VZCZCXRO2101
PP RUEHDE
DE RUEHYN #2063/01 1991321
ZNR UUUUU ZZH
P 181321Z JUL 06
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 4695
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 SANAA 002063 
 
SIPDIS 
 
SIPDIS 
 
PLEASE PASS TO USTR FOR CECILIA KLEIN AND DAWN SHACKLEFORD; 
USAID EGAT/EG FOR PATTERSON BROWN. 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON ETRD EAID ECIN KMCA KMPI YM
SUBJECT: WTO MEETING BREATHES NEW LIFE INTO TRADE REFORMS 
 
SANAA 00002063  001.2 OF 002 
 
 
¶1. SUMMARY:  When it comes to trade reform, Yemen may finally 
be willing to do business.  The ROYG's World Trade 
Organization (WTO) negotiating team recently returned from 
the third Working Party meeting in Geneva reporting 
significant progress.  Despite some differences on tariff 
rates, the ROYG felt its offers were well received, and that 
WTO accession was possible in the near future.  The United 
States and the European Union applied coordinated pressure on 
Yemen to implement key elements of its action plans, asking 
Yemen to demonstrate a genuine commitment to trade reform. 
This message was understood, and the ROYG is once again 
interested in utilizing support from the Trade and Investment 
Framework Agreement (TIFA) with the United States to move 
forward in key areas, including customs valuation and 
commercial codes.  A new reform-minded Cabinet is strongly 
supportive of WTO accession, as is President Saleh, opening 
up a window of opportunity for renewed cooperation.  END 
SUMMARY. 
 
---------------------------------- 
Yemen Gets Serious About Accession 
---------------------------------- 
 
¶2.  On July 17, Econoffs met with Hamoud al-Nagar, WTO 
Director at the Ministry of Trade, following the July 7 WTO 
Working Party meeting in Geneva (the third such meeting). 
Nagar appeared positive about Yemen's progress towards WTO 
accession, and said that his team had constructive bilateral 
meetings with the United States and the European Commission. 
According to Nagar, the ROYG's most recent Goods and Services 
offer represented a significant step forward, and was on par 
with those of other Least Developing Countries in the WTO, 
such as Nepal and Cambodia.  Nagar pointed specifically to a 
reduction in the average of binding tariffs from 62 percent 
to 32 percent, and dropped three quarters of the protected 
goods named in the previous offer. 
 
¶3.  "The mood in our government has changed dramatically," 
said Nagar.  "In 2000, WTO was almost a dirty word.  We were 
afraid to talk about it."  Since the Cabinet reshuffle in 
February, however, Nagar noted that the ROYG was now firmly 
pro-WTO.  President Saleh's recent call for speedy accession 
removed any doubts about the country's direction, according 
to Nagar, who insisted that even the obstructionist Prime 
Minister Bajammal was now firmly in the WTO camp.  Nagar also 
said that Yemen as interested in moving forward on a 
bilateral trade agreement with the United States, as was 
recently done with China. 
 
¶4.  One serious point of contention in Geneva, said Nagar, 
was the U.S. suggestion that Yemen bind its tariff rates at 
the current applied rates.  Nagar argued that when 
implementing World Bank and IMF reforms, in many cases the 
ROYG reduced rates below the ceilings proposed in the current 
WTO Goods and Services Offer.  The ROYG should not be 
punished for unilaterally lowering rates as part of an effort 
to combat smuggling, argued Nagar.  There may come a day when 
Yemen will need added protection for a specific good, 
specifically agricultural products, and the current offer 
maintains some room for policy changes in the future.  Nagar 
expressed his hope that the United States would show 
flexibility on this point. 
 
