Afghanistan-Pakistan Transit Trade Talks Postponed:

UNCLAS SECTION 01 OF 02 KABUL 003102

C O R R E C T E D C O P Y (REMOVED DECLAS INSTR)

SIPDIS
SENSITIVE

SRAP FOR MARY BETH GOODMAN AND BOB DEUTSCH
DEPT PASS USTR DEANGELIS

E.O. 12958
TAGS: ETRD PREL AF PK
SUBJECT: Afghanistan-Pakistan Transit Trade Talks Postponed:
Charting a New Way Forward

REF: (A) KABUL 3036 (B) KABUL 3000 (C) KABUL 2943

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1. (SBU) Summary: Afghan Deputy Commerce Minister (and Chief Transit
Trade Negotiator) Adib Farhadi told Embassy October 4, that the
Pakistan side that day had requested a formal postponement of the
upcoming fourth round of the Afghanistan-Pakistan Transit Trade
Agreement (APTTA) until Islamabad received notification from the
Afghanistan's Foreign Minister that the re-export/smuggling study
(Refs A and B) will go ahead as planned and be incorporated into the
APTTA. In the absence of Commerce Minister Shahrani (in the U.S.
October 4-9),Farhadi is leading the effort to try to persuade the
Foreign Ministry to reverse its stand to exclude the
re-export/smuggling study. Looking for creative ways to bridge the
impasse, Farhadi said that reciprocal side-letters on the
re-export/Wagah issues would not work. However, he is open to the
notion of "protocols," but only if they are approved by both
parliaments and enforceable as international agreements. U.S.
officials can usefully raise the protocol option and other creative
solutions to end this impasse with Commerce Minister Shahrani now in
Washington. We will also look to raise the issue with Foreign
Minister Spanta. End summary.


2. (SBU) Chief APTTA Negotiator Farhadi told ECONCOUNS Oct. 4, that
the Pakistan side had formally requested the upcoming fourth round of
APTTA talks in Kabul be postponed until Afghanistan's Foreign
Minister notifies Islamabad that the re-export/smuggling study will
"go ahead as planned and be incorporated into the APTTA." Farhadi
said he is disappointed because the decision sets back the talks, but
added the lost time could be made up if the impasse is quickly
bridged with the Foreign Ministry.

Strategic Trade-Off: the Wagah Crossing and Re-exports
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3. (SBU) Farhadi said the postponement may be a blessing in disguise
since it gives both sides a chance to "get the issue right." He
repeatedly stressed that omitting the re-export study from the APTTA,
currently embodied only as a textual footnote, could compel the
Pakistan side to withdraw its bracketed APTTA language on the Wagah
border crossing. Such an outcome would set the talks back further
and could be leaked to the press, aiding hard-liners on both sides
opposed to making any concessions concerning re-exports and Indian
market access.


4. (SBU) Farhadi said Pakistan's chief negotiator had already
privately committed to a five-year transitional period giving
Afghanistan unimpeded truck access to the Indian market -- but only
in exchange for Afghanistan's compliance with the re-export study's
recommendations, something that would be completed after the APTTA is
signed. The Pakistan side needed the re-export study, he explained,
to ensure Indian goods are not re-exported back into Pakistan from
Afghanistan. Farhadi opined that Pakistan is not seriously concerned
with Western goods being re-exported into Pakistan from Afghanistan,
but wants safeguards in place to prevent Indian goods from being
smuggling into Pakistan and giving the Indians an export advantage
without liberalizing overall trade flows.

Multi-year Plan to Open the Wagah Border
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5. (SBU) In return for Afghanistan's full compliance with the
re-export study's recommendations, Pakistan would:

--in Year One of the APTTA going into effect, permit Afghan trucks
unimpeded access to the Pakistan side of the Wagah border.

--in Year Two, permit Afghan trucks unimpeded access to the Indian
side of the Wagah border.

--in Year Three, permit Afghan trucks to return from India with
certain Indian goods.

--In Year Four, permit Afghan trucks to return from India with an
expanded number of Indian goods.

--In Year Five, grant Afghanistan full access to India in terms of
transport and Indian imports.

Potential Solution: "Separate Protocols"
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6. (SBU) Farhadi rejected the idea of separate side-letters
addressing the Wagah/re-export issues because such a modality is not
legislatively approved but constitutes an executive branch commitment
that can be more easily modified. Nonetheless, he said he is open to
introducing the notion of "protocols separate from but parallel with
the APTTA" -- as long as they are approved by both parliaments and

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thus enforceable as international agreements.


7. (SBU) Farhadi's stated preferred course is to convince the
Foreign Ministry to reverse its position on the re-export study.
Short of that, he would turn to the protocol option, if it resonates
with the Pakistan side.

Next Steps
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8. (SBU) Farhadi repeatedly stated the APTTA issue does not receive
careful Presidential review because other issues, notably the
election outcome, "crowd it out." Despite these difficulties,
Farhadi states he remains confident the fourth round could be held
November 17-18, if the current impediments are overcome, and that the
two sides can conclude the APTTA by the end of 2009.


9. (SBU) United States officials can usefully encourage Commerce
Minister Shahrani (visiting Washington October 4-9) to continue
seeking a creative solution (such as "separate but independent
protocols") to address the impasse with the Foreign Ministry. We
will also look to meet soon with Foreign Minister Spanta and engage
him on the need to move forward.

Eikenberry