UKRAINE SIGNS BILATERAL WTO AGREEMENT WITH KYRGYZSTAN,

UNCLAS SECTION 01 OF 02 KYIV 002824 SIPDIS SIPDIS STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA STATE PLEASE PASS TO USTR FOR KLEIN/BURKHEAD USDOC FOR 4201/DOC/ITA/MAC/BISNIS USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK GENEVA FOR USTR E.O.: 12958: N/A TAGS: ETRD WTRO ECON PGOV UP SUBJECT: UKRAINE SIGNS BILATERAL WTO AGREEMENT WITH KYRGYZSTAN, REMOVES MAJOR OBSTACLE TO ACCESSION REF: A) BISHKEK 1354 B) Kasper-Klein Email of 11/01 C) KYIV 2722 D) KYIV 2500 E) KYIV 331 ¶1. Summary: Ukraine signed a WTO bilateral agreement with Kyrgyzstan on November 14, removing the major hurdle to accession. The GOU agreed to pay $27.3 million worth of humanitarian assistance to Kyrgyzstan in order to secure the deal. Meanwhile, the GOU reports that it has also signed an agreement with Vietnam, the last needed for accession. Disagreement with the EU over export duties remains the only unresolved issue. The GOU still needs to follow up on several commitments of importance to the USG, but we are confident that these issues will not delay accession. With the Kyrgyz agreement now signed, Ukraine is poised to wrap up accession within a matter of months. End Summary. Kyrgyz Bilat - Done -------------- ¶2. Following high-level negotiations in Bishkek November 12-14 (ref A),Ukraine and Kyrgyzstan signed a WTO bilateral Market Access Agreement on November 14. Ukrainian Foreign Minister Arseniy Yatsenyuk made the announcement to the media late in the evening on the 14th, and the official website of the Kyrgyz President carried a similar press release on the 15th. As part of deal, Ukraine agreed to provide $27.3 million in "humanitarian aid as the result of the recent earthquake" to Kyrgyzstan. This figure matched the amount claimed by Kyrgyzstan as debt owed by Ukraine (refs B, C, E),but Ukraine refused to recognize the claim as state debt. President Viktor Yushchenko issued a decree on November 13 instructing the government to provide this assistance money, and the Cabinet of Ministers formally approved the proposal on November 14. (Note: We have not been able to discuss the details of the agreement with Ukraine's lead negotiators, as they have not yet returned to Kyiv. Their staff at the Ministry of Economy has confirmed the signing of the deal, however. End Note.) Vietnam Bilat - Done -------------- ¶3. Newly-acceded WTO member Vietnam joined Ukraine's WTO Working Party late in the game, just in time for the latest Working Party meeting on October 25 (ref C). Ukraine's lead WTO negotiator Valeriy Pyatnytskiy traveled to Vietnam for talks immediately before his trip to Kyrgyzstan, and Ministry of Economy official Zhanna Pastovenska told Econoff on November 15 that a bilateral Market Access Agreement had already been signed. (Note: Pyatnytskiy and Serhiy Korsunskiy, Director of the MFA's Economic Cooperation Department, had previously told Econ Counselor that the Vietnamese only wanted Market Economy Status from Ukraine, and that since Ukrainian anti-dumping laws did not have provisions for Non-Market Economy Status, this made the issue easy to solve. End Note.) EU Export Duties Issue - Still Unresolved -------------- ¶4. Perhaps the only issue still holding up Ukraine's accession is a disagreement with the European Union over export duties. The Europeans have requested beefed-up language in the draft Working Party Report regarding Ukraine's commitment not to use export duties that violate WTO rules. In particular, the Europeans want Ukraine to promise not to introduce any new export duties "unless justified under an exception of the WTO Agreement." Pastovenska, who takes the lead for Ukraine on drafting the Working Party Report, told Econoff on November 15 that the GOU had not made any progress in talks with the Europeans on the subject. Luis Manuel Portero Sanchez, Head of the European Commission's Trade and Economic Section in Kyiv, told Econoff on November 9 that the Europeans had seen no progress from their side either, and said he thought consultations between EU and USG negotiators might help. Outstanding U.S. Issues - Not Holding us Back -------------- ¶5. Post continues to stress that the GOU still needs to follow through on several issues of importance to the USG, including implementing regulations to create a system of registration for the products of biotechnology, amendment to the country's trade remedy laws, and amendment to laws affecting Technical Barriers to Trade (TBT). The GOU has shown goodwill and willingness to move forward KYIV 00002824 002 OF 002 in all these areas, however, and we are confident of continued progress. One problem area, however, could be Ukraine's use of grain export restrictions, which the GOU has promised to eliminate prior to accession, but have meanwhile been extended well into 2008 (ref D). However, GOU negotiators have consistently confirmed to us they will follow through on their commitment to lift the restrictions. Comment: Major Hurdle now Cleared -------------- ¶6. The conclusion of an agreement with Kyrgyzstan marks a major step forward for Ukraine's accession. Kyrgyzstan's prior intransigence (ref B) had threatened to delay accession indefinitely. With this hurdle now cleared, Ukraine is poised to wrap up accession within a matter of months. The GOU will seek a final Working Party meeting as soon as possible to approve the final version of the Working Party Report, in the hopes to finish in time for a WTO General Council vote at its December 19-20 meeting. By that time, Ukraine's new Parliament should be in place, ready to pass a few outstanding laws and to ratify the accession. TAYLOR