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