IRAQ'S WTO ACCESSION PROCESS TEMPORARILY STALLED

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001701 SIPDIS STATE PASS USTR E.O. 12958: DECL: 06/23/2019 TAGS: ETRD EFIN PGOV ECON IQ SUBJECT: IRAQ'S WTO ACCESSION PROCESS TEMPORARILY STALLED REF: A. BAGHDAD 1601 ¶B. BAGHDAD 1223 ¶C. BAGHDAD 636 Classified By: Economic Counselor Michael Dodman, Reasons 1.4 (b,d). ¶1. (C) SUMMARY: Iraq's WTO accession efforts have reached a temporary standstill. The MOF appears to have deliberately submitted to the Council of Representatives (COR) a customs tariff bill that is not WTO-compatible, further delaying the long-awaited Initial Goods Offer. A lack of leadership at the Ministry of Trade (MOT) also threatens to delay Iraq's submission of its Services Offer until 2010, even though the MOT's WTO Unit will likely have a reasonable initial offer ready by September. Several pieces of draft legislation from Iraq's Legislative Action Plan are also ready, but the GOI remains reluctant to submit them to Geneva for comment prior to sending them to the Council of Representatives (COR) for approval. We continue to urge GOI officials to view the WTO accession process as a dialogue -- one in which they may submit incomplete information or partially completed "initial" offers to the WTO for discussion, even as they move through the slower negotiation and approval process here in Baghdad. We continue to assist the WTO Unit in its effort to work through onerous approval requirements and to overcome the MOF's increasingly obvious obstruction. END SUMMARY. Still Awaiting the Long-Awaited Goods Offer -------------- ¶2. (SBU) The GOI remains reluctant to submit its Initial Goods Offer, despite the good progress that the MOT's WTO Unit has made within the GOI interagency to compile it over the past several months (Refs B and C). The current draft Offer still has several deficiencies, including some 20 commitments on trade in goods that remain only partially addressed, as well as some 300 items on the new tariff schedule that are sure to raise eyebrows at the WTO. Nevertheless, in our judgment the GOI has already pulled together a reasonable Initial Offer that would serve as a decent basis for opening negotiations at a Third Working Party -- if the GOI would just submit it. ¶3. (C) Unfortunately, several recent events and the Iraqi predilection for extremely centralized decision making have prevented submission of the Goods Offer. The arrests in May and June of several senior MOT officials, including Minister Abd Al-Falah Al-Sudani (Ref A),have left a power vacuum at the top of the Trade Ministry. WTO Unit officials tell us bluntly that they cannot move the Goods Offer forward without explicit approval from new Acting Trade Minister Safa Al-Din Al-Safi who is also Minister of State for Parliamentary Affairs) -- and Al-Safi has not even met with the WTO Unit yet. Further undermining progress on the Goods Offer is what appears to be outright obstruction from the Ministry of Finance. As reported in Reftel B, the Minister of Finance rejected a WTO-compatible draft customs tariff law (provided by USAID's contractors) and sent forward its own two-page bill that does little more than legally discontinue the current 5% reconstruction levy and replace it with the new draft tariff schedule. The new Director General of Customs -- a former Ministry of Interior official with close ties to Finance Minister Bayan Jabr but no finance or customs experience -- has also reassigned the customs service's representative to the GOI's Goods Offer committee and refuses to replace him. According to the head of the MOT's WTO Unit, the MOF continues to say it supports the GOI's WTO bid, but its actions betray an increasingly obvious opposition to the Qits actions betray an increasingly obvious opposition to the process. Services Offer: The Perfect Becomes the Enemy of the Good -------------- -------------- ¶4. (SBU) As with the Goods Offer, the GOI has made decent progress on compiling its Initial Services Offer. Several significant portions of the Offer -- including tourism, financial services, and information technology/research -- are already at the stage where they could be submitted to the WTO for initial comment, and the telecom and maritime transport portions will be ready by September. However, MOT officials say that they have been instructed not to submit any part of the ACC5 until all portions are "complete" and vetted by the Council of Ministers (and perhaps even the COR) -- a stage they will not reach until at least mid-2010. We have urged the GOI to treat the Offer as exactly what it is -- an INITIAL offer that does not need to be perfect, but only needs to serve as a basis to begin a dialogue in Geneva. But again, without approval from the highest levels, the WTO Unit cannot go forward. Key Legislation Drafted -------------- BAGHDAD 00001701 002 OF 002 ¶5. (SBU) The WTO Unit has finalized three key items from the GOI's Legislative Action Plan: the sanitary/phytosanitary draft law, the intellectual property rights (IPR) law, and the technical barriers to trade law. They have also completed the English translations required by the WTO. We continue to urge (thus far without success) the GOI to submit the English drafts to the WTO for comment prior to beginning the long process of seeking COM approval and enactment by the COR. Comment -------------- ¶6. (C) Aside from the MOT's leadership vacuum and the MOF's obstruction, the current lull in progress on WTO accession is part of an overall slow place of government activity that will continue as Iraqi leaders position themselves for the January 2010 national elections. The COR is moving slowly on its extensive legislative docket while it focuses attention on increasingly aggressive and high-profile oversight of the executive branch, and line ministries are often over-cautious and slow to make decisions. For these reasons, it is unlikely that the GOI and CoR will seriously focus on WTO accession issues until after the new government and the new COR are seated in 2010. Until then, our focus will remain on helping the Iraqis prepare the technical aspects of their WTO accession package -- drafting legislation, compiling answers to the Working Party's questions, and gathering the data needed to complete the Goods and Services offers. END COMMENT. FORD