--------------------------- 
ROYG Loses Focus on TIFA... 
--------------------------- 
 
¶5.  In the run-up to the Working Party meeting, Post 
experienced a frustrating delay in its cooperation with the 
ROYG.  After a November 2004 TIFA meeting in Washington, the 
USG agreed to provide technical assistance to the ROYG for 
the accession process in such areas as intellectual property 
rights (IPR), customs, standards/technical barriers to trade, 
and sanitary and phytosanitary measures (SPS).  The flagship 
program was a USD 500,000 effort to support implementation of 
WTO customs valuation standards, jointly funded by MEPI and 
USAID.  Initial success in training customs staff and 
advising on proposed legislation soon stalled, however, when 
it became clear that the ROYG had no strategy to implement 
the new standards. 
 
¶6.  Customs valuation in turn became an indicator of the 
ROYG's overall commitment to TIFA cooperation.  Since the 
2004 meeting, there were no additional meetings of the TIFA 
ministerial group, and only one conference call for the 
technical committee.  Despite several USG offers, there were 
few signs from the ROYG as to what assistance was required. 
In addition, there was considerable confusion as to who 
 
SANAA 00002063  002.2 OF 002 
 
 
within the ROYG was leading the TIFA process.  Formal 
leadership rested with the Ministry of Planning, while all 
WTO-related matters were handled in the Ministry of Trade. 
Lack of coordination between these and other ministries 
resulted in complete deadlock. 
 
--------------------------- 
...USG Gets Their Attention 
--------------------------- 
 
¶7.  Ambassador raised TIFA issues directly with the Ministers 
of Finance, Trade and Planning to no effect.  On June 6, 
Ambassador addressed a letter to the Prime Minister (with 
copies to the above ministers), noting delays in TIFA 
cooperation and urging the ROYG to select a champion for the 
cause.  Post did not receive an official response, but the 
letter was noted by officials in each ministry and reportedly 
treated seriously. 
 
¶8.  In addition to bilateral discussions with the ROYG, Post 
and USTR also worked together to establish a common position 
among Working Party representatives in Geneva to press for 
progress on implementation of proposed action plans.  Post 
worked informally to establish a common position with the 
members of the European Commission, the Canadians, and the 
Japanese.  The message came across clearly in Geneva, as 
Nagar reported an increased focus in the meetings on reducing 
implementation times for compliance with WTO standards. 
 
------------------------- 
New Hope For Trade Reform 
------------------------- 
 
¶9.  The focus on implementation appeared to have spurred 
Nagar to action.  As WTO Coordinator, Nagar is currently 
working with the Customs Authority to create an action plan 
for accepting WTO valuation standards.  Nagar added that the 
ROYG is seriously considering adoption of WTO agreements on 
civil aviation and information technology, and welcomed the 
suggestion that the MEPI-funded Commercial Law Development 
Program (CLDP) could work with the Cabinet, Parliament, and 
the private sector on Yemen's commercial code.  He further 
recommended that the ROYG convene a TIFA meeting in September 
to focus on implementing action plans and completing a needs 
assessment for the accession process.  Nagar promised that 
regardless of which ministry had the official lead, his 
office would work hard to identify specific areas for TIFA 
cooperation in advance of the next WTO Working Party meetings 
in early 2007. 
 
---------------------------- 
"Now Is The Time For Action" 
---------------------------- 
 
¶10. COMMENT:  Considering the newfound support for WTO 
accession within the Government, Nagar stressed that this is 
the time to push for trade reforms.  Post could not agree 
more.  After more than one year of delays on TIFA programs, 
and no clear indication of the ROYG's commitment to joining 
WTO, there appears to be renewed willingness to engage on all 
fronts.  Post will explore the possibility of restarting 
assistance for customs valuation within the new action plan, 
move forward with CLDP's offer of legal assistance, and 
explore other possibilities for cooperation under MEPI-funded 
TIFA initiatives.  These actions could potentially have a 
ripple effect on the Government's broader reform plan, and 
its standing with the Millennium Challenge Account -- a point 
not lost on the Ministry of Trade.  Ultimately, the ROYG's 
follow-through on the proposed September TIFA meeting will 
provide a clear test as to whether U.S.-Yemeni cooperation on 
trade reform has new life.  END COMMENT. 
Khoury