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June 30, 2009

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Reference ID Created Released Classification Origin
09KYIV1093 2009-06-30 12:48 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv

DE RUEHKV #1093/01 1811248
R 301248Z JUN 09

E.O.: 12958: N/A 
REFS: A) KYIV 1086 
      B) KYIV 777 
      C) 2008 KYIV 2017 
      D) 2008 KYIV 1875 
1. (SBU) Summary: Assistant U.S. Trade Rep (AUSTR) for 
Europe and the Middle East Chris Wilson visited Kyiv June 
22-23.  AUSTR Wilson delivered a positive message on our 
desire to expand bilateral trade and investment.  The GOU 
gave us some good news, lifting a ban on U.S. pork put in 
place due to H1N1 fears.  GOU reps expressed a desire to 
lift the current 13 percent import tariff surcharge on 
cars and refrigerators, although several interlocutors 
cautioned that positive action from parliament was far 
from certain.  AUSTR Wilson praised the GOU for its 
efforts to improve IPR enforcement and highlighted a few 
areas where more progress was needed.  AUSTR Wilson also 
raised a litany of trade and investment climate irritants 
affecting U.S. companies; GOU interlocutors took his 
points and promised to follow up on several issues.  GOU 
officials again raised continued U.S. anti-dumping orders 
on Ukrainian metal and chemical products.  Several 
officials identified a Free Trade Agreement with the EU 
as Ukraine's most important trade-related goal; one 
prominent think-tanker expressed concern that Ukraine and 
the EU might, for political expediency, give up on a more 
ambitious "Deep FTA."  The GOU reaffirmed its desire to 
join the WTO Government Procurement Agreement, although 
cautioned that the need for legislative changes would 
slow the process.  AUSTR Wilson and GOU officials agreed 
to hold the next meeting of our bilateral Trade and 
Investment Council in Washington this fall.  End Summary. 
Pork Ban Lifted 
2. (U) Minister of Agriculture Yuriy Melnyk and Chief Vet 
Petro Verbitsky informed AUSTR Wilson on June 22 that the 
GOU had finally lifted its ban on U.S. pork, put in place 
as a result of H1N1 flu fears on April 27 (ref B), with 
immediate effect.  (Note: We received a letter later in 
the day on June 22, dated June 15, confirming that the 
ban had in fact been lifted.  End note.)  AUSTR Wilson 
thanked the GOU for its action and reaffirmed in 
interviews with the press that the scientific community 
had found no link between the H1N1 flu and consumption of 
13 Percent Import Tariff Surcharge 
3. (SBU) AUSTR Wilson thanked the GOU for repealing the 
13 percent import tariff surcharge on most goods, but 
noted that the measure continued to have a negative 
impact on trade.  He explained that the USG did not 
believe Ukraine was facing a balance-of-payments crisis 
justifying such action, and the structure of the measure, 
for example by identifying specific goods, was not in 
line with WTO rules.  GOU officials responded they were 
hoping to completely remove the measure in the near 
future, but that action by the Rada (parliament) would be 
required.  Minister of Economy Bohdan Danylyshyn noted 
that he had spoken out publicly against the measure and 
said he hoped the Rada would move to cancel the surcharge 
entirely before the end of its current session on July 
4. (SBU) Influential Opposition MP Iryna Akimova 
cautioned AUSTR Wilson that protectionist sentiment was 
still running high within the Rada.  She estimated the 
odds at 50-50 that the Rada would pass legislation 
eliminating the remaining 13 percent tariff surcharge on 
cars and refrigerators.  (Note: AUSTR Wilson's meetings 
came before the June 24 Constitutional Court ruling on 
this matter, which may force the GOU to reinstate the 
surcharge on the longer list of goods (ref A). End note.) 
Intellectual Property Rights 
5. (U) AUSTR Wilson praised the GOU for its progress in 
recent years in improving IPR protection and encouraged 
continued GOU dialogue with industry and with the USG 
KYIV 00001093  002 OF 004 
through our IPR Enforcement Cooperation Group.  He also 
noted a few areas -- internet piracy, transshipment of 
IPR-infringing goods, government use of pirated software, 
and illegal camcording in movie theatres -- where we 
hoped to see additional progress. 
