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Cablegate: Report On Belarus Accession to the Wto - Informal

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 GENEVA 002599

SIPDIS

PASS USTR FOR ALLGEIER AND DWOSKIN
EB/OT FOR CRAFT
USDA FOR FAS/ITP/SHEIKH, MTND/YOUNG
USDOC FOR ITA/JACOBS

E.O. 12958: N/A
TAGS: ETRD BO WTRO USTR
SUBJECT: REPORT ON BELARUS ACCESSION TO THE WTO - INFORMAL
CONSULTATIONS - OCTOBER 24, 2005


1. Summary. At the close of Belarus' last WTO Working Party
(WP) meeting in May 2005, the WP Chair was unable to confirm
support among WTO Members to hold another WP meeting for Belarus
this year, so it was decided that informal consultations would be
held on Monday, October 24. These consultations were again
extremely difficult, with Belarus refusing to acknowledge that
its responses to previously submitted questions were inadequate.
The Belarus delegation led by Deputy Foreign Minister Aleksandr
Mikhnevich, Minister of Economy Nikolai Zaichenko, and head of
the Customs Service Alexander Shpilevsky pushed for development
of an initial draft WP report, normally not done until WP members
have a clear picture of an applicant's trade regime and
negotiations have entered a concluding stage. When WP Members
rejected the proposal for development of a WP report at this
time, Belarus pushed for other process benchmarks. WP members
held firm, and the Belarus delegation departed disappointed and
angry, threatening to revisit their approach to the WTO back in
capital. We are uncertain if this is bluster or sincere, as
they clearly do not want to provide additional detail on the two
critical issues that have become the center of discussion:
customs confiscations and retrieval of government control through
the principle of "golden share." End Summary.

2. BACKGROUND. Belarus' WTO accession process has been a
difficult one, with early progress slowed by squabbles with WTO
members over documentation, market access issues, and the need to
define Belarus' competence to negotiate a separate WTO accession
from Russia. Periodic economic and diplomatic crises during
President Lukashenko's administrations have also taken their toll
on WP discussions. During 2003 and 2004, Belarus moved its WTO
accession forward, presumably to catch up with Russia, with which
it shares an economic union. Members were willing to see if the
new urgency translated into improved market access offers and
domestic reforms that would deal with the identified deficiencies
in the trade regime vis--vis WTO. These have included extensive
foreign exchange controls and non-tariff requirements on
importation; discriminatory taxation; customs fees and other
charges; subsidies; SPS; TBT; import licensing; and intellectual
property rights protection. Most recently, Belarus has refused
to address WP concerns due to customs confiscations and the
practice of rolling back privatization through invocation of the
Government's right to a "golden share" to control previously
state-owned, but now privatized, firms. Equally as discouraging
was the way Belarus' market access offers have deteriorated in
subsequent revisions after January 2004, barely improved in some
areas or even a step backward. In goods, Belarus has made it
clear it will not negotiate independently of results achieved
with Russia. As a result, Belarus has not made the progress
necessary to move the accession process forward. After an
exceptionally difficult Working Party meeting in May, Belarus
nevertheless pushed hard for an additional WP meeting this year,
further market access bilaterals with delegations, and the
development of a draft WP report text from the factual summary
already on the table. Delegations already stretched thin with
work on other negotiations and the Doha Round balked, refusing to
agree to expend further resources on the negotiations or schedule
additional meetings in Geneva without tangible evidence that
Belarus will cooperate. The informal consultations scheduled for
October 24 were a way to review the issue in light of hopefully
changed circumstances, and Belarus was encouraged to provide
forward leaning market access offers and detailed responses to
Members' questions if they wanted to secure support for their
agenda: a firm date for a next WP meeting, a draft report
commissioned, and positive responses from delegations on its
market access offers. End background

3. CONSULTATIONS. Attendees included the United States, the EU
(including local reps from Poland, Latvia, and Lithuania), Japan,
Canada, China, Chinese Taipei, India, and Cuba. Australia was
unable to attend, but sent word to the Chair of support for the
U.S. and EU position. The Chair is Ambassador Horn Af Rantzien
of Sweden. In his opening remarks, Mikhnevich asserted that
Belarus' answers to the most recent tranche of Members' questions
are "crystal clear" and because they haven't heard any concerns
about them from Members, they could "only assume" that Members
will be able to accept directing the Secretariat to develop a
first draft WP report. In particular, he believed these
responses explained the golden share regulation "in practical
terms" as well as "how the customs regime works." He noted that
bilateral market access negotiations were complete with two
Members, and believed they could be concluded with 6-7 others
(unnamed) by the time of the Hong Kong Ministerial. He
emphasized Belarus' effort to lay out a WTO-compatible domestic
regulatory framework in Belarus, a good foundation for the next
stage of work. Without agreement to move to "the next step,"
they will not know what to do next. Give us clear "homework,"
they requested, that only a first draft WP report can provide.

