different law on VAT
(Law No. 273-V, signed by the President on October 19),which
actually extends the current discriminatory regime for
another year.


5. (SBU) The promised law on biotechnology products has not
yet been submitted, although the Cabinet of Ministers has
tasked the Ministries of Agriculture and Health to produce a
draft. The GOU does not publicly link the biotech law to WTO
accession, but recognizes privately that it remains one of
Ukraine's outstanding bilateral commitments to the USG.
Sergiy Ryzhuk, Party of Regions MP and member of the
Agricultural Committee, told Econ Counselor on December 1 he
thought the prospects for passing a biotech law were
significantly improved.

Adopted Laws Not Perfect
--------------


6. (SBU) The consensus among KYIV-based WTO experts we

KYIV 00004531 002 OF 002


talked to was that, while some of the laws as passed have
shortcomings that could cause concern in Geneva, on the whole
the Rada refrained from meddling with the provisions. The
result was, as one expert told us, "the best that could be
expected." An exception to this rule could be the law on
Foreign Economic Activity, signed by Yushchenko on December

4. The version passed is reportedly a "truncated" version of
the earlier draft, and may need careful review to ensure it
provides for WTO consistency. Another concern is that the
Presidential Secretariat had submitted a number of drafts to
the Rada before the Ministry of Economy had received U.S.
comments on them. The Ministry was reportedly unable to
incorporate U.S. suggestions into those drafts prior to
passage.

Domestic Auto Industry Still Fighting
--------------


7. (C) MP Svyatash cautioned EconOff on December 6 that some
lawmakers continue to try to undermine Ukrainian commitments
made in the automobile sector. Ukraine's largest automobile
producers had fiercely opposed the Rada's March 2005
cancellation of subsidies and tax breaks to the industry.
MPs connected to automobile producers have now appealed this
cancellation to the Constitutional Court on legal grounds.
Svyatash noted that the case is moving unusually quickly
through the Court and worried that the subsidies will be
restored.


8. (C) Comment: While Svyatash is a recent convert to the
pro-WTO camp, he appears to have ulterior motives for
fighting the automotive subsidies. Only the two largest
automobile producers in Ukraine, ZAZ and LuAZ, would qualify
for the GOU's old package of subsidies, leaving smaller
producers at a comparative disadvantage. Svyatash appears to
have links to Ukraine's smaller auto producers and is likely
lobbying on their behalf. Meanwhile, Yulia Tymoshenko Bloc
MP Tariel Vasadze, chief oligarch of the automotive industry
and the Honorary President of the Ukrainian Automobile
Corporation, was clear in a November 21 meeting with Econ
Counselor that he was desperate to do whatever he could to
protect the domestic industry (ref B). Vasadze, who has
interests in ZAZ, and Our Ukraine MP Petro Poroshenko, who
has interests in LuAZ, are likely the chief figures behind
the push to reinstate subsidies. End Comment.

Concluding Bilateral Agreements
--------------


9. (SBU) Ukraine has yet to sign bilateral Market Access
Agreements with Kyrgyzstan and Taiwan. Post understands that
the GOU hopes to sign the agreement with Taiwan on December
15 in Geneva. Post is unaware of any progress on the Kyrgyz
bilat, but we understand that Minister of Economy Volodymyr
Makukha plans to continue negotiations with Kyrgyz officials
December 8.

Concluding Negotiations on Agricultural Support
-------------- --


10. (SBU) Mykhailo Gladiy (BYUT) and Sergiy Ryzhuk
(Regions),key members of the Rada's Agricultural Committee,
told Econ Counselor on December 1 that they view agricultural
support levels as the major obstacle to accession. Ryzhuk
noted, however, that the Rada is prepared to accept whatever
agreement the government reaches. In a sign that Ukrainian
thinking on the subject is evolving, Gladiy and Ryzhuk said
Ukraine needed to find new methods of support that would not
violate WTO rules or distort trade. Ryzhuk said that Deputy
Prime Minister Andriy Kluyev would head an informal body to
develop such WTO-consistent measures.
Gwaltney