US embassy cable - 05GENEVA2599

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, Trade 
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