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Cablegate: Ukraine's Legislative Progress Since Wto Accession

VZCZCXYZ1110
RR RUEHWEB

DE RUEHKV #1726/01 2781452
ZNR UUUUU ZZH
R 051452Z OCT 09
FM AMEMBASSY KYIV
TO SECSTATE WASHDC 8531

UNCLAS KYIV 001726

SIPDIS

STATE FOR EUR/UMB AND EEB/TPP/MTA

E.O. 12958: N/A
TAGS: EAID ETRD EAGR UNGA
SUBJECT: UKRAINE'S LEGISLATIVE PROGRESS SINCE WTO ACCESSION

REF: KYIV 1027

1. (U) Summary. Ukraine's accession to the World Trade
Organization (WTO) on May 16, 2008 was seen as a major step
forward in the country's ongoing integration with the
international economic system. With a few noted exceptions,
Ukraine is living up to the terms of its WTO accession. One
of central requirements for Ukraine's accession was that
parliament amend its trade-related laws to bring its legal
code into alignment with WTO guidelines. Ukraine enacted
five key laws just prior to accession, and passed several
more thereafter, but one year after accession, two required
legal amendments are still unresolved. Further, one
non-WTO-compliant law allowing the government to impose new
tariffs as a balance of payments measure was enacted in
February 2009, and with its expiration in September 2009
comes word of additional non-compliant protectionist tariff
proposals being considered in parliament. End Summary.

2. (U) Ukraine's accession to the World Trade Organization
(WTO) on May 16, 2008 was seen as a major step forward in the
country's ongoing integration with the international economic
system. As part of the accession process, the Verkhovna Rada
(Ukraine's parliament) was required to pass or amend several
pieces of legislation to bring the country's legal code into
alignment with international standards on a variety of trade
issues.

--------------------------------------------- -
WTO-Compliant Regulations Passed, as Required
--------------------------------------------- -
3. (U) Just prior to the accession date, the Verkhovna Rada
enacted five pieces of legislation, amending laws on
insurance; protection of national producers from subsidies,
dumping and imports; foreign investment; protection of
intellectual property rights; standards, technical
regulations, and conformity assessment.
4. (U) Over the following year, the Verkhovna Rada continued
to pass WTO-related legislation to bring Ukraine's legal code
up to WTO standards. Amendments were made to the laws on
grain export quotas; veterinary medicine; state support of
book publishing; taxation of and subsidies for agricultural
producers; grain storage; application of value added taxes to
agricultural production and international transportation. In
general, Ukrainian authorities are, to the best of their
ability, operating in accordance with the provisions of these
new laws and regulations. The USG actively provides
technical assistance and training for Ukrainian officials and
professionals on application of these amended trade laws in
accordance with international best practices, especially in
the area of intellectual property rights enforcement.
----------------------------------------
Non-Compliant Tariff Surcharges Expired
----------------------------------------

5. (U) One law passed by the Verkhovna Rada after WTO
accession contained provisions that conflict with Ukraine's
WTO obligations. Notably, the February 4th law "To Improve
the Payment Balance of Ukraine in Connection with the World
Financial Crisis" established a special procedure for
introducing temporarily increased import duties, which was
not fully compliant with the WTO rules regarding balance of
payment difficulties. This law expired on September 7th,
2009. Customs officials estimate that, in net terms, the
decreased volume of trade and reduced sales tax revenue
attributable to the tariff cost the GOU in excess of UAH
500,000 (USD 60,000).

--------------
Remaining Work
--------------

6. (U) Two pieces of legislation that are required to bring
Ukraine's legal code fully into WTO compliance have not yet
been passed into law. They are Draft Law no. 2297 "On Fish,
other Living Aquatic Resources and Food Made of Them", which
deals with Sanitary & Phyto-Sanitary (SPS) requirements and
Technical Barriers to Trade (TBT) issues; and Draft Law no.
3322 "On Quality and Safety of Food Products and Food Raw
Materials", which would define the legal parameters of the
term 'standard', harmonizing it with international norms on
food safety and quality. The first was deleted from the
agenda of the Verkhovna Rada on February 3, 2009 and the
second was revoked by the Cabinet of Ministers on May 20,
2009.

7. (U) In an effort to support the draft WTO-related
legislation and make further progress toward harmonizing
Ukraine's legal code with WTO requirements, President
Yuschenko issued Decree 713 on September 4, 2009. This
decree requires the Cabinet of Ministers to support the
following Draft Laws in the Verkhovna Rada: 1365 on Market
Surveillance; 2297 On Fish and Other Live Products (once it
has been re-introduced on the agenda); 3301 On the Amendment
of Article 1 of the Law On the Importation in Ukraine of Raw
Cane Sugar; and 3421 On the General Safety of Products.
Decree 713 further tasks the Ministers with writing and
submitting legislation to the Rada on the following topics:
On the Amendment of the Law On Standards, Technical
Regulations and Procedures for Conformity Assessment -
abolishing the requirement for manufacturers to register
conformity statements; On the Amendment of the Law on Quality
and Safety of Food Products - a revision to the bill revoked
on May 20, 2009; On the Amendment of Certain Laws of Ukraine
to Bring the Product Nomenclature in Compliance with the 2007
Harmonized System of Description and Coding of Goods - meets
commitments in accordance with International Conventions in
this area and brings import duty rates into accord with WTO
accession requirements.

8. (U) Despite Ukraine's accession to the WTO, several GOU
regulations continue to create costly problems for U.S.
exporters attempting to operate in the Ukrainian marketplace.
Recent implementation of a regulation long on the books but
not enforced requires packaged goods to have a stamp on their
import documents attesting to the existence of a waste
recycling contract with the GOU monopoly UkrEcoComResursy.
Fines are levied for non-compliance, even if importers have
existing contracts with private waste management firms in
Ukraine. Importers report to the Embassy that although they
attempt to comply with this requirement, they are unable to
reach anyone at UkrEcoCoResursy. On July 28, 2009, the
Cabinet of Ministers published Decree no. 767 requiring all
importers to provide a copy of the Shippers Export
Declaration (SED) (filed with the U.S. Census) to provide a
basis for the valuation of their goods. Enforcement of the
decree is scheduled to begin on October 27th, 2009. U.S. law
explicitly prohibits U.S. firms from providing the SED to
foreign buyers in most cases. In addition, Ukraine has
recently circulated a draft veterinary & phytosanitary
regulation that would require any U.S. processing plant that
wants to export animal-products (meat, seafood, genetic
materials) to Ukraine to submit to inspections by the
Ukrainian veterinary service. These types of problems create
delays and additional expenses for U.S. firms. Furthermore,
the GOU often fails to properly notify the WTO of new
regulations affecting trade, such as those mentioned above.
However, when areas of non-compliance with WTO mandates are
brought to GOU attention, officials usually make efforts
(though not always effectively) to remedy the situation.

--------
Comment
--------

9. (SBU) Comment. Ukraine has made significant process in
aligning its legal code with the international norms
stipulated by the WTO. However, the onset of the global
financial crisis has spurred considerable protectionist
sentiment in domestic industries, particularly the Ukrainian
automotive sector. This has resulted in several power blocs
in the parliament lending their support to WTO non-compliant
tariff legislation as a means of harnessing populist
sentiment in advance of upcoming elections, despite the
harmful effects such measures have on budget revenue.
Sources at the Ministry of Economy and Customs Office have
told EmbOffs that they do not support the enactment of
additional tariffs and that future non-WTO compliant measures
may be enforced only against non-WTO members, such as Russia,
Ukraine's largest trading partner. End Comment.
PETTIT

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