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Cablegate: Ukraine: 3/23 Wto Update

VZCZCXRO4089
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHKV #0688/01 0821541
ZNR UUUUU ZZH
P 231541Z MAR 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 1691
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHGV/USMISSION GENEVA 0059
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHEK/AMEMBASSY BISHKEK 0004
RUEHBI/AMCONSUL MUMBAI 0006

UNCLAS SECTION 01 OF 03 KYIV 000688

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA
STATE PLEASE PASS TO USTR FOR KLEIN/MOLNAR

USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
GENEVA FOR USTR
MUMBAI FOR WKLEIN
BISHKEK FOR GWINSTEAD

E.O.: 12958: N/A
TAGS: ETRD WTRO ECON PGOV UP
SUBJECT: UKRAINE: 3/23 WTO UPDATE

REF: A. KYIV 648

B. WINSTEAD-YARNELL EMAIL OF 3/13
C. KYIV 331
D. KYIV 200
E. KYIV 82

KYIV 00000688 001.2 OF 003


1. (SBU) Summary: Ukraine has received comments regarding
recently passed WTO-related legislation from members of its
WTO Working Party and is working hard to respond to these
comments quickly. Legislative drafting on issues of
importance to the USG, such as IPR, biotechnology, and VAT
on agricultural products, is already underway, although the
GOU wants to wait for a Working Party meeting before
initiating the next round of legislative action. A new
revision of the draft Working Party Report is expected in
late March, and the next Working Party meeting in late
April or early May. We continue to hear rumors about a
breakthrough on the bilateral agreement with Kyrgyzstan,
the last remaining for Ukraine's accession, but see no
concrete evidence of progress. There has been a major
shakeup at the Ministry of Economy, with a new Minister
taking over on March 21, but Ukraine's WTO negotiating team
remains unchanged. End Summary.

2. (U) This latest edition in a series of regular update
cables regarding the status of Ukraine's WTO accession
(refs C-E and previous) covers the period February 12 -
March 23.

GOU Receives Working Party Comments...
--------------------------------------

3. (SBU) Ukraine in February received comments on its
recently passed legislation from WTO Working Party members.
Some GOU officials, including Prime Minister Viktor
Yanukovych and his foreign policy advisor Konstantin
Gryshenko, were initially taken aback by the volume of USG
comments. They noted that comments from the European
Commission, for example, were significantly shorter, and
questioned whether our comments were meant to delay
Ukraine's accession. (Comment: The Europeans seem to be
relying on the USG to insist on necessary changes in
Ukraine's trade regime. Luis Manuel Portero Sanchez, head
of the trade section at the Commission's Kyiv office, has
repeatedly told Econoff that the EU recognizes remaining
problems in Ukrainian legislation but will not insist on
many changes, as they will have "another chance" to do so -
- presumably referring to Free Trade Agreement negotiations
that will follow WTO accession. End Comment.)

4. (SBU) Ambassador responded to these concerns on March 8
by noting that the United States often takes the lead in
the accession process, and by emphasizing that USG comments
now pave the way for substantive progress. Econoff has on
several occasions delivered a similar message to Ministry
of Economy officials, who have unanimously described their
recent series of consultations with USTR as extremely
helpful. Vyacheslav Tsymbal, head of the Ministry of
Economy's WTO Department, told Econoff on March 23 that he
viewed the volume of USG comments as a positive signal that
Washington is ready to work out all remaining issues for
Ukraine's accession.

...And Responds Quickly
-----------------------

5. (SBU) At the working level, the GOU has moved quickly to
respond to Working Party concerns. The State Department
for Intellectual Property (SDIP), in cooperation with the
Ministry of Economy, has already developed a draft law to
bring IPR-related legislation fully into compliance with
TRIPS. Elena Scherbakova, head of SDIP's International
Relations Department, told Econoff on March 6 that the GOU
would try to push this "WTO fix" IPR law through the
legislative process as quickly as possible. Oksana
Amdjadin, from the Ministry of Economy, forecasted on March
16 that the law could be passed by early summer. Econoff
noted that the GOU should also work to ensure that other
IPR-related laws currently in the draft stage, such as
amendments to the Copyright and Trademark Laws, are in line

KYIV 00000688 002.2 OF 003


with WTO principles. Scherbakova agreed, noting that these
other draft laws still require significant changes and
would not be submitted to the Rada anytime soon. (Note:
SDIP is currently accepting public comments in an effort to
improve both the Copyright and Trademark draft amendments.
The American Chamber of Commerce and European Business
Association have both submitted comments reflecting
concerns of member companies, many U.S. based. End Note.)

