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08KYIV915, UKRAINE BECOMES WTO MEMBER ON MAY 16, BUT FAILS TO

May 15, 2008

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Reference ID Created Released Classification Origin
08KYIV915 2008-05-15 16:00 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv

VZCZCXRO5296
OO RUEHBW RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #0915/01 1361600
ZNR UUUUU ZZH
O 151600Z MAY 08
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5581
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 0119
RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 02 KYIV 000915 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/UMB, EB/TPP/BTA, EB/TPP/MTA 
STATE PLEASE PASS TO USTR FOR KLEIN/BURKHEAD 
USDOC FOR 4201/DOC/ITA/MAC/BISNIS 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK 
GENEVA FOR USTR 
 
E.O.: 12958: N/A 
TAGS: ETRD WTRO PGOV UP
SUBJECT: UKRAINE BECOMES WTO MEMBER ON MAY 16, BUT FAILS TO 
PASS IMPORTANT LEGISLATION BEFOREHAND 
 
REFS: A. KASPER-YARNELL EMAIL OF 5/15 
 
      B. KYIV 902 
      C. KYIV 729 
 
SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET PUBLICATION. 
 
1. (SBU) Summary: Ukraine joins the WTO on May 16, marking 
a major success for the country's economic reform efforts. 
Accession is marred, however, by Ukraine's failure, due to 
domestic political turmoil, to pass five laws promised as 
part of accession negotiations.  One of the five is the law 
designed to lower Ukraine's tariff duties in line with its 
WTO commitments, a fundamental part of the accession 
process.  Trying to avoid disaster, the government has 
issued orders to Customs to implement the new tariffs 
anyway, although the legality of such instructions might be 
questioned.  Post will monitor whether the new tariffs do 
in fact come on line.  Blame for this legislative failure 
falls squarely on the GOU and ruling coalition.  End 
Summary. 
 
Ukraine Joins the WTO... 
------------------------ 
 
2. (U) Ukraine is set to become the 152nd member of the WTO 
on May 16.  (Note: The WTO General Council approved 
Ukraine's accession on February 5.  The Ukrainian Rada 
(parliament) ratified the protocol of accession on April 
10, and the President signed it into law on April 16.  End 
Note.)  Ukraine's accession marks the end of more than 14 
years of negotiations and marks a major step forward for 
the country's economic reform efforts. 
 
...But with a Serious Glitch 
---------------------------- 
 
3. (U) Ukraine's accession is marred, however, by the 
government's failure to pass the last five laws in a 
legislative package promised by the GOU during accession 
negotiations.  (Note: The Rada previously passed five of 
the laws on April 10 (ref C).  End Note.)  The outstanding 
bills include: 
 
-- Draft Amendment to the Law "On the Customs Tariff of 
Ukraine" (to bring into force Ukraine's bound tariff rates 
according to the agreements with WTO member countries); 
 
-- Draft Amendment to the Law "On Safety and Quality of 
Food Products" (to bring Ukraine's inspection regime into 
line with WTO rules by clarifying that standards are not 
mandatory); 
 
-- Draft Amendment to the Law "On Veterinary Medicine" (to 
ensure that the production of beef with hormones, the 
assessment of "contaminants" and "maximum residue limits," 
and the regulation on the system of animal identification 
are in compliance with the SPS Agreement, CODEX 
Alimentarius, and our bilateral agreement); 
 
-- Draft Amendment to Several Laws (to eliminate the zero 
VAT rate for agricultural producers, and to eliminate a 
difference in excise duty rates for the commodity group 
UKTZED 220820 (spirits received from processing grape 
wines)); and 
 
-- Draft Amendment to the Law "On Fish, Other Water Living 
Resources, and Food Production from Them" (to ensure 
compliance with the norms of the WTO TBT and SPS 
Agreements) 
 
4. (U) The GOU had intended for the laws to be passed 
during the week of May 12, after the Rada returned from a 
several week recess, but infighting among the ruling 
coalition on non-WTO issues (ref B) prevented the Rada from 
meeting.  Speaker of Parliament Arseniy Yatsenyuk canceled 
the Rada session on May 15 after political negotiations 
failed to reach an agreement.  Yatsenyuk called for the 
Rada to meet on May 16, although there is no indication 
that the political wrangling will conclude by then. 
 
Legislative Failure Leaves WTO Commitments in Doubt 
 
KYIV 00000915  002 OF 002 
 
 
--------------------------------------------- ------ 
 
5. (SBU) Failure to pass the five bills leaves Ukraine in 
violation of WTO rules and our bilateral agreement.  In 
addition, Ukraine also has so far not completed work on 
implementing regulations on biotechnology and the meat 
trade, as agreed in our bilateral agreement.  Perhaps most 
concerning is that the failure to pass the law lowering 
customs duties potentially means that Ukraine may be in 
breach of one of the most basic obligations of WTO members 
-- to lower its tariffs in accordance with agreements made 
during accession negotiations.  Recognizing this danger, 
Prime Minister Yulia Tymoshenko sent instructions to the 
State Customs Service to apply the new, lowered tariff 
rates from May 16 regardless.  (Note: Deputy Prime Minister 
Hryhoriy Nemyrya sent a letter on May 15 to WTO members, 
through Geneva, outlining this plan (ref A).  End Note.) 
The GOU claims that such instructions are valid because the 
lower tariffs were laid out in the protocol of accession, 
which was ratified by the Rada.  (Comment: Post belie
ves 
the government's move is legally dubious without the 
relevant amendment to the Law "On the Customs Tariff of 
Ukraine," and domestic producers could try to challenge the 
decision in court.  End Comment.) 
 
6. (SBU) Post contacted the State Customs Service on May 15 
for clarification.  Petro Vengel, Head of Customs Tariff 
Division, confirmed to Econ Assistant that Customs had 
received the PM's instructions, and that Customs did in 
fact intend to implement the lower tariffs from May 16.  He 
noted, however, that as of 16:00 the Customs Service had 
not yet sent the relevant instructions to regional customs 
offices.  (Comment: Given the last-minute nature of these 
instructions, and their unclear legal status, Post 
anticipates that the new tariffs will be implemented 
inconsistently.  End Note.) 
 
Comment: No One to Blame but Themselves 
---------------------------------------- 
 
7. (SBU) This latest gaffe by the GOU was certainly 
avoidable.  Ukraine had until July 4 to ratify the protocol 
of accession but itself chose to expedite the process, 
making it impossible to pass the entire legislative package 
in one sitting because some of the draft laws had not yet 
obtained Rada Committee approval.  Even with ratification 
on April 10, President Yushchenko could have delayed 
signing the protocol into law, and the GOU could have held 
back on officially informing the WTO Secretariat, in order 
to give the Rada more time to pass the remaining 
legislation.  In addition, members of the ruling coalition 
itself are blocking the Rada's work, even though the draft 
laws are ready and would likely pass without much 
difficulty.  Post will keep an eye on the situation and 
monitor whether the new tariffs actually come on line as of 
accession on May 16, as the government promises. 
 
TAYLOR

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