US embassy cable - 05NAIROBI4983

UNCLAS SECTION 01 OF 04 NAIROBI 004983 
 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR WJACKSON 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ETRD, ECON, EAGR, EAID, PREL, PGOV, WTRO, KE 
SUBJECT:  WTO - KENYA, WITH THE EU, PREPARES FOR HONG 
KONG 
 
REF:  (A) STATE 211956  (B) NAIROBI 4949 (NOTAL) 
 
Sensitive-but-unclassified.  Not for release outside USG 
channels. 
 
1.  (U) This report includes an action request for State, 
USTR, and USDA; please see paragraph 9. 
 
2.   (SBU) SUMMARY:  Despite the fact that it does not 
have a sitting Trade Minister, Kenya hopes to play a 
leadership role in developing a consensus among African 
countries at the upcoming WTO Hong Kong Ministerial, 
according to David Nalo, Kenya's Permanent Secretary for 
Trade and Industry.  Nalo provided draft points on 
Kenya's current thinking for Hong Kong (copied in 
paragraph 8) and invited U.S. reaction.  The points 
indicate that the EU has significant influence on the 
policy positions being developed by the Trade Ministry's 
technical groups, a point Nalo acknowledged.  END 
SUMMARY. 
 
------------------------------------ 
Kenya Wants to Lead the Africa Group 
------------------------------------ 
3.  (U) Econ/C and Econoff met with Kenya's Permanent 
Secretary for Trade and Industry, David Nalo, on November 
 
SIPDIS 
30 to discuss U.S. and Kenyan preparations for the 
December 13-18 WTO Ministerial in Hong Kong.  Econ/C 
reiterated ref A points and highlighted the need for 
Kenya to push for a more ambitious EU response on 
agriculture. 
 
4.  (U) Nalo explained that despite the current lack of a 
Trade Minister and Assistant Minister (the result of 
President Kibaki's November 23 dismissal of all 
Ministers), the Ministry's External Trade Division is 
continuing to draft Kenya's positions in order to bring 
up to speed Kenya's (likely large) WTO delegation.  He 
offered to brief Emboffs early the following week and 
said the Ministry also plans to better publicize its 
positions before Hong Kong.  [Note:  We expect news at 
any time of President Kibaki's new Cabinet, and it is 
possible that former Trade Minister Kituyi will be asked 
to return.  In any event, Nalo said that even if Kituyi 
is posted to a different cabinet slot, he would still 
join the delegation to Hong Kong.  Separately, Kitui told 
the Ambassador December 1 that he will definitely be 
leading the Kenyan delegation to Hong Kong, regardless of 
his status at the time.  End Note.] 
 
5.  (SBU) According to Nalo, in Hong Kong, Kenya will try 
to organize side meetings with a few "pro-trade" African 
countries (naming Mauritius, South Africa, and Uganda - 
likely not the complete list) to encourage a consensus, 
based on Kenya's position, that would then be taken to 
the entire Africa Group.  When asked about current 
negotiating groupings, Nalo agreed that Kenya, and other 
less developed countries, need to examine closely the 
logic of holding common positions with large, rapidly 
developing countries such as India and Brazil, but said 
that changing the current lineups would be a "delicate 
matter."  He admitted that these large, rapidly-growing 
economies should be more open to exports from the less 
developed world. 
 
------------------ 
The EU's Influence 
------------------ 
6.  (SBU) As reported in ref B, in raising the issue of 
geographic indications, Econ/C noted that Kenya's 
position in favor of the EU proposal appeared at odds 
with Kenya's economic interests.  Nalo replied that the 
Ministry needed a significant overhaul of its technical 
groups, who were often too strongly influenced by 
supporters of one side on an issue.  He admitted that the 
EU, or groups or individuals promoting EU positions, are 
closely involved with some of the technical groups.  He 
said that these advisors provide funding for the groups' 
work, but stopped just short of saying the EU is paying 
directly.  Nalo added that it is probably too late to 
 
NAIROBI 00004983  002 OF 004 
 
 
attempt any major revision of Kenya's positions ahead of 
Hong Kong, but he welcomed a continued dialog with U.S. 
officials. 
 
