UKRAINE: 3/23 WTO UPDATE

UNCLAS SECTION 01 OF 03 KYIV 000688 SIPDIS SENSITIVE SIPDIS STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR USDOC FOR 4201/DOC/ITA/MAC/BISNIS USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK GENEVA FOR USTR MUMBAI FOR WKLEIN BISHKEK FOR GWINSTEAD E.O.: 12958: N/A TAGS: ETRD WTRO ECON PGOV UP SUBJECT: UKRAINE: 3/23 WTO UPDATE REF: A. KYIV 648 ¶B. WINSTEAD-YARNELL EMAIL OF 3/13 ¶C. KYIV 331 ¶D. KYIV 200 ¶E. KYIV 82 KYIV 00000688 001.2 OF 003 ¶1. (SBU) Summary: Ukraine has received comments regarding recently passed WTO-related legislation from members of its WTO Working Party and is working hard to respond to these comments quickly. Legislative drafting on issues of importance to the USG, such as IPR, biotechnology, and VAT on agricultural products, is already underway, although the GOU wants to wait for a Working Party meeting before initiating the next round of legislative action. A new revision of the draft Working Party Report is expected in late March, and the next Working Party meeting in late April or early May. We continue to hear rumors about a breakthrough on the bilateral agreement with Kyrgyzstan, the last remaining for Ukraine's accession, but see no concrete evidence of progress. There has been a major shakeup at the Ministry of Economy, with a new Minister taking over on March 21, but Ukraine's WTO negotiating team remains unchanged. 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 and previous) covers the period February 12 - March 23. GOU Receives Working Party Comments... -------------- ¶3. (SBU) Ukraine in February received comments on its recently passed legislation from WTO Working Party members. Some GOU officials, including Prime Minister Viktor Yanukovych and his foreign policy advisor Konstantin Gryshenko, were initially taken aback by the volume of USG comments. They noted that comments from the European Commission, for example, were significantly shorter, and questioned whether our comments were meant to delay Ukraine's accession. (Comment: The Europeans seem to be relying on the USG to insist on necessary changes in Ukraine's trade regime. Luis Manuel Portero Sanchez, head of the trade section at the Commission's Kyiv office, has repeatedly told Econoff that the EU recognizes remaining problems in Ukrainian legislation but will not insist on many changes, as they will have "another chance" to do so - - presumably referring to Free Trade Agreement negotiations that will follow WTO accession. End Comment.) ¶4. (SBU) Ambassador responded to these concerns on March 8 by noting that the United States often takes the lead in the accession process, and by emphasizing that USG comments now pave the way for substantive progress. Econoff has on several occasions delivered a similar message to Ministry of Economy officials, who have unanimously described their recent series of consultations with USTR as extremely helpful. Vyacheslav Tsymbal, head of the Ministry of Economy's WTO Department, told Econoff on March 23 that he viewed the volume of USG comments as a positive signal that Washington is ready to work out all remaining issues for Ukraine's accession. ...And Responds Quickly -------------- ¶5. (SBU) At the working level, the GOU has moved quickly to respond to Working Party concerns. The State Department for Intellectual Property (SDIP),in cooperation with the Ministry of Economy, has already developed a draft law to bring IPR-related legislation fully into compliance with TRIPS. Elena Scherbakova, head of SDIP's International Relations Department, told Econoff on March 6 that the GOU would try to push this "WTO fix" IPR law through the legislative process as quickly as possible. Oksana Amdjadin, from the Ministry of Economy, forecasted on March 16 that the law could be passed by early summer. Econoff noted that the GOU should also work to ensure that other IPR-related laws currently in the draft stage, such as amendments to the Copyright and Trademark Laws, are in line KYIV 00000688 002.2 OF 003 with WTO principles. Scherbakova agreed, noting that these other draft laws still require significant changes and would not be submitted to the Rada anytime soon. (Note: SDIP is currently accepting public comments in an effort to improve both the Copyright and Trademark draft amendments. The American Chamber of Commerce and European Business Association have both submitted comments reflecting concerns of member companies, many U.S. based. End Note.) ¶6. (SBU) The GOU is also actively working on draft legislation to bring