This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 KIEV 000374 
 
SIPDIS 
 
SENSITIVE 
 
NSC FOR WILSON 
TREASURY FOR GAERTNER 
USDOC FOR 4201/DOC/ITA/MAC/BISNIS 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK 
DEPT PLEASE PASS TO USTR FOR CKLEIN/LMOLNAR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR PREL UP
SUBJECT: UKRAINE: BILATERAL COORDINATION GROUP TALKS: TRADE 
ISSUES 
 
 
Sensitive but Unclassified; Not for Internet Distribution. 
 
¶1. (SBU) Summary:  In Bilateral Coordination Group (BCG) 
talks January 24, EB A/S E. Anthony Wayne said restoration of 
Ukraine's access to the Generalized System of Preferences 
(GSP) was due to the GOU's good work on amending the optical 
disc law and implementing the new legislation.  GOU officials 
responded that this decision inspired them to continue to 
improve protection of intellectual property rights (IPR) in 
Ukraine.  A/S Wayne explained the Department of Commerce 
(DOC) decision to extend the market economy status (MES) 
review until February 16 was an excellent opportunity for the 
GOU to highlight positive developments of the last few months 
in Ukraine.  GOU officials said they were surprised by the 
delayed decision but hoped MES recognition would stimulate 
further reform in Ukraine.  The Director of the Ministry of 
Economy's WTO Cooperation Department said GOU and USG 
negotiators were close to signing a WTO bilateral market 
access agreement; the GOU would have to compromise with 
business to push the remaining legislation necessary for 
multilateral agreement through parliament.  A/S Wayne said he 
hoped to reach bilateral agreement in the next few weeks and 
highlighted key outstanding issues.  A/S Wayne said the USG 
supported lifting Jackson-Vanik for Ukraine and advised the 
GOU to distance itself from anti-Semitic organizations.  An 
MFA official said President Yushchenko condemned anti-Semitic 
or xenophobic behavior.  End Summary. 
 
¶2. (U) A U.S. delegation headed by EUR A/S Fried and 
including EB A/S Wayne, ASD/ISP Flory, NSC Director Wilson 
and Ambassador participated January 24 in Bilateral 
Coordination Group (BCG) discussions with a Ukrainian 
delegation headed by DFM Volodymyr Khandohiy.  Discussions 
reported below covered bilateral trade issues; other topics 
reported septels. 
 
IPR: Restoration of GSP Trade Benefits Very Welcome 
--------------------------------------------- ------ 
 
¶3. (SBU) A/S Wayne opened with the comment that he was very 
pleased to get the decision from the U.S. Trade 
Representative (USTR) regarding restoration of Ukraine's 
access to the GSP in time for the BCG meeting.  The decision 
was due to the GOU's good work on amending the optical disc 
law and implementing the new legislation.  Protection of IPR 
was important for modern economies.  Improvements in Ukraine 
meant the country's rating would be changed from Priority 
Foreign Country to Priority Watch List.  A/S Wayne said he 
had spoken with Ukrainian officials at the Ministry of 
Education and Science and the Ministry of Economy, where he 
had noted that the planned enforcement cooperation group 
would be an excellent vehicle for cooperation between both 
governments and industry. 
 
¶4. (SBU) Omelyan Sukholytki, Director of the Department of 
International Cooperation of the Ministry of Education and 
Science, expressed gratitude for the restoration of GSP 
eligibility and a commitment to continue to cooperate in the 
IP field.  Volodymyr Zharov, First Deputy Chairman of the 
State Department of Intellectual Property, asked that A/S 
Wayne share Ukrainian gratitude with USTR and USG 
counterparts.  Restoration of GSP was a great reward for all 
of the GOU efforts.  The GOU remained committed to improving 
on IPR protection and was very inspired. 
 
MES: GOU Anxious for Result 
--------------------------- 
 
¶5. (SBU) A/S Wayne noted that the Department of Commerce had 
decided to delay a decision in its market economy status 
(MES) review of Ukraine for an additional 30 days in order to 
reopen the record and allow for additional submissions. 
There had been many important events since the period for 
submissions had closed in the summer, and it was important 
for the GOU to comment by January 25, since those comments 
would be part of DOC's evaluation.  The results were now due 
February 16.  It was an excellent opportunity to highlight 
the positive developments that had occurred in the last few 
months in Ukraine, A/S Wayne added. 
 
¶6. (SBU) Natalya Sydoruk, Deputy Director of the Anti-dumping 
Department, said, DOC's decision to extend the MES review was 
very unexpected in light of all the previous work done by 
both Ukraine and the United States.  Reforms in Ukraine had 
been recognized by many sources, such as the Wall Street 
Journal Economic Freedom Index and Freedom House.  Ukraine's 
market transition was quite sustainable.  Russia and 
Kazakhstan had been recognized 3-4 years earlier as market 
economies, while many sources rated the economic development 
of Ukraine to be higher than in those countries.  Sydoruk 
said, in any case, she hoped Ukraine's aspirations to this 
end would be appreciated and finally there would be technical 
recognition of what actually is happening in the country. 
DFM Khandohiy remarked that he also believed recognition of 
Ukraine's MES was a technical question, but hoped this 
recognition would stimulate further reform efforts. 
 
