12/22 UKRAINE WTO UPDATE

UNCLAS SECTION 01 OF 02 KYIV 004648

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E.O. 12958: N/A
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: 12/22 UKRAINE WTO UPDATE

REF: A. YARNELL-KLEIN EMAIL OF 12/20

B. KASPER-KLEIN EMAIL OF 12/19

C. KYIV 4576

D. KYIV 4531

E. KYIV 4415


1. (SBU) Summary: Ukrainian WTO negotiators held
consultations with Working Party members in Geneva on
December 18. The GOU is anxious for feedback on its recently
passed legislation, although anticipates having to make some
additional legislative fixes to ensure WTO conformity. A law
on biotechnology products is the only outstanding law not
passed in any form, although Ministry of Economy officials
say that the drafting process is now underway. Ukrainian and
Kyrgyz negotiators may have made a breakthrough on a
bilateral Market Access Agreement, the last remaining for
Ukraine's accession, but political turmoil in Kyrgyzstan
could complicate the deal. Ministry of Agriculture officials
offered a "compromise" on beef and pork but still link
resumption of trade to conducting an audit of the U.S.
veterinary inspection system. End Summary.


2. (U) This latest edition in a series of regular update
cables regarding the status of Ukraine's WTO accession (refs
C-E) covers the period December 18-22.

Consultations on WTO Legislation
--------------


3. (U) Deputy Minister of Economy Valeriy Pyatnytskiy and his
team of WTO negotiators met with Working Party members on
December 18 in Geneva to review accession progress (ref B).
Ukrainian negotiators told Econoff on December 20 that they
were reasonably satisfied with the consultations, and are
anxious to receive comments from Working Party members on the
recently passed WTO legislation.


4. (SBU) As described in ref D, one of the laws on the GOU's
list -- "On Value Added Tax (regarding taxation of
agricultural enterprises)" -- was supposed to cancel the
discriminatory VAT regime on agricultural enterprises. The
Rada had in October passed a routine, annual measure (Law
273-V) that partially extended the existing VAT regime for
one year, and on November 3 decided not to consider the new
draft on the subject (Draft Law 2389). However, the GOU has
decided to forward the passed VAT law for review by Working
Party members along with the rest of the WTO-required laws,
while admitting to us and the WTO that this law is flawed.
Vyacheslav Tsymbal, Director of the Ministry of Economy's WTO
Division, reiterated on December 20 that he anticipates
having to introduce new legislation after the New Year. To
avoid confusion, Post will include this VAT law on our list
of passed laws, which now number 20, with the caveats listed
above.


5. (SBU) From our summer list of 21 laws thought needed for
accession, only the law on biotechnology products has not
passed in any form. Pyatnytskiy had previously told Econ
Counselor that the GOU does not formally link this law to
accession, since it is a bilateral commitment to the USG and
not part of WTO conformity (ref C). The Cabinet of Ministers
has tasked the Ministries of Agriculture and Health to draft
the law, and Tsymbal told Econoff on December 20 that the
Ministry of Economy is also actively involved in the drafting
process. Tsymbal said that the GOU is using the previous,
failed version of the biotech law (which Post passed to
Washington in ref A) as the starting point for the new law.
Ministry of Health official Mykola Prodanchuk told Econoff
that the GOU's health-related concerns do not involve U.S.
biotechnology products, but rather those from countries with
lower safety standards, such as China.

Outstanding Government Resolutions
--------------


6. (U) In addition to the list of 21 laws, the GOU identified
approximately eight resolutions that it believed were
necessary to bring Ukrainian regulations in line with WTO
standards and commitments made to trading partners. The
Ministry of Economy issued one of these resolutions,
involving import licensing, on November 10. The Cabinet of
Ministers will need to issue most of the outstanding
resolutions. Tsymbal told Econoff that he did not expect any
difficulties with the resolutions, which the Ministry of

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Economy had already drafted, and thought they would be issued
within a matter of weeks.

Concluding Bilateral Agreements: Kyrgyz Progress
-------------- ---


7. (U) Ukraine signed a bilateral Market Access Agreement
with Taiwan on December 14 (ref C). Kyrgyzstan is now the
sole remaining holdout who has not signed an agreement with
Ukraine. Ukrainian negotiators met with members of the
Kyrgyz delegation in Geneva on December 18. Citing an
unnamed source "who participated in the negotiations" --
likely a member of the Ukrainian side, Ukrainian daily
Kommersant Ukraina reported December 19 that the Kyrgyz made
significant concessions at this meeting. According to the
Kommersant source, the Kyrgyz agreed to sign a bilateral
agreement in exchange for Ukraine dropping its safeguard
measures against Kyrgyz light bulbs, which have cut Kygyz
producers such as OJSC Mailuu-Suu out of the Ukrainian
market.


8. (SBU) Pyatnytskiy confirmed to Econoff on December 20 that
the discussions focused on current safeguard measures against
Kyrgyz producers. (Note: GOU officials had previously
complained that the Kyrgyz were making demands for repayment
of Soviet-era debt and regarding sensitive agricultural
issues. End Note.) Pyatnytskiy downplayed the progress,
however, noting that he still had not held direct talks with
Bishkek, and that the recent resignation of the Kyrgyz
cabinet could complicate the negotiations.

Imports of U.S. Beef and Pork
--------------


9. (SBU) Ministry of Agriculture officials told Acting Econ
Counselor on December 22 that they were willing to
"compromise" on U.S. beef and pork imports, but outlined a
proposal that continued to link the resumption of trade to
conducting an audit of the U.S. veterinary inspection system.
Deputy Minister Petro Verbitsky initially said that Ukraine
would begin permitting imports of U.S. beef and pork as soon
as Ukraine was invited to begin its audit. Verbitsky
however, backed away from even that proposal after chief
veterinarian Ivan Byesiuk stated categorically that Ukraine
would not permit the imports until the audit was in fact
complete. In the end, the Ministry of Agriculture proposal
was to conduct the audit quickly in January, so that trade
could begin to flow soon. Acting Econ Counselor said that
the March bilateral agreement did not link resumption of
trade to the audit, and that U.S. agencies would be glad to
discuss audits once trade had resumed. He promised to relay
the Ministry's proposal to Washington.


10. (SBU) The Ministry of Agriculture officials were aware of
the shipment of beef livers that was originally refused entry
at Odessa port, and was now again en route to Odessa for
another attempt to bring the product in. Verbitsky said that
if the U.S. agreed to invite Ukrainian inspectors to conduct
an audit in early January, the cargo would be admitted to
port when it arrives (planned for Dec. 26),assuming the
product passed laboratory testing.


11. (SBU) The Ministry officials were unable to produce a
copy of the document promised in Washington showing that the
Ministry had instructed port officials to honor the U.S.
veterinary certificates negotiated and agreed to in March.
Instead, said Deputy Chief Veterinarian Horsheyev, all the
Ministry had done was to pass to port officials a copy of the
U.S. certificates for their information. Acting Econ
Counselor asked whether that meant there had been no "green
light" from the Ministry to accept the certificates. Chief
vet Bisyuk responded, "That's exactly right, no products can
enter Ukraine without the express permission of the
Veterinary Service."
Taylor