US embassy cable - 03KATHMANDU702

UNCLAS SECTION 01 OF 02 KATHMANDU 000702 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR SA/INS AND INL/AAE 
STATE PLEASE ALSO PASS USTR - LEVINE 
GENEVA FOR USTR - GREENIDGE 
 
E.O. 12958: N/A 
TAGS: ETRD, PREL, SNAR, NP, U.S-Nepali Relations 
SUBJECT: NEPAL REQUESTS USG LENIENCY FOR WTO ACCESSION 
 
REF: A. (A) STATE 91517 
 
     B. (B) 4/15 LAUTERBACH-WELBORNE E-MAIL 
     C. (C) 02 KATHMANDU 2263 
     D. (D) 00 GENEVA 3607 
     E. (E) 00 KATHMANDU 1643 
 
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SUMMARY 
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1.  (SBU) Summary and Action Request:  In an April 16 meeting 
with the Ambassador, Commerce Secretary Lawa Prasad Devkota 
requested that the USG show greater flexibility in accepting 
Nepal's revised WTO offers.  As a long-time development 
partner, it is "kind of incumbent" upon the US to assist 
Nepal in its efforts to accede to WTO, Devkota said.  The 
Secretary also reiterated long-standing requests for the USG 
 
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to provide Nepal with technical assistance in customs 
valuation.  Nepal expects to provide the WTO Secretariat with 
a consolidated response to all Working Party members' 
reactions to their revised offers by the end of April.  In 
separate meetings with the Ambassador on April 15 and with 
econoff on April 16, two visiting officials from the WTO 
Secretariat similarly urged that the USG moderate its 
 
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reaction to Nepal's revised offers.  Action Request:  INL has 
apparently decided not to fund our FY 03 proposal to provide 
technical assistance in customs valuation to Nepal.  The 
Embassy urges INL to reconsider this decision.  End summary. 
 
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COMMERCE ASKS FOR GREATER LEEWAY 
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2.  (SBU)  In an April 16 meeting with the Ambassador, 
Commerce Secretary Lawa Prasad Devkota asked that the USG 
demonstrate greater flexibility in its reactions to Nepal's 
revised WTO offers (Reftel).  The Government of Nepal (GON) 
is committed to meeting all requirements to accede, Devkota 
stressed.  Citing the history of cordial bilateral 
cooperation between the two governments, Devkota said he 
regards it as "kind of incumbent" upon all of Nepal's 
development partners to support the process.  He said he 
found it surprising that two of Nepal's most munificent 
bilateral donors--the U.S. and Japan--were the two countries 
with the most stringent reactions to Nepal's revised offers. 
Devkota also raised the GON's outstanding request for 
technical assistance on customs valuation from the USG.  The 
EU has already agreed to provide assistance on sanitary and 
phytosanitary measures, while Australia has agreed in 
principle to assist in complying with TRIPS regulations. 
 
3.  (SBU)  Joint Secretary Prachanda Man Shrestha raised USG 
requests on binding tariffs and financial services market 
access as areas of particular concern.  The GON will be 
unable to accommodate the USG request on binding tariffs 
because applied rates have not stabilized, he said.  Instead, 
the GON has proposed binding tariffs at an average of between 
30 and 45 percent.  The GON will be unable to compromise much 
more than that, he indicated.  With respect to financial 
services, Shrestha noted that the GON has offered to open up 
60 subsectors--more than any other LDC has offered.  The GON 
has already agreed to assess zero percent duty on information 
technology, Shrestha observed, but needs a certain amount of 
"transition time" to absorb this change. 
 
4.  (SBU) The Ambassador responded that the USG would like to 
assist Nepal to accede to the WTO.  With no Parliament, Nepal 
is an unusual situation, he observed, and there is concern in 
some quarters about whether ordinances passed during this 
interim period will survive as binding legislation once 
Parliament resumes.  He noted that officials from the WTO 
Secretariat now in Kathmandu seem fairly optimistic about 
 
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Nepal's prospects.  That said, the GON will have to work 
quickly to ensure that its responses to each of the Working 
Party members' reactions are ready by the end of April. 
Joint Secretary Shrestha said that the GON will provide the 
WTO Secretariat with a consolidated response to all Working 
Party members' reactions before the next Working Party 
meeting at the end of April. 
 
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WTO Secretariat in Nepal 
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5.  (SBU) The Ambassador met with Hector Millan and Arif 
Hussain, Director of the Accessions Division, of the WTO 
Secretariat on April 15.  During their brief exchange, the 
 
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Secretariat officers reiterated the GON's complaints and 
 
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called for the USG to "step back" from its latest negotiating 
position.  On April 16, Millan presed econoff again, 
criticizing the demands of the USG.  Specifically, he saw the 
demand to bind tariffs on industrial goods as out of step 
with the regional tariff structure and beyond the standards 
of other developing countries already members of the WTO. 
Millan also dismissed USG requests for preferences, including 
chemical harmonization and information technology items.  In 
terms of trade in services, Millan commented that the USG 
demands were "out of step."  (Comment:  Despite Millan's 
vehement opposition to the USG position, he was ignorant of 
Nepal's blacklist of industries, regulatory barriers to 
foreign investment (let alone the barriers in practice), and 
of the negotiation stance taken by the GON on binding rates. 
End comment.) 
 
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COMMENT 
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6.  (SBU)  Our exchanges in Kathmandu indicate that the GON 
will likely stress its status as an LDC to justify requests 
for more lenient treatment.  Based on the comments made by 
the two officials visiting from Geneva, it also seems likely 
that the Secretariat is encouraging this position.  The 
Embassy supports the GON's request for technical assistance 
in customs valuation, which, apparently, the USG committed to 
provide at the first Working Party meeting in Geneva in 2000 
(Ref D).  So far, however, we have been unable to identify a 
source of funding for such assistance.  We understand that 
our request for INL funding to support the customs valuation 
training appears unlikely to be granted (Refs B and C).  We 
urge INL to reconsider its apparent decision not to fund 
customs valuation assistance for Nepal. 
MALINOWSKI