Progress toward Ukraine's WTO Accession 
--------------------------------------- 
 
¶7. (SBU) Vyacheslav Tsymbal, Director of the Ministry of 
Economy's WTO Cooperation Department, said that accession to 
the WTO was a key goal of Ukraine's foreign economic policy. 
The GOU had signed 42 WTO bilateral market access agreements, 
and only agreements with the United States, Australia and a 
few other countries remained outstanding.  Noting that GOU 
and USG negotiators were close to finishing and had completed 
the technical aspects of the talks, Tsymbal asked about USG 
internal procedures for approval of the bilateral protocol. 
 
¶8. (SBU) On a multilateral basis, Tsymbal explained that the 
process involved passing a series of laws, commenting that 
the U.S. Embassy had done great work in following the 
progress of draft legislation in the Rada.  His government's 
attention to this process was evidence of GOU commitment to 
WTO accession.  Parliament had passed over half of the more 
than 20 WTO-related bills the GOU had submitted.  For the 
Rada to pass the remaining legislation, it would be necessary 
to negotiate a compromise between business and government. 
The GOU would also need some concessions from the WTO working 
party and would ask for some transition periods and other 
alternatives.  A list of documents had to be completed, and 
some GOU interagency coordination also remained.  The 
Ministry of Economy was working on a package of proposals for 
the WTO working party and would appreciate USG comments. 
 
¶9. (SBU) A/S Wayne observed that Ukraine's WTO accession 
involved work in three areas:  bilateral, multilateral work 
on the working party report, and legislative progress.  He 
congratulated the GOU on strong progress on the bilateral 
with the U.S., noting that many of the issues that had been 
outstanding when he last visited Ukraine in October 2005 had 
since been resolved.  A/S Wayne said he hoped our two sides 
could reach agreement in the next few weeks.  A few issues 
remained, including those related to insurance intermediation 
services, meat certificates, Avian Influenza, the period of 
patent protection for chemicals and pharmaceuticals, and 
audiovisual services.  On the last issue, he noted the USG 
had made several proposals to reconcile our interests with 
that of other trading partners (e.g., the EU).  We hoped 
these would provide for agreement.  USTR was awaiting 
responses on several of these issues. 
 
¶10. (SBU) Regarding the internal USG process for approving a 
bilateral agreement, A/S Wayne said USTR would need to 
conduct consultations, but the U.S. side would need to check 
whether a formal procedure was required for signing and get 
back to the Ministry of Economy.  (Note:  On January 25, 
Embassy sent Tsymbal information received from the Department 
via email on the procedure, which noted that consultations 
with Congress were not required, but they were normally done 
for countries of significant commercial interest or those 
subject to provisions like Jackson-Vanik.)  A/S Wayne asked 
for the GOU assessment as to whether the Rada would soon pass 
remaining legislation.  Tsymbal replied that the GOU would 
keep fighting to pass priority legislation, and the last bill 
that had passed was a law on plant quarantine on January 12. 
February 7 would begin the next session of the Rada, DFM 
Khandohiy noted, adding that passing legislation would become 
more difficult closer to the March parliamentary elections. 
 
GOU Hopes House Will Lift Jackson-Vanik 
--------------------------------------- 
 
¶11. (SBU) A/S Wayne stressed that the Administration 
supported lifting Jackson-Vanik for Ukraine.  The Secretary 
had written to Congress to urge it to lift the measure.  On 
November 18, the Senate passed such legislation.  We had been 
urging the House to pass a similar bill.  During 
consultations, Congressmen noted progress on IPR and WTO 
membership.  However, A/S Wayne wanted to flag the issue of 
anti-Semitic statements of private Ukrainian institutions. 
Some Congressmen cited continuing instances of anti-Semitism 
as a reason they were hesitant to take action.  A/S Wayne 
advised the GOU to distance itself from such organizations 
and do as much as possible, within the limits of democratic 
discourse, to discourage such statements. 
 
¶12. (SBU) Volodymyr Yatsenkivskyi, Deputy Director of the 
Second Territorial Directorate of the MFA (covering Europe 
and the Americas), said this was not a new issue in 
U.S.-Ukraine bilateral relations.  He welcomed the Senate's 
decision on Jackson-Vanik and was pleased that the initiator 
had been Senator Lugar.  Yatsenkivskyi hoped the House would 
take a decision soon.  He wanted to thank the U.S. for taking 
steps to make this possible, underlining that President 
Yushchenko had condemned anti-Semitic or xenophobic behavior 
and also distanced himself from such disgraceful statements. 
Khalidko of the Ministry of Education and Science (MES) said 
the statements of the Interregional Academy of Personnel 
Management (MAUP) were made by a private person (Note:  MAUP 
Director Shchokin) from a private institution.  MES had 
distanced itself from the organization, and had unfriendly 
relations with Shchokin, even though the ministry had earlier 
issued MAUP accreditation as a private educational 
institution.  Khandohiy reiterated that it was President 
Yushchenko's and the government's policy to condemn such 
utterances.  It was important to remember that the 
organization consisted of 50,000 people (the vast majority 
students), all of whom could not be associated with 
Shchokin's statements.  He hoped the Ukrainian Embassy could 
provide a persuasive case to Congress.  Ukraine was a 
democratic state, but such incidents reaffirmed that it must 
be vigilant. 
 
¶13. (U) A/S Wayne cleared this cable. 
 
¶14. (U) Visit Embassy Kiev's classified website: 
www.state.sgov.gov/p/eur/kiev. 
HERBST