---------------------------------------- 
The GOK's Current Thinking for Hong Kong 
---------------------------------------- 
7.  (U) Nalo presented talking points, pulled together 
specifically for the meeting with Econ/C, (copied in para 
8) of Kenya's WTO negotiating position.  He noted that 
these were draft points and still under discussion among 
the Trade Ministry and its advisors.  Nalo said he would 
welcome our comments. 
 
8.  (SBU) Begin Text of Kenya Draft Talking Points: 
 
-- The preparations for the 6th WTO Ministerial 
Conference scheduled for Hong Kong are at an advanced 
stage and the main challenge for all members is to 
identify priorities to ensure a successful outcome that 
will set the pace for the conclusion of the DDA 
negotiations by 2006. It is important therefore for 
members to focus on resolving the outstanding 
difficulties before the Hong Kong Ministerial Meeting, 
particularly in the major areas of agriculture, non- 
agricultural market access, services, rules, trade 
facilitation and development issues. This will be crucial 
so as to ensure a successful outcome of the ministerial 
conference. 
 
-- Kenya has been very supportive of initiatives and 
proposals to ensure a successful outcome that will 
reflect the ambition set forth under the Doha mandate and 
in particular the development dimension that takes into 
account the needs and interests of developing countries. 
In this respect Kenya is keen to work with other key 
players in the negotiations including the EU, US, G20, 
the G90 and others to ensure a balanced outcome in Hong 
Kong. 
 
-- We acknowledge with appreciation the recent proposals 
by the major players in the negotiations which include 
the US, G20 and the E.C particularly after the Zurich 
meeting where selected trade Ministers exchanged views on 
the key Doha negotiating subjects and the challenges of 
striking a deal before Hong Kong. The EU on its part has 
indicated that all participants have domestic constraints 
and political limitations and shall therefore negotiate 
on the basis of the mandate decided by the Council of 
Ministers. 
 
-- On the other hand the US has given a conditional offer 
to eliminate all tariffs, subsidies and other barriers to 
free flow of goods and services provided other members 
are prepared to make significant contributions. The 
target of this offer is to create new trade opportunities 
in manufactured goods and services comparable to those 
created in agriculture. 
 
-- The US offer is similar to the recent EU contribution 
on agriculture negotiations which is conditional to 
certain targets being met in other areas of the Doha Work 
programme and specifically a higher ambition for NAMA and 
benchmarking for Services. However despite the difficult 
political circumstances that both the EU and the US face, 
they both have a responsibility of ensuring that the 
outcome of the Hong Kong meeting takes into account the 
specific concerns of developing and least developed 
countries. In this respect Kenya calls upon the US in 
particular to continue providing the necessary leadership 
during the preparatory process leading to the Ministerial 
conference. 
 
-- As a country Kenya is particularly concerned that on 
the overall there has been a predominant focus on the two 
major issues of Agriculture and Industrial Tariffs, 
leaving many of the important issues of interest to 
developing countries on the sidelines. This has led to 
the process and pace of the negotiations largely being 
dependent on the position of the major players, and in 
 
NAIROBI 00004983  003 OF 004 
 
 
particular the US and EC. Many developing countries are 
concerned at this state of the negotiations, as it 
marginalizes the issues of interest to them as well as 
their involvement in the negotiations process.  Some of 
the key issues include; 
 
-- On Agriculture, the critical issue is agreeing on the 
structure of the tiered formulae to be used for the 
tariff reductions and how this will impact on the 
different Members. A resolution of this issue is 
necessary to unlock possible movement on the issues of 
domestic support and export competition pillars. In 
addition specific concerns for developing countries which 
include, special and differential treatment provisions, 
the question of preference erosion, Special Products, 
Special Safeguard Mechanism, implementation periods for 
commitments and increased market access through the 
expansion of tariff rate quotas, cotton initiative and 
commodities should be adequately addressed in the 
negotiations. 
 
-- On NAMA there is need to resolve the formula to be 
used for tariff reductions and the treatment of unbound 
tariffs to avoid a situation where developing countries 
could assume a disproportionate burden of the tariff 
reduction commitments. On average, developing countries 
have high tariff rates compared to the developed 
countries, and hence the potential impacts of any tariff 
reduction formula on their economies will need to be 
assessed. In this respect number of flexibilities for 
developing countries should be factored into any final 
framework on tariff reductions to incorporate longer 
implementation periods, exemption from applying formula 
cuts, provision to maintain some unbound tariffs and the 
full exemption of least-developed countries from 
undertaking any reduction commitments. The key concern 
for Kenya is the treatment and the flexibilities to be 
accorded to countries that have bound less than 35% of 
their tariff lines and in particularly with regard to the 
conditions attached. 
 
