DEMARCHE DELIVERED: KAZAKHSTAN'S INCREASE IN MEAT

UNCLAS ASTANA 001448 SIPDIS SENSITIVE SIPDIS DEPT FOR EB/ESC; SCA/CEN (O'MARA); PLEASE PASS TO USTR E.O. 12958: N/A TAGS: EAGR ECON ETRD WTRO USTR KZ SUBJECT: DEMARCHE DELIVERED: KAZAKHSTAN'S INCREASE IN MEAT IMPORT TARIFFS REF: STATE 67132 ¶1. (U) The Ambassador raised the issue of increased meat import tariffs with Prime Minister Masimov on May 17, underscoring the negative impact on WTO accession efforts. Pol-Econ Chief delivered reftel demarche on May 23 to Zhanar Aitzhanova, Deputy Minister of Industry and Trade and lead WTO accession negotiator; and on May 25 to Akylbek Kurishbayev, Vice-Minister of Agriculture, and Naylia Abdimoldayeva, Deputy Head of Agriculture Ministry,s Department for Development of Processing Industry and WTO affairs. ¶2. (SBU) Aitzhanova told Pol-Econ Chief that the GOK's decision to raise the import tariffs was difficult and a political compromise resulting from lengthy discussions between the Ministry of Industry and Trade and the Ministry of Agriculture. The push for higher tariffs, she said, came from agricultural producers and parliamentarians who believe that the agricultural sector is not ready for Kazakhstan's WTO accession. The move, of which Prime Minister Masimov was fully aware, was aimed at demonstrating that the government is doing something to help the farmers. Aitzhanova added that she had no choice but to take some action. Had her Ministry done nothing, she stated, other ministries would have blocked WTO accession negotiations, and she would not have been able to get necessary legislation through parliament. ¶3. (SBU) Both Aitzhanova and Kurishbayev stressed that the tariff increase is not expected to have a serious impact on U.S. agricultural exports to Kazakhstan. Poultry meat, Kurishbayev said, is the only market where higher tariffs have the potential of adversely affecting U.S. exporters. But, he stated, the actual tariff increase is "very insignificant," and Kazakhstani agricultural tariffs remain "quite low." Aitzhanova went further, telling Pol-Econ Chief that the tariff hike was carefully calculated not to have an impact on U.S. sales; effective protection of Kazakhstani products, she added, would have required a rate increase to 200%. Abdimoldayeva added that the tariff's impact would be weakened by the tenge's appreciation against the dollar. (Note: Over the past six months, the tenge has appreciated against the dollar by approximately 6%. End note.) Kurishbayev said that Kazakhstani farmers had requested much stronger action, including import quotas. The actual rate increase, he remarked, is merely a small step to stimulate much-needed development of Kazakhstan's domestic poultry industry. Currently, Kurishbayev elaborated, Kazakhstan imports 75% of its annual poultry meat consumption of 200,000 tons. ¶4. (SBU) Aitzhanova stated that the tariff hikes came into force one month after Prime Minister Masimov's April 11 signature of the decree. Both Kurishbayev and Aitzhanova asked for time to evaluate the impact of the higher tariffs. Aitzhanova requested "a few months" to see the impact of the tariff increases on the market before revisiting the issue. Kurishbayev remarked that he does not expect poultry imports to change next year. In regard to the standstill agreement, both Aitzhanova and Kurishbayev stressed that it represents an expectation rather than a formal obligation. GILMER