NEW MOLDOVAN REGULATION TO IMPEDE TRADE

UNCLAS CHISINAU 001384

SIPDIS

SENSITIVE

SIPDIS

STATE FOR EUR/UMB AND EEB/TPP/ABT/ATP
STATE PASS USTR

E.O. 12958: N/A
TAGS: ECON ETRD WTO PGOV PREL MD
SUBJECT: NEW MOLDOVAN REGULATION TO IMPEDE TRADE

SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY


1. (SBU) SUMMARY: Side-stepping Parliament and filters intended to
give the business community a voice in new regulations effecting
them, the Government of Moldova (GOM) adopted a decision requiring a
state commercial stamp on all containers of non-alcoholic beverages
sold in Moldova. Ostensibly a consumer-safety and quality-control
measure, we doubt that imported soft drinks from the EU pose a
threat to Moldovan consumers. While the GOM lauds efforts to
harmonize its legislation with the EU, the adoption of this
quasi-fiscal measure raises questions about the GOM's true
intentions. Multiplied by the hundreds of millions of bottles and
cans imported into Moldova annually, the sale of stamps will be very
lucrative for the GOM. END SUMMARY.

BACKGROUND ON DECISION 934
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2. (SBU) On August 15, the GOM adopted government decision 934,
creating a "State Registry for mineral, natural and potable water
and non-alcoholic bottled beverages." The decision was subsequently
published in the GOM's Official Monitor on August 24. Media reports
note that this decision is based on a similar law in Belarus, the
only country in the CIS to have such a measure. The decision
establishes sanitary norms for mineral, natural and potable water;
sets regulations on the quality, labeling and marketing of
soft-drinks; and requires a state commercial stamp for all bottled
non-alcoholic beverages sold in Moldova. The stamps will be
produced by the Ministry of Information Development and sold by the
State Tax Inspectorate.


3. (SBU) The measure enters into force on January 1, 2008, although
the publication of the implementing regulation, which was due
October 1, has been delayed. A stamp will cost 20 bani (about 1.8
U.S. cents),which is the same as the cost of state commercial
stamps for wine. Multiplied by the hundreds of millions of bottles
of non-alcoholic beverages imported annually into Moldova, the sale
of stamps becomes very lucrative, albeit at the expense of
consumers.

INTERNATIONAL AND BUSINESS PRESSURE MOUNTS...
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3. (SBU) On October 4, we sent a letter to Prime Minister Tarlev,
noting our concerns about the decision as it relates to Moldova's
WTO obligations. We expressed our concern that the measure created
an unnecessary obstacle to international trade. On October 5, the
EU raised the issue with the GOM during the meeting of the MD-EU
Cooperation Council's Sub-Committee on Trade and Investment in
Chisinau. Following the meeting, the GOM promised to send an
official notification to the WTO.


4. (SBU) On November 6, Econoff met with representatives from
Coca-Cola Romania, which covers Moldova. Post also received letters
from the Romanian National Soft Drinks Association (ANBR) and the
Romanian Mineral Water Employers Association (APEMIN),noting their
concerns about this non-trade barrier. On November 15, we received
a letter from Prime Minister Tarlev, assuring us of equal treatment
for domestic producers and imported products, and promising WTO
notification. Tarlev said that Moldovan non-alcoholic beverages
would also require the stamp; thus the GOM would not treat foreign
beverages differently than it treated those bottled in Moldova.

...CAUSING GOM TO DELAY IMPLEMENTATION
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5. (SBU) On November 16, Econoff met Octavian Calmac, Director
General of Trade of the Ministry of Economy, noting U.S. and
industry concerns about the measure. Calmac said the GOM had
prepared the WTO notifications, which would be filed the week of
November 19 by the Moldovan Embassy in Geneva. In addition to the
U.S., he noted mounting pressure from the EU and foreign and
domestic producers. Calmac acknowledged that the pressure had
caused a delay in finalizing the implementing regulations stipulated
by the government decision.


6. (SBU) Calmac said the GOM was awaiting comments and questions
from trading partners and a final determination from the WTO before
moving forward. He noted that internal pressure was also building
and that Speaker of Parliament Marian Lupu, responding to industry
pressure, had recently asked the Executive to re-evaluate the
measure. Calmac asked Econoff to contact the Ministry of Health and
deliver similar points regarding our concerns about trade barriers.
He said this would help better inform the GOM's internal debate.

COMMENT
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7. (SBU) Responding to international and industry pressure, the GOM
has delayed development of the implementing regulations for this
unhelpful decision pending a WTO determination. Sources note that
the Minister of Economy is trying to broker a solution. However,
the involvement of the Minister of Information Development indicates
the interest of the Executive in this measure. Quality-control
measures for water products are necessary in Moldova, because of the
high levels of ground-water contamination. However, this measure
appears to be more about generating revenue than protecting
consumers. It may actually harm rural populations, which need
access to safe bottled water, by increasing prices and reducing
competition in the market. It will also alienate much-needed
foreign investors.

Kirby