6. (SBU) Volodymyr Dmitrishyn, Acting Chairman of the 
State Department of Intellectual Property, said that SDIP 
appreciated USG support on IPR issues and welcomed 
continued cooperation.  Dmitrishyn recognized illegal 
camcording as an important issue that was not properly 
addressed in Ukrainian legislation.  He noted that SDIP 
was already working on a draft amendment to the Copyright 
Law but would in the meantime seek to address the 
camcording issue through regulatory fixes.  Dmitrishyn 
described internet piracy as a particularly challenging &#x000A
;area and welcomed USG help in offering best practices for 
Ukraine to follow.  On software piracy, Dmitrishyn 
recognized that the GOU needed to set a better example in 
using only legitimate software, although he argued that 
consistent progress had lowered the piracy level in 
government agencies from 89 percent in 2002 to 51 percent 
in 2009. 
VAT Refunds 
7. (SBU) American Chamber of Commerce members identified 
arrears in the GOU's repayment of value-added tax (VAT) 
to exporters as a major impediment to doing business. 
Akimova described VAT arrears as a long-running problem 
usually caused by corruption but noted that the budget 
crisis was now driving the arrears, as the GOU intended 
to use un-refunded VAT to finance the budget.  Several 
prominent Amcham members agreed with this assessment. 
Deputy Minister of Economy Natalia Boytsun blamed 
"procedural problems" for the accumulation of VAT arrears 
and said she was engaged with the State Tax 
Administration to resolve the issue. 
Customs Valuation 
8. (SBU) AUSTR Wilson identified customs valuation 
problems -- particularly the inflation of customs value 
by Ukrainian Customs -- as a significant barrier to trade 
and investment.  Melnyk said that the Ministry of 
Agriculture was fully aware of the issue and often tried 
to help importers struggling to obtain customs clearance 
of agricultural goods.  Melnyk added that he believed 
Customs already had all the necessary tools to properly 
value imports and that he would continue to push Customs 
to fix the problems. 
State Reserve Dispute 
9. (SBU) AUSTR Wilson encouraged the GOU to engage 
constructively with U.S. poultry companies who faced 
significant losses in late 2008 when Ukraine's State 
Reserve failed to pay for poultry shipments.  He noted 
that the U.S. companies intended to proceed with 
arbitration through our Bilateral Investment Treatment 
and argued that a negotiated, mutually-accepted solution 
would be preferable.  Danlyshyn said he was aware of the 
dispute and that officials from his Ministry would be 
meeting with the State Reserve within days to discuss. 
He stressed his preference to avoid such disputes and 
said he would be willing to meet with the U.S. companies 
or their local representatives to discuss in more detail. 
10. (SBU) Melnyk expressed his disapproval of the 
original deal with the State Reserve, calling it an 
"artificial import scheme."  He did, however, agree to 
encourage a settlement between the parties. 
Poultry AD Investigation 
11. (SBU) AUSTR Wilson asked GOU officials for an update 
on an ongoing anti-dumping investigation against U.S. 
poultry producers.  AUSTR Wilson noted that the GOU had 
sent mixed signals on whether or not Ukraine intended to 
KYIV 00001093  003 OF 004 
use sampling as part of the investigation, and he urged 
the Ministry of Economy to give serious consideration to 
companies' requests for more time in filling out the 
informational questionnaire.  Danylyshyn and Boytsun 
promised to provide reasonable extensions and accurately 
noted that they had already been accommodating.  Boytsun 
and Roman Bestrakevich, head of the Ministry's Anti- 
Dumping Department, noted that it had already been months 
since the questionnaire was sent out to companies and 
expressed some concern that they could not delay the 
investigation endlessly. 
12. (U) Bestrakevich clarified that, at a later date, the 
Ministry may or may not decide to use some kind of 
sampling in the course of the investigation.  Regardless 
of that decision, all exporters who wanted to participate 
in the investigation must now provide a response to the 
full questionnaire.  Companies that did not submit the 
full questionnaire should understand that the GOU may use 
other available information to make a determination, and 
may lump companies together rather than treat them 
individually, said Bestrakevich. 
