IRAQ WTO ACCESSION: BETTER NEWS ON CUSTOMS LEGISLATION

UNCLAS BAGHDAD 003134

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ETRD EFIN EINV IZ
SUBJECT: IRAQ WTO ACCESSION: BETTER NEWS ON CUSTOMS LEGISLATION

REF: A. Baghdad 2898

B. Baghdad 2830

C. Baghdad 2014

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.


1. (SBU) SUMMARY: According to Iraqi officials, political
differences over the stalled draft Law on Customs and Tariffs appear
to have been resolved, and it could be enacted as early as January.
Passing a WTO-compatible customs law would mark a significant step
forward on Iraq's WTO Legislative Action Plan. However, the
accompanying tariff schedule promises to be daunting. END SUMMARY.

A Stalled Bill Slowly Moves Forward
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2. (U) Contacts at the Ministries of Finance and Trade informed us
over the past several days that the draft Law on Customs and Tariffs
-- a key item on Iraq's "Legislative Action Plan (LAP) for
Implementation of WTO Agreements" -- may move forward sooner than
expected. The bill had emerged as the subject of philosophical
differences within the Cabinet, which culminated in August when
Finance Minister Bayan Jabr announced publicly that he intended to
significantly revise the WTO-compatible draft put forward by the
MOT. Some cabinet ministers were concerned that WTO requirements
would jeopardize Iraqi producers by allowing "cheap imports" into
the country against which they could not compete, our contacts
reported. MOF officials were also concerned about a potential loss
of customs revenue. (See Refs A and B.) This contrasts with the
MOT, where most officials recognize the free trade benefits that
lower tariffs are likely to yield.


3. (SBU) These disagreements appear now to be headed toward
resolution. In a Sept. 10 meeting with Econ and Treasury
Counselors, MOF Director General for Customs Ahmed Jassim al-Itiya
indicated that the MOF, MOT and Ministry of Industry have agreed on
a new MOF-drafted bill that "took into account the requirements of
the WTO." The MOF presented the draft to the Shura Council in early
September, Jassim said. Once the Shura ensures its
constitutionality, it should move through the Council of Ministers
(COM) and on to the Council of Representatives (COR) fairly quickly,
he predicted. "We hope for passage by the end of the year."


4. (SBU) Jassim acknowledged that the bill had indeed been the
subject of some controversy. Referring to Jabr's public call for
major revisions, Jassim said that he had received a directive asking
his office to review the Saddam era customs law (Law 23 of 1984) to
see if it could be re-enacted to "replace the Bremer Law" (i.e., the
CPA Directive) currently in effect. After studying Law 23, the
Customs Directorate determined that it would be "unfair" to Iraqi
merchants and would apply restrictions on too many products. "It
just wouldn't work," Jassim determined, and the new draft was
subsequently produced. He added that the GOI is fully committed to
WTO membership, and that the new draft incorporates many of the
suggestions that USAID-funded contractors have offered, as well as
aspects of the legislation that regional governments that have
attained WTO membership -- such as Jordan and Saudi Arabia -- have
enacted.

Tariff Concerns
--------------

5. (SBU) While this step forward on the customs law is encouraging,
Jassim suggested that the tariff schedule that accompanies it will
likely be extremely complex. When we repeated the USG view that a
"low and flat" tariff structure both encourages trade and is the
easiest to enforce (see Ref A),Jassim smiled and admitted that his
directorate is currently considering a schedule that runs to more
than 700 pages. This tome is based on a previous schedule that
dates back to 1955 and was revised when Law 23 was enacted in 1984,
he explained. However, the "revision of 2008" will reflect "the
reality of today" and demonstrate that "we have a goal of being a
WTO member as soon as possible."


6. (SBU) COMMENT AND NEXT STEPS: Fears still linger within the MOF
that low tariff rates could result in import substitution and lost
customs revenue, and we expect that a tariff schedule as complex as
the one Jassim describes is intended to provide protection to Iraqi
industries. That said, his indication that the long-stalled Customs
and Tariff draft may be moving forward soon is welcome news. Jassim
emphasized more than once the Customs Directorate's full commitment
to moving Iraq toward WTO membership, and he even committed to
showing us a draft of the bill (which we will share with our
USAID-funded experts) for comment before it goes to the COR. END
COMMENT.

CROCKER