6. (SBU) The GOU is also actively working on draft
legislation to bring VAT treatment of agricultural products
in line with WTO rules, and to create a legal framework for
products of biotechnology, as agreed in our bilateral
Market Access Agreement. The GOU sent proposed language
for a biotech law to Washington on March 7. Tsymbal told
Econoff on March 23 that the GOU would wait for feedback
from Washington before proceeding.

7. (SBU) Former Minister of Economy Volodymyr Makukha (who
might have continuing responsibilities for WTO if he
becomes a Deputy Minister of Foreign Affairs) told
Ambassador on March 23 that four legislative issues -- used
car imports, VAT on agricultural products, insurance, and
banking -- are particularly sensitive in the Rada and would
be difficult for the GOU to readdress. He queried the
Ambassador on Washington's possible "flexibility" on these
issues, and Ambassador promised to relay his concerns.

8. (SBU) Econoff asked Tsymbal if the GOU had yet developed
a complete action plan laying out the legislative and
regulatory changes necessary for accession. Tsymbal said
that, because there could be disagreement among Working
Party members regarding the necessity of some changes, the
GOU would wait until the next Working Party meeting before
finalizing its action plan. An advisor to the Ministry
told Econoff on March 14 that several draft laws likely to
be necessary for accession, such as amendments to the Law
on Veterinary Medicine, had already been drafted, but that
the GOU would want to receive its "marching orders" from
the Working Party before initiating the legislative
process. (Comment: Some GOU officials had misguidedly
presented the package of WTO-related laws passed in
December 2006 as the last required for accession. The GOU
can expect public criticism when it announces that
additional legislation is required. The GOU will be better
able to secure new legislation in the wake of a Working
Party meeting. End Comment.)

Next Steps
----------

9. (U) Ukraine's Working Party held informal consultations
in Geneva on March 16. The WTO Secretariat is now revising
the draft Working Party Report and should distribute a new
revision at the end of March. The next Working Party
meeting is expected to take place in late April or early
May. A plurilateral meeting to discuss agricultural
support levels will likely take place on the margins of the
Working Party meeting.

More Rumors of Kyrgyz Bilat Breakthrough
----------------------------------------

10. (SBU) Local media reported that President Yushchenko
and Prime Minister Viktor Yanukovych discussed Ukraine's
sole remaining bilateral market access agreement (ref C)
with their Kyrgyz counterparts on March 7 and 10,
respectively. One report claimed that an agreement would
be signed within "5-7 days." Deputy Prime Minister Mykola
Azarov subsequently announced on March 16, "The Kyrgyz
government has officially notified us that it is prepared
to sign the [agreement]." A source within the Cabinet of
Ministers also said that agreement had been reached, and
that a formal announcement would likely be made in late
March.

11. (SBU) Tsymbal confirmed that talks did occur but was
much less optimistic that an agreement would be immediately
forthcoming. He told Econoff on March 23 that the GOU had
not yet received a reply from the Kyrgyz on its most recent

KYIV 00000688 003.2 OF 003


proposal. Post understands from Embassy Bishkek that
Kyrgyz officials were also more pessimistic as of March 13
(ref B). New Minister of Economy Anatoliy Kinakh told
Ambassador on March 23 that he hoped a resolution could be
worked out at the next meeting of the Ukraine-Kyrgyzstan
Bilateral Commission planned for the second week of April.
(Comment: Previous rumors of a breakthrough with the Kyrgyz
have proven misleading. Post therefore views these latest
reports with cautious optimism. End Comment.)

Shakeup at Ministry of Economy
------------------------------

12. (U) Anatoliy Kinakh, head of the Party of
Industrialists and Entrepreneurs, replaced Volodymyr
Makukha as Minister of Economy on March 21 (ref A).
Meeting with the Ambassador on March 23 (septel), Kinakh
affirmed his full commitment to pursuing WTO accession as
soon as possible. Ambassador told Kinakh that the USG
continues to strongly support Ukraine's accession, and
outlined a few key issues, such as grain export
restrictions, biotech framework, and beef/pork imports,
that the GOU needs to work on. Five new deputy ministers
were also named, but Deputy Minister and lead WTO
negotiator Valeriy Pyatnytskiy survived the shakeup. No
changes in Ukraine's WTO negotiating team are expected.

TAYLOR

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