US embassy cable - 04KATHMANDU584

C O N F I D E N T I A L SECTION 01 OF 03 KATHMANDU 000584 
 
SIPDIS 
 
STATE FOR SA/INS 
STATE PLEASE PASS TO USTR 
STATE PLEASE ALSO PASS TO USAID 
STATE PLEASE ALSO PASS TO CUSTOMS 
 
E.O. 12958: DECL: 03/28/2014 
TAGS: ECON, NP, WTO, Nepali Government Policy 
SUBJECT: NEPAL: RATIFIES ITS MEMBERSHIP WITHIN WTO 
 
Classified By: Deputy Chief of Mission Robert K. Boggs for reasons 1.5 
(B, D) 
 
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SUMMARY 
======= 
 
1.  (SBU) On March 24, the Government of Nepal (GON) 
officially accepted and ratified its membership within the 
World Trade Organization and will become the 147th member of 
the organization as of April 23.  Nepal is the first least 
developed country (LDC) to qualify and accede on its own 
merits without being grandfathered into the WTO.  There was 
much domestic debate surrounding the modality the GON used 
for ratification.  In the absence of a sitting Parliament, 
the Nepalese cabinet amended the Nepal Treaties Act of 1990 
to shift ratification authority from the Parliament to the 
Cabinet.  There are remaining hurdles to overcome prior the 
December 31, 2006 deadline, specifically in the area of 
intellectual property rights, sanitary and phyto-sanitary 
matters, customs and technical barriers to trade.  A GON 
official indicated that the Government will need substantial 
donor assistance, including from the U.S., to meet its 
committments.  The official also asked that the USG review a 
draft Customs Act before its final release.  END SUMMARY. 
 
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Nepal Ratifies Its WTO Membership 
================================= 
 
2.  (U)  The Government of Nepal (GON) officially accepted 
and ratified its membership within the World Trade 
Organization (WTO) on March 24.  On April 23, Nepal will 
become the 147th member of the WTO and the first least 
developed country (LDC) to accede to the WTO on its own 
merits without being grandfathered into the organization. 
 
3.  (U)  According to the Nepal Treaties Act of 1990, the 
authority to ratify trade agreements and treaties lies with 
the Parliament.  (NOTE: King Gyanendra, on the recommendation 
of then-Prime Minister Sher Bahadur Deuba, dissolved 
Parliament in May 2002.   End Note.) In the absence of 
Parliament, the Cabinet amended the Treaties Act by 
Cabinet-level ordinance to shift the ratification authority 
from the Parliament to the Cabinet.  The King signed this 
ordinance on March 17, which opened the door to the GON 
ratifying Nepal's WTO membership seven days later, on March 
24. 
 
4. (SBU)  There was much open debate on the modalities that 
the GON used to ratify Nepal's membership.  Some commentators 
speculate that if the Cabinet can amend the Trade Treaties 
Act, the next step could be amendment of Nepal's 
Constitution.  During a meeting with Emboff on 26 March, 
Prachanda Man Shrestha, Joint Secretary for Commerce, 
Industries and Supplies (and the GON official in charge of 
Nepal's WTO cell), said there were no other options 
available.  Nepal agreed to the terms in September 2003, 
knowing the dilemma the lack of a sitting Parliament would 
pose. He added that the GON coordinated with stakeholders, 
including political party leaders, prior to ratifying the 
agreement (through meetings, seminars, informal 
conversations).  Shrestha said that the ordinance amending 
the Nepal Trade Treaties Act of 1990, although it does not 
specifically mention the WTO, limits the Cabinet's authority 
to "multilateral international organizations" (and not 
regional or bilateral organizations/trade agreements, like 
SAARC or BIMSTEC).  It also limits the validity of the 
ordinance until a general election date has been declared. 
Within seven days of Parliament's first session, all 
documents pertaining to Nepal's WTO membership must be 
presented by the GON. 
 
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INTERNATIONAL ASSISTANCE TO MEET COMMITMENTS 
=========================================== 
 
5.  (SBU) Shrestha told Emboff that Nepal's successful 
membership and standing within the WTO requires not only the 
commitment of the GON, but also commitment from the 
international donor community.  He explained that many 
countries promised technical assistance during Nepal's 
accession negotiations, but that there has been "little 
follow through" by the international community. 
 
6.  (C) For example, the Government of Australia offered 
assistance in the area of intellectual property rights and in 
August 2003 funded an Australian consultancy group's review 
of Nepal's IPR needs.  Following this visit, he indicated 
that the group submitted a report for GON comments and 
consideration. Since then, however, no further assistance has 
been forthcoming.  Shrestha admitted that the delay did not 
necessarily translate into a lack of commitment and might 
actually be due to the Australian budget cycle. 
 
7.  (C) According to Shrestha, the Europeans' "empty promises 
are more troublesome."  The GON requested EU assistance in 
the areas of Sanitary and Phyto-sanitary (SPS) and technical 
barriers to trade.  Following the Cancun meeting, the 
Europeans made an ambitious "4 million Euro technical 
assistance program" commitment (2 million Euros for 
legislative review, GON capacity building; 2 million Euros 
for private sector development) that included a deadline of 
January 2004 for consultancy team review and March 2004 for 
implementation of the team's review.  Shrestha stated that 
nothing has been done to date, and he mentioned that Foreign 
Minister Bekh Bahadur Thapa was told during his recent 
meetings in Europe that "there were political problems" with 
European assistance, "specifically with regard to how the GON 
handles the Maoists." 
 
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REQUEST FOR USG ASSISTANCE 
========================== 
 
8.  (C)  Emboff told Shrestha that the USG is committed to 
helping Nepal become a valuable member of the WTO and is now 
developing a technical assistance program in customs 
valuation, tailored specifically to meet Nepal's immense 
needs.  (NOTE: A U.S. Customs Team visited Nepal in 2000. 
Additional Note: USAID recently secured approximately USD 
500,000 funding to develop its initial assistance program. 
END NOTES.)  Shrestha mentioned that the GON has drafted a 
revised "Customs Act," which the GON would like U.S. Customs 
to review before it is released.  Emboff requested a copy of 
the draft Customs Act and will forward it to appropriate USG 
contacts once it is available.  Shrestha also requested that 
U.S. Customs send a team of agents to Nepal to provide a 
quick "hands on" training seminar at Nepal's five main ports 
of entry (approximately 20 Nepalese customs agents at each 
port of entry).  Shrestha indicated that Nepal has until July 
2004 to meet its initial WTO customs deadline for having 
legislation in place. 
 
 
9.  (U)  In addition to technical assistance, USTR-USAID, in 
coordination with the Embassy, will offer a training course 
to government officials and major exporters from South Asia's 
Least Developed Countries (LDC):  Nepal, Afghanistan and 
Bangladesh.  This training is tentatively scheduled for late 
May and will focus on how to meet U.S. regulations (in areas 
like customs, GSP, SPS, rules of origin, ISO and private 
sector grades and standards), how to attract foreign 
investment and how to compete in the global trading arena. 
Shrestha mentioned that this "hands on" training program will 
greatly assist Nepal and looked forward to participating in 
the program. 
 
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COMMENT 
======= 
 
10.  (C) Although many hurdles remain, the GON appears to be 
committed to meeting its WTO obligations as best it can. 
Nepalese interlocutors express a perception that the GON has 
abandoned by the donor community following the Cancun Round 
and that there is a lack of international commitment to 
helping Nepal to be a viable player within the WTO.  USG 
willingness to assist Nepal provides an opportunity for us to 
reinforce our commitment to Nepal and to help strengthen this 
struggling economy. 
 
 
 
 
 
MALINOWSKI