4. In her response, the EU representative expressed
disappointment with the quality of both the responses to
questions and the revised market access offers received, which
she noted were barely improved from their previous editions. The
EU is gravely concerned, she continued, about the state of the
negotiations. Among the issues of concern, the EU listed the
golden share and customs confiscations, but also referred to many
others. As Belarus has sent separate offers to separate Members,
the EU rep suggested that Belarus' offers be multilateralized by
the Secretariat and circulated more broadly, "in the interest of
transparency." In conclusion, the EU was not ready to move to a
first draft WP report, "on the contrary," she said, "we are far
from that." Nor was the EU ready to consider a date for the next
formal meeting.

5. Drawing on previous guidance, the US representative agreed,
explaining that it was not ready to move this accession out of a
factual phase prior to receiving responses in detail and in
writing to the important questions asked, including those on
customs confiscations issues and the golden share. He described
these issues as serious, and having important systemic
implications for many aspects of Working Party deliberations. He
referred to questions already asked, pointing to areas where the
responses are lacking, e.g., the U.S. request for the list of 18
administrative customs offenses and what corrective action can be
taken in each case; the list of the 7 offenses that can incur an
administrative penalty in the form of confiscation; more details
on improvements that Belarus is making in these areas beyond the
fleeting references in the documents; an overall sense of the
value of confiscations; and a better understanding of the
judicial and appeals process. On the golden share, the U.S. rep
asked for more clarity on the scope of the regulation and -
reaching a bit beyond the existing questions - asked for a table
explaining how it has been used recently, suggesting this
information might help the WP understand how it would be used in
the future. He underscored U.S. willingness to continue work and
that U.S. suggestions were provided in a constructive spirit.
Chinese Taipei, India, China, and Cuba gave vacuous prearranged
statements of support for moving to a first draft WP report.
Canada supported the EU and the US. No other attendees spoke,
which left the victory to those opposing forward movement in the
negotiations at the present time.

6. Belarus reacted sharply, apparently surprised by the EU and
US interventions despite advance word of the U.S. view informally
passed to the Belarus delegation in Geneva a few days before.
[Note: The WP Chair also held a lunch for Belarus on Friday,
October 21 to try to prepare them for the EU and US views.]
After initially indicating a willingness to provide the requested
information, Mikhnevich took the offensive, pressing again and
again for agreement to produce the first draft WP report. He
said he was convinced that only a first draft WP report could
give direction to Belarus's work, and he questioned the value of
further Qs and As, asking why the answers already provided
weren't sufficient. The head of the Belarus customs office,
Alexander Shpilevsky, would not acknowledge any problems on the
border and strongly defended his agency's use of customs
procedures to prevent smuggling - "it is the best customs service
in the world," he said - and asserted that the amount of money
collected through seizures is "no secret and about $20 million"
per year. (Note: This seems low compared to reporting from
Embassy Minsk. End note)

7. Summing up, the Chair recognized that Members had been clear.
There would be no formal WP meeting without improved responses
and no first draft WP report for the near term. She suggested
that Belarus look again at the responses document, make
appropriate improvements, and offered to reconvene the informal
consultations in February to take stock, a clear and elegant nod
to Belarus at this point that would allow it to claim that
negotiations were continuing. But Belarus continued to push for
some sort of procedural victory, maintaining its insistence on
development of a first draft working party report, plurilaterals
with the EC and the United States on customs issues and the
golden share next week, or at least a firm date for a WP meeting
next month. He vigorously opposed circulating market access
offers to the entire WP, saying it would be totally unprecedented
(Note: While most applicants do circulate their offers to the
entire WP, it is not mandatory, and Belarus is within its rights
to issue "boutique" offers to individual delegations. End
note). At various times, both the US and EU spoke up to politely
support the chair's approach, to confirm their willingness to
review the responses when they are ready, and underscore that it
is these responses that will set the stage for further advances.
The U.S. del added that we look forward to the time when we would
be able to take the next step and he expressed a willingness to
meet informally during the week to further clarify the remaining
information gaps on these issues. Rejecting the Chair's
compromise, Mikhnevich indicated that the delegation would return
to Minsk and consider taking "a different approach" to the WTO
accession. Belarus was clearly angry when the gavel came down.

8. COMMENT. It is hard to understand why the outcome of the
informal consultations should come as a shock to the Belarus
delegation, particularly in light of the clear "heads up" given
to the local delegate in the days before by the Chair, the
Secretariat, the EU and the US. It is equally hard to fathom why

SIPDIS
they rejected the lifeline thrown by the Chair, given their
primary objectives for the Working Party were not achievable at
this time. We intend this cable to provide background to Embassy
Minsk to help field the complaints that will most likely follow
from the GOB. We would appreciate posts' views on the issues
outlined above, but we do not request any specific reporting at
this time. If it appears that Belarus has decided to take a self
initiated time-out from the negotiations (not an uncommon
occurrence), we would appreciate notification. As necessary,
Post may reassure Belarus representatives that we continue to
support their accession, but only if they are actually committed
to changing their trading system to provide market access on WTO
terms and commitments that actually liberalize trade. End
comment. Shark

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