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
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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
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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