-- On Services the general assessment is that the offers 
on the negotiating table are unsatisfactory in terms of 
quality, including the sectors and modes of supply 
covered by the offers. The recent proposals are calling 
for additional modalities to raise the coverage, quality 
and number of participants in the services negotiations 
including complimentary approaches that would establish 
mandatory benchmarks for all Members to meet in terms of 
the offers. However in Kenya's view the approach to be 
agreed must ensure that developing countries will only 
undertake liberalization commitments which are consistent 
with their development needs as provided for in the GATS 
and the negotiating guidelines. 
 
-- The Services negotiations should equally focus on 
specific measures to strengthen the capacity of 
developing countries in the supply of services and their 
participation in international trade. Such measures 
should include ways and means to increasing the 
competitiveness of their services sectors, providing them 
with access to distribution channels and information 
networks in developed country markets, and for developed 
countries to undertake increased commitments on temporary 
mobility under mode 4. 
 
-- The general assessment on Trade Facilitation is that 
these negotiations are `progressing well and on 
schedule'. Consequently, the expectation is that the Hong 
Kong Ministerial could result in a broad agreement on the 
main elements on trade facilitation, and pave the way for 
the finalization of the relevant legal instrument by 
2006. However WTO members should take stock of the 
negotiations and the implications of a possible agreement 
on trade facilitation. This will give a clear assessment 
of the capacity of different Members to implement new 
commitments on trade facilitation, special and 
differential treatment provisions, as well as the 
implication of a dispute settlement process that is 
likely to be an integral part of the agreement. 
 
NAIROBI 00004983  004 OF 004 
 
 
 
-- On Development issues it is important to recall that 
the Doha mandate and the July Package provide that the 
interests and needs of developing and least developed 
countries should be placed at the core of the DDA 
negotiations and also their outcome. In this regard the 
Special and Differential Treatment provisions should be 
strengthened to make them more precise, effective and 
operational", through increased market access for 
developing countries, balanced rules as well as the 
provision of capacity building and technical assistance 
to enable developing countries implement both Uruguay 
Round Agreements and results of the Doha Round. 
 
-- On TRIPS and Public Health, Kenya is keen to have a 
speedy adoption of an amendment to implement the 30th 
August, 2003 Decision on TRIPS and Public Health in line 
with the African Group proposal which is widely supported 
by a large majority of developing countries. It is 
therefore important for members to intensify 
consultations to complete the necessary amendment before 
Hong Kong. The amendment should address the difficulties 
regarding the implementation of compulsory licensing 
measures and also integrate the 30th August Decision into 
the TRIPS agreement in a manner that will guarantee the 
interests of developing countries are taken into account. 
The issue of access to essential drugs that are subject 
to higher prices due to the stronger patent regime 
resulting from the TRIPS agreement, for diseases other 
than the HIV/AIDS, malaria and tuberculosis should 
provide the motivation for a more dynamic resolution of 
this matter. In this regard the issue of incorporating 
the Chairman's statement in the amendment of the TRIPS 
Agreement remains a genuine concern for many developing 
countries including Kenya. 
End Text. 
 
9.  (U) Action request:  Post would appreciate any 
comments or questions from Washington agencies on Kenya's 
draft points to deliver to Ministry of Trade officials. 
Econ/C and Econoff meet again the morning of December 5 
with Nalo and the technical-level officials who are 
working on finalizing Kenya's positions going into Hong 
Kong. 
 
------- 
Comment 
------- 
10.  (SBU) Our reading of Kenya's draft points indicates 
an obvious slant towards an EU perspective, despite our 
good relations with Ministry of Trade officials, 
including former Minister Kituyi.  Kenya's trade 
officials have a fairly good grasp of the issues at hand, 
and we believe Kenya wants to see a successful Hong Kong 
outcome.  However, to date, we have not seen a 
willingness by Kenyan officials to call on the EU to 
improve its offer on agriculture, and without Kenya's 
leadership, it is unlikely any larger African grouping 
will do so either. 
 
BELLAMY