13. (SBU) AUSTR Wilson encouraged the GOU to develop an 
effective regulatory regime for the products of 
agricultural biotechnology, in line with bilateral 
commitments made by Ukraine during WTO accession 
negotiations.  Melnyk said that, although the Rada passed 
the basic biotech framework law in 2007, the GOU needed 
additional time to develop necessary regulations due to 
its lack of expertise in this area.  Melnyk said that a 
package of draft regulations were currently making its 
way through the interagency approval process and that he 
hoped the regulations would be issued within a month. 
AD Orders on Ukrainian Metals/Chemicals 
14. (SBU) Danylyshyn and other officials asked about U.S. 
anti-dumping orders on Ukrainian metal and chemical 
products that remain in place from before Ukraine had 
achieved market economy status.  AUSTR Wilson said he 
would pass on the GOU's concerns to the Department of 
Commerce but noted that he understood that action was 
needed from Ukrainian exporters before the AD orders 
could be rescinded. 
15. (SBU) Danylyshyn described Ukraine's potential Free 
Trade Agreement (FTA) with the European Union (ref D) as 
a key strategic goal.  He painted a rosy portrait of the 
status of negotiations, saying they could be finished by 
the end of the year.  Minister of Agriculture Melnyk 
cautioned that the EU FTA would create difficulties for 
Ukraine's ag sector and appeared less of a supporter of 
the agreement. 
16. (SBU) Opposition MP Akimova expressed strong support 
for the EU FTA, calling it more important than NATO 
accession in integrating Ukraine with Europe, as it would 
address more fundamental economic issues.  She said 
Ukraine should accelerate the process but questioned the 
commitment of the current government and its ability to 
properly consult with the Rada and private sector as part 
of the negotiations. 
17. (U) Olga Shumylo, director of the well-respected 
think tank International Centre for Policy Studies 
(ICPS), emphasized the importance of the FTA and urged 
the USG, although it was not a party to the talks, to 
nonetheless support the negotiations.  Shumylo expressed 
concern that Ukraine and the EU might for political 
reasons seek a speedy conclusion to the negotiations by 
avoiding the more difficult administrative reform issues 
needed to truly integrate Ukraine with Europe -- i.e. 
pursue a less-ambitious, simple FTA rather than a "Deep 
KYIV 00001093  004 OF 004 
Government Procurement 
18. (U) AUSTR Wilson encouraged Ukraine to accede to the 
WTO Government Procurement Agreement (GPA) and asked for 
an update on Ukraine's progress.  Zhanna Pastovenska, 
from the Ministry of Economy's WTO Department, noted that 
Ukraine officially became an observer to the GPA on 
February 25 and that the Ministry was currently working 
with other GOU agencies on Ukraine's initial offer to 
begin accession procedures.  Pastovenska said that the 
GOU was actively pursuing GPA accession but cautioned 
that legislative amendments would be necessary, likely 
slowing down the process. 
Both Sides Committed to Relationship 
19. (U) AUSTR Wilson delivered a clear message to all 
interlocutors and the press that the USG wanted to expand 
and strengthen our bilateral trade and commercial ties. 
His interview with the daily paper Kommersant Ukraine is 
available online at  Danylyshyn 
emphasized the "strategic importance" of our bilateral 
ties and said the GOU wanted to expand cooperation on 
trade and investment issues.  Danylyshyn proposed that we 
develop a roadmap for increased cooperation, perhaps to 
be adopted at the next meeting of the Trade and 
Investment Council. 
Next TICA Council Meeting 
20. (U) AUSTR Wilson and Danylyshyn agreed to try to hold 
the next meeting of our bilateral Trade and Investment 
Council in the fall in Washington.  (Note: The first 
meeting of the Council took place in Kyiv in October 2008 
(ref C).  End note.)  Both sides agreed that the private 
sector should be actively involved. 
21. (U) USTR has cleared on this message. 


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