AF-PAK Transit Trade Talks Hit Snag

1. (SBU) Summary: Foreign Affairs Minister (FM) Spanta recently
rejected the Terms of Reference (TOR) for the re-
export/smuggling study that both the Afghan and Pakistan
governments agreed upon in principle during the third round of
APTTA talks, according to Commerce Deputy Minister Farhadi.
This rejection is an APTTA Qdeal-breakerQ for the Pakistan side,
which has refused to participate in the upcoming fourth round of
talks, slated for October 10-12, until the Afghan Foreign
Ministry reverses its decision, according to Farhadi. Foreign
Minister Spanta is currently in New York participating in the
United Nations General Assembly (UNGA) until October 5. Embassy
recommends senior U.S. officials meet with Spanta on the fringes
of the UNGA to seek his agreement that the TOR go ahead in order
to keep the APTTA on track for completion by the end of 2009.
(Comment: Spanta and Afghan Commerce Minister Shahrani have had
differences on other aspects of this negotiation, including over
the importance of the Wagah border crossing to India. End
Comment.) End summary.



2. (SBU) Commerce Deputy Minister (and Chief APTTA negotiator)
Adib Farhadi told EconCouns September 28 that FM Spanta rejected
the TOR for the re-export/smuggling study in early September and
had so notified the Pakistan side at that time via the Afghan
embassy in Islamabad. The Pakistan side later notified the
Afghan Commerce Ministry which has subsequently and
unsuccessfully tried to discuss the issue with FM Spanta and to
raise it in the Afghan cabinet. To date, the issue remains
unresolved.

Re-export/Smuggling Study Key to APTTA
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3. (SBU) Deputy Minister Farhadi says the Pakistan side
considers FM SpantaQs rejection of the TOR (funded by USAID) a
Qdeal breakerQ for the APTTA talks. As previously reported in
ref (A), the Pakistan side had counted on Afghan concurrence
that the key recommendations of the re-export study would be
implemented upon the studyQs completion in the next 6-12 months
and such an understanding would be incorporated into the APTTA.
The Afghan side, lead by the Commerce Ministry, had accepted
this position in principle, making it clear they must, in
return, receive unimpeded access to PakistanQs Wagah border
crossing with India. As a result of the FMQs recent rejection,
the Pakistan side has refused to participate in the upcoming
fourth round in Kabul, now slated for October 10-12, until the
FM has reversed his decision.

Spanta Objects...
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4. (SBU) Foreign Minister Spanta reportedly has two objections
to the re-export/smuggling study, according to Farhadi:

--the study is unnecessary to advance AfghanistanQs initiative
to improve transit trade access through Pakistan. Since
Afghanistan currently places no barriers on PakistanQs
lucrative access to Central Asia, Pakistan should not seek to
impose this additional condition in the APTTA;

--and the study appears to be a U.S.-driven and U.S.-led
initiative that involves U.S. policy objectives related to its
anti-corruption agenda. As such, the study is not germane to
the APTTA.

...But Spanta is Missing Key Points
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5. (SBU) Foreign Minister SpantaQs trade policy staff do not
have the influence or clout to advise him that his reported
views on the re-export study do not reflect key realities,
according to Farhadi. Deputy Minister Farhadi noted that
SpantaQs views appear to be shaped by an outside economic
advisor and/or the Presidential Palace. He added that the re-
export/smuggling study addresses the issue of AfghanistanQs
tariff-free imports (coming in largely from Karachi and Qre-
exportedQ or smuggled into Pakistan, to avoid duties) but also
addresses the delays of those imports initially transiting
through Pakistan and their relatively high transit costs. He
argued that Spanta must realize that it is just as important
that the study address the delays of Afghan imports transiting
Pakistan as it is for Pakistan to resolve their perceived
problems of re-exports. In this sense, the re-export study
offers both sides a potential win-win, if the studyQs
recommendations are binding on the APTTA and implemented.


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6. (SBU) In addition, Spanta reportedly argues that this
initiative is U.S.-led and U.S.-driven to advance anti-smuggling
goals. On the contrary, Farhadi told us the Pakistani and
Afghan negotiators made clear in the third round that the TOR
and subsequent study was their initiative -- and noted that
launching the study would mark a major step toward a final APTTA
agreement. The U.S. role was, and is, solely confined to
funding the TOR and re-export study as a contribution to
advancing this important trade initiative for both sides. In
addition, he stressed the U.S. government has had no direct role
in shaping or approving the TOR or in approving the advisors to
carry it out. Finally, he noted that the Afghan and Pakistan
sides plan to select the consultants to carry out the actual re-
export study, without any U.S. government concurrence.



7. (SBU) Comment and Recommendation: Foreign Minister Spanta is
in New York participating in the United Nations General Assembly
until October 5. Embassy recommends that senior U.S. officials
meet with Spanta on the fringes of the UNGA to seek his
understanding that the TOR go ahead as agreed upon in order to
keep the APTTA on track for completion by the end of 2009. We
understand Spanta may believe the re-export study is a U.S.
policy tool. However, he should be reminded that the U.S.
played only a facilitating, supportive role. Following a
readout on U.S. meetings with FM Spanta on this issue, we will
pursue additional meetings here to ensure that both the Afghan
and Pakistan sides can keep the APTTA talks on track for October


10. (We not, however, that Foreign Minister Spanta has told us
previously that he disagrees with this Commerce Ministry over
another key issue: the Priorities which that Ministry has put on
reaching a solution to access for Afghan goods to India via the
Wagah border crossing. Spanta has argued to senior U.S.
officials that the Wagah issue should not block an APTTA
accord.) If the issue remains unresolved by that date, the next
round of talks would likely occur on or around November 10.
However, such a postponement could delay the APTTA process into


2010. End comment.

EIKENBERRY