UKRAINE: AMBASSADOR DELIVERS STRONG MESSAGE ON

UNCLAS KYIV 000425

SIPDIS
SENSITIVE

STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA
STATE PLEASE PASS TO USTR FOR CKLEIN, PBURKHEAD, CMORROW
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK
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GENEVA FOR USTR

E.O.: 12958: N/A
TAGS: ETRD EFIN WTRO PGOV UP
SUBJECT: UKRAINE: AMBASSADOR DELIVERS STRONG MESSAGE ON
IMPORT TARIFF LAW, GOU TRYING TO FIX

REFS: A) STATE 17765
B) KYIV 349

SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION.


1. (SBU) Summary: Ambassador Taylor has delivered a
demarche protesting Ukraine's plans for a 13 percent
surcharge on import duties to a range of high-level
government officials, including the President. The GOU
claims it opposed the law and appears to be looking for a
way to remedy the situation. The government may introduce
new legislation to eliminate or reduce the 13 percent
surcharge. End Summary.


2. (U) Ambassador Taylor delivered ref A demarche,
concerning Ukraine's adoption of legislation to raise
import tariffs (ref B),to the following high-level
officials: President Victor Yushchenko, 1st Deputy Prime
Minister Oleksandr Turchinov, and Deputy Prime Minister
(for International Affairs) Hryhoriy Nemyrya. Econoff also
delivered the demarche to Volodymyr Baluta, head of the
Ministry of Economy's WTO Department, and Yevgen Burkat,
head of the MFA's Trade Policy Division. Ambassador Taylor
has requested a meeting with Minister of Economy Bohdan
Danylyshyn to discuss further.


3. (SBU) DPM Turchinov told the Ambassador on February 25
that GOU leadership had in fact opposed the tariff increase
and encouraged the President to veto the law. The
Ambassador pointed out in response that members of BYUT, PM
Yulia Tymoshenko's electoral bloc, had voted overwhelmingly
in favor of the law and that Serhiy Teriokhin, a prominent
BYUT MP, had been the driving force of the initiative.


4. (SBU) Meeting with the Ambassador on February 26, DPM
Nemyrya recognized the problem but did not offer any
potential way forward. (Note: Nemyrya, on the margins of a
February 24 event, had previously intimated to Econoff that
the GOU was looking for a legal loophole to either suspend
enforcement of the law or to reduce the impact on
importers. End note.) Baluta told Econoff on March 2 that
the Ministry of Economy was drafting a new law to lower the
import tariff surcharge from 13 percent to 2-3 percent.
Baluta added that the Ministry was drafting an official WTO
notification on the new tariffs and would submit it as soon
as the Ministry of Finance provided some necessary data,
expected by the week of March 9.


5. (U) PM Yulia Tymoshenko told the press on March 5 that
the GOU was planning to submit a draft law to parliament to
lower or eliminate altogether the 13 percent surcharge.
Tymoshenko noted that the devaluation of the hryvnia (the
national currency) had already eased Ukraine's trade
deficit, making the surcharge "unnecessary." Tymoshenko
added that the "introduction of a 13 percent extra duty
charge directly contradicts Ukraine's agreements within the
WTO."

TAYLOR