VAT treatment of agricultural products in line with WTO rules, and to create a legal framework for products of biotechnology, as agreed in our bilateral Market Access Agreement. The GOU sent proposed language for a biotech law to Washington on March 7. Tsymbal told Econoff on March 23 that the GOU would wait for feedback from Washington before proceeding. ¶7. (SBU) Former Minister of Economy Volodymyr Makukha (who might have continuing responsibilities for WTO if he becomes a Deputy Minister of Foreign Affairs) told Ambassador on March 23 that four legislative issues -- used car imports, VAT on agricultural products, insurance, and banking -- are particularly sensitive in the Rada and would be difficult for the GOU to readdress. He queried the Ambassador on Washington's possible "flexibility" on these issues, and Ambassador promised to relay his concerns. ¶8. (SBU) Econoff asked Tsymbal if the GOU had yet developed a complete action plan laying out the legislative and regulatory changes necessary for accession. Tsymbal said that, because there could be disagreement among Working Party members regarding the necessity of some changes, the GOU would wait until the next Working Party meeting before finalizing its action plan. An advisor to the Ministry told Econoff on March 14 that several draft laws likely to be necessary for accession, such as amendments to the Law on Veterinary Medicine, had already been drafted, but that the GOU would want to receive its "marching orders" from the Working Party before initiating the legislative process. (Comment: Some GOU officials had misguidedly presented the package of WTO-related laws passed in December 2006 as the last required for accession. The GOU can expect public criticism when it announces that additional legislation is required. The GOU will be better able to secure new legislation in the wake of a Working Party meeting. End Comment.) Next Steps -------------- ¶9. (U) Ukraine's Working Party held informal consultations in Geneva on March 16. The WTO Secretariat is now revising the draft Working Party Report and should distribute a new revision at the end of March. The next Working Party meeting is expected to take place in late April or early May. A plurilateral meeting to discuss agricultural support levels will likely take place on the margins of the Working Party meeting. More Rumors of Kyrgyz Bilat Breakthrough -------------- ¶10. (SBU) Local media reported that President Yushchenko and Prime Minister Viktor Yanukovych discussed Ukraine's sole remaining bilateral market access agreement (ref C) with their Kyrgyz counterparts on March 7 and 10, respectively. One report claimed that an agreement would be signed within "5-7 days." Deputy Prime Minister Mykola Azarov subsequently announced on March 16, "The Kyrgyz government has officially notified us that it is prepared to sign the [agreement]." A source within the Cabinet of Ministers also said that agreement had been reached, and that a formal announcement would likely be made in late March. ¶11. (SBU) Tsymbal confirmed that talks did occur but was much less optimistic that an agreement would be immediately forthcoming. He told Econoff on March 23 that the GOU had not yet received a reply from the Kyrgyz on its most recent KYIV 00000688 003.2 OF 003 proposal. Post understands from Embassy Bishkek that Kyrgyz officials were also more pessimistic as of March 13 (ref B). New Minister of Economy Anatoliy Kinakh told Ambassador on March 23 that he hoped a resolution could be worked out at the next meeting of the Ukraine-Kyrgyzstan Bilateral Commission planned for the second week of April. (Comment: Previous rumors of a breakthrough with the Kyrgyz have proven misleading. Post therefore views these latest reports with cautious optimism. End Comment.) Shakeup at Ministry of Economy -------------- ¶12. (U) Anatoliy Kinakh, head of the Party of Industrialists and Entrepreneurs, replaced Volodymyr Makukha as Minister of Economy on March 21 (ref A). Meeting with the Ambassador on March 23 (septel),Kinakh affirmed his full commitment to pursuing WTO accession as soon as possible. Ambassador told Kinakh that the USG continues to strongly support Ukraine's accession, and outlined a few key issues, such as grain export restrictions, biotech framework, and beef/pork imports, that the GOU needs to work on. Five new deputy ministers were also named, but Deputy Minister and lead WTO negotiator Valeriy Pyatnytskiy survived the shakeup. No changes in Ukraine's WTO negotiating team are expected. TAYLOR