AUSTR WILSON'S VISIT TO UKRAINE: PORK BAN LIFTED

UNCLAS SECTION 01 OF 04 KYIV 001093 SIPDIS SENSITIVE STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA STATE PLEASE PASS TO USTR FOR CWILSON, CKLEIN AND PBURKHEAD COMMERCE FOR CLUCYK GENEVA FOR USTR E.O.: 12958: N/A TAGS: ETRD ECON WTRO PGOV UP SUBJECT: AUSTR WILSON'S VISIT TO UKRAINE: PORK BAN LIFTED REFS: A) KYIV 1086 B) KYIV 777 C) 2008 KYIV 2017 D) 2008 KYIV 1875 ¶1. (SBU) Summary: Assistant U.S. Trade Rep (AUSTR) for Europe and the Middle East Chris Wilson visited Kyiv June 22-23. AUSTR Wilson delivered a positive message on our desire to expand bilateral trade and investment. The GOU gave us some good news, lifting a ban on U.S. pork put in place due to H1N1 fears. GOU reps expressed a desire to lift the current 13 percent import tariff surcharge on cars and refrigerators, although several interlocutors cautioned that positive action from parliament was far from certain. AUSTR Wilson praised the GOU for its efforts to improve IPR enforcement and highlighted a few areas where more progress was needed. AUSTR Wilson also raised a litany of trade and investment climate irritants affecting U.S. companies; GOU interlocutors took his points and promised to follow up on several issues. GOU officials again raised continued U.S. anti-dumping orders on Ukrainian metal and chemical products. Several officials identified a Free Trade Agreement with the EU as Ukraine's most important trade-related goal; one prominent think-tanker expressed concern that Ukraine and the EU might, for political expediency, give up on a more ambitious "Deep FTA." The GOU reaffirmed its desire to join the WTO Government Procurement Agreement, although cautioned that the need for legislative changes would slow the process. AUSTR Wilson and GOU officials agreed to hold the next meeting of our bilateral Trade and Investment Council in Washington this fall. End Summary. Pork Ban Lifted -------------- ¶2. (U) Minister of Agriculture Yuriy Melnyk and Chief Vet Petro Verbitsky informed AUSTR Wilson on June 22 that the GOU had finally lifted its ban on U.S. pork, put in place as a result of H1N1 flu fears on April 27 (ref B),with immediate effect. (Note: We received a letter later in the day on June 22, dated June 15, confirming that the ban had in fact been lifted. End note.) AUSTR Wilson thanked the GOU for its action and reaffirmed in interviews with the press that the scientific community had found no link between the H1N1 flu and consumption of pork. 
13 Percent Import Tariff Surcharge -------------- ¶3. (SBU) AUSTR Wilson thanked the GOU for repealing the 13 percent import tariff surcharge on most goods, but noted that the measure continued to have a negative impact on trade. He explained that the USG did not believe Ukraine was facing a balance-of-payments crisis justifying such action, and the structure of the measure, for example by identifying specific goods, was not in line with WTO rules. GOU officials responded they were hoping to completely remove the measure in the near future, but that action by the Rada (parliament) would be required. Minister of Economy Bohdan Danylyshyn noted that he had spoken out publicly against the measure and said he hoped the Rada would move to cancel the surcharge entirely before the end of its current session on July ¶10. ¶4. (SBU) Influential Opposition MP Iryna Akimova cautioned AUSTR Wilson that protectionist sentiment was still running high within the Rada. She estimated the odds at 50-50 that the Rada would pass legislation eliminating the remaining 13 percent tariff surcharge on cars and refrigerators. (Note: AUSTR Wilson's meetings came before the June 24 Constitutional Court ruling on this matter, which may force the GOU to reinstate the surcharge on the longer list of goods (ref A). End note.) Intellectual Property Rights -------------- ¶5. (U) AUSTR Wilson praised the GOU for its progress in recent years in improving IPR protection and encouraged continued GOU dialogue with industry and with the USG KYIV 00001093 002 OF 004 through our IPR Enforcement Cooperation Group. He also noted a few areas -- internet piracy, transshipment of IPR-infringing goods, government use of pirated software, and illegal camcording in movie theatres -- where we hoped to see additional progress. ¶6. (SBU) Volodymyr Dmitrishyn, Acting Chairman of the State Department of Intellectual Property, said that SDIP appreciated USG support on IPR issues and welcomed continued cooperation. Dmitrishyn recognized illegal camcording as an important issue that was not properly addressed in Ukrainian legislation. He noted that SDIP was already working on a draft amendment to the Copyright Law but would in the meantime seek to address the camcording issue through regulatory fixes. Dmitrishyn described internet piracy as a particularly challenging area and welcomed USG help in offering best practices for Ukraine to follow. On software piracy, Dmitrishyn recognized that the GOU needed to set a better example in using only legitimate software, although he argued that consistent progress had lowered the piracy level in government agencies from 89 percent in 2002 to 51 percent in 2009. VAT Refunds -------------- ¶7. (SBU) American Chamber of Commerce members identified arrears in the GOU's repayment of value-added tax (VAT) to exporters as a major impediment to doing business. Akimova described VAT arrears as a long-running problem usually caused by corruption but noted that the budget crisis was now driving the arrears, as the GOU intended to use un-refunded VAT to finance the budget. Several prominent Amcham members agreed with this assessment. Deputy Minister of Economy Natalia Boytsun blamed "procedural problems" for the accumulation of VAT arrears and said she was engaged with the State Tax Administration to resolve the issue. Customs Valuation -------------- ¶8. (SBU) AUSTR Wilson identified customs valuation problems -- particularly the inflation of customs value by Ukrainian Customs -- as a significant barrier to trade and investment. Melnyk said that the Ministry of Agriculture was fully aware of the issue and often tried to help importers struggling to obtain customs clearance of agricultural goods. Melnyk added that he believed Customs already had all the necessary tools to properly value imports and that he would continue to push Customs to fix the problems. State Reserve Dispute -------------- ¶9. (SBU) AUSTR Wilson encouraged the GOU to engage constructively with U.S. poultry companies who faced significant losses in late 2008 when Ukraine's State Reserve failed to pay for poultry shipments. He noted that the U.S. companies intended to proceed with arbitration through our Bilateral Investment Treatment and argued that a negotiated, mutually-accepted solution would be preferable. Danlyshyn said he was aware of the dispute and that officials from his Ministry would be meeting with the State Reserve within days to discuss. He stressed his preference to avoid such disputes and said he would be willing to meet with the U.S. companies or their local representatives to discuss in more detail. ¶10. (SBU) Melnyk expressed his disapproval of the original deal with the State Reserve, calling it an "artificial import scheme." He did, however, agree to encourage a settlement between the parties. Poultry AD Investigation -------------- ¶11. (SBU) AUSTR Wilson asked GOU officials for an update on an ongoing anti-dumping investigation against U.S. poultry producers. AUSTR Wilson noted that the GOU had sent mixed signals on whether or not Ukraine intended to KYIV 00001093 003 OF 004 use sampling as part of the investigation, and he urged the Ministry of Economy to give serious consideration to companies' requests for more time in filling out the informational questionnaire. Danylyshyn and Boytsun promised to provide reasonable extensions and accurately noted that they had already been accommodating. Boytsun and Roman Bestrakevich, head of the Ministry's Anti- Dumping Department, noted that it had already been months since the questionnaire was sent out to companies and expressed some concern that they could not delay the investigation endlessly. ¶12. (U) Bestrakevich clarified that, at a later date, the Ministry may or may not decide to use some kind of sampling in the course of the investigation. Regardless of that decision, all exporters who wanted to participate in the investigation must now provide a response to the full questionnaire. Companies that did not submit the full questionnaire should understand that the GOU may use other available information to make a determination, and may lump companies together rather than treat them individually, said Bestrakevich. Biotech -------------- ¶13. (SBU) AUSTR Wilson encouraged the GOU to develop an effective regulatory regime for the products of agricultural biotechnology, in line with bilateral commitments made by Ukraine during WTO accession negotiations. Melnyk said that, although the Rada passed the basic biotech framework law in 2007, the GOU needed additional time to develop necessary regulations due to its lack of expertise in this area. Melnyk said that a package of draft regulations were currently making its way through the interagency approval process and that he hoped the regulations would be issued within a month. AD Orders on Ukrainian Metals/Chemicals -------------- ¶14. (SBU) Danylyshyn and other officials asked about U.S. anti-dumping orders on Ukrainian metal and chemical products that remain in place from before Ukraine had achieved market economy status. AUSTR Wilson said he would pass on the GOU's concerns to the Department of Commerce but noted that he understood that action was needed from Ukrainian exporters before the AD orders could be rescinded. EU FTA -------------- ¶15. (SBU) Danylyshyn described Ukraine's potential Free Trade Agreement (FTA) with the European Union (ref D) as a key strategic goal. He painted a rosy portrait of the status of negotiations, saying they could be finished by the end of the year. Minister of Agriculture Melnyk cautioned that the EU FTA would create difficulties for Ukraine's ag sector and appeared less of a supporter of the agreement. ¶16. (SBU) Opposition MP Akimova expressed strong support for the EU FTA, calling it more important than NATO accession in integrating Ukraine with Europe, as it would address more fundamental economic issues. She said Ukraine should accelerate the process but questioned the commitment of the current government and its ability to properly consult with the Rada and private sector as part of the negotiations. ¶17. (U) Olga Shumylo, director of the well-respected think tank International Centre for Policy Studies (ICPS),emphasized the importance of the FTA and urged the USG, although it was not a party to the talks, to nonetheless support the negotiations. Shumylo expressed concern that Ukraine and the EU might for political reasons seek a speedy conclusion to the negotiations by avoiding the more difficult administrative reform issues needed to truly integrate Ukraine with Europe -- i.e. pursue a less-ambitious, simple FTA rather than a "Deep FTA." KYIV 00001093 004 OF 004 Government Procurement -------------- ¶18. (U) AUSTR Wilson encouraged Ukraine to accede to the WTO Government Procurement Agreement (GPA) and asked for an update on Ukraine's progress. Zhanna Pastovenska, from the Ministry of Economy's WTO Department, noted that Ukraine officially became an observer to the GPA on February 25 and that the Ministry was currently working with other GOU agencies on Ukraine's initial offer to begin accession procedures. Pastovenska said that the GOU was actively pursuing GPA accession but cautioned that legislative amendments would be necessary, likely slowing down the process. Both Sides Committed to Relationship -------------- ¶19. (U) AUSTR Wilson delivered a clear message to all interlocutors and the press that the USG wanted to expand and strengthen our bilateral trade and commercial ties. His interview with the daily paper Kommersant Ukraine is available online at http://kommersant.ua/doc.html?docId=1192768. Danylyshyn emphasized the "strategic importance" of our bilateral ties and said the GOU wanted to expand cooperation on trade and investment issues. Danylyshyn proposed that we develop a roadmap for increased cooperation, perhaps to be adopted at the next meeting of the Trade and Investment Council. Next TICA Council Meeting -------------- ¶20. (U) AUSTR Wilson and Danylyshyn agreed to try to hold the next meeting of our bilateral Trade and Investment Council in the fall in Washington. (Note: The first meeting of the Council took place in Kyiv in October 2008 (ref C). End note.) Both sides agreed that the private sector should be actively involved. ¶21. (U) USTR has cleared on this message. PETTIT