VZCZCXRO1783
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHKB #0476/01 1101108
ZNR UUUUU ZZH
P 201108Z APR 07
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC PRIORITY 2845
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 BAKU 000476 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PLEASE PASS USTR PAUL BURKHEAD AND ELIZABETH HAFNER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAID USTR PREL AJ
SUBJECT: AZERBAIJAN: TECHNICAL SUPPORT STRATEGY AND PROGRAM 
FOR WTO ACCESSION 
 
REF: (A) STATE 45995 (B) BAKU 319 
 
SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET DISTRIBUTION 
-- PLEASE HANDLE ACCORDINGLY 
 
¶1. (SBU) Democratic and economic reform is essential to 
Azerbaijan's long-term stability and prosperity. 
Azerbaijan's WTO accession process is a vital instrument of 
reform efforts, as it will put in place the legal, regulatory 
and institutional framework necessary for Azerbaijan to 
emerge as a rule-based market-oriented, transparent 
democracy.  Acceleration of the WTO accession process is 
perhaps the best and only tool that can be effective in 
forcing fundamental change in an economy dominated by 
monopolies and corruption.  We believe that renewed US 
assistance to support Azerbaijan's WTO accession efforts -- 
particularly assistance that focuses on establishing an open, 
transparent legal system -- is a critical part of our overall 
reform strategy. 
 
¶2. (SBU) We welcome the Department and USTR's interest in 
renewed technical assistance for Azerbaijan's WTO accession 
process, and agree that any U.S. WTO accession support should 
be based on clear evidence of political will and commitment 
by the GOAJ (Reftel A).  Embassy also agrees that solid 
benchmarks and a constant evaluation of progress will be a 
part of the U.S. assistance.  In addition, Embassy welcomes 
any assistance and expertise U.S. agencies can offer to 
bolster U.S. assistance efforts in Azerbaijan.  Embassy feels 
that recent GOAJ measures and statements signal a new and 
serious commitment to WTO accession (Reftel B). 
 
¶3. (SBU) Embassy feels it is important to take advantage of 
the current window of opportunity to accelerate Azerbaijan's 
WTO accession process and proposes to implement an ambitious 
WTO accession support program, in addition to the current 
targeted efforts being carried out by USAID over the next six 
weeks.  U.S. efforts will focus on providing time-effective 
expert feedback on GOAJ's accession status, including the 
legal and regulatory reform measures which need to be 
completed to accelerate progress at the WTO working party 
level meetings.  These efforts will be closely coordinated 
with U.S. experts in Washington and Geneva. We do not propose 
to provide assistance that will strengthen Azerbaijan's 
position vis-a-vis the United States in our bilateral 
negotiations.  The U.S. expects the GOAJ to support the 
accession process in several ways and we will insist that the 
GOAJ be responsible for paying for all translation services. 
In addition, the GOAJ has already committed to paying for 
supplementary WTO support staff at the Ministry of Economic 
Development (MED) and Ministry of Foreign Affairs (MFA); it 
also has stepped up its public education and advocacy 
efforts. Cost-sharing of discrete portions of the technical 
assistance may also be examined. 
 
STATUS OF GOAJ WTO EFFORTS 
-------------------------- 
 
¶4. (SBU) The recently completed review of the status of the 
GOAJ's WTO efforts sponsored by USAID has revealed the 
complexity of Azerbaijan's WTO efforts.  Based on more than 
20 meetings at 15 ministries and state agencies, the WTO 
expert confirmed that there is widespread political will to 
accede to the WTO, driven mainly by a desire to accede before 
Russia.  In addition, there is a widespread belief within the 
GOAJ that economic gains from WTO membership will outweigh 
any costs or losses and that WTO membership will fully 
integrate Azerbaijan into the world economy. 
 
¶5. (SBU) There is resolve at all ministries to complete 
drafting of all 22 pieces of legislation included in the 
Legislative Action Plan which are due no later than June 30, 
¶2007.  In addition to the pending draft laws developed thus 
far, there are an additional 25 to 30 pieces of legislation 
and regulatory decrees which would need to be developed. 
These cover a broad range of critical areas including but not 
limited to trade-in-goods, financial services, 
telecommunications, energy, customs, IPR public procurement, 
and the competition law regime.  The GOAJ has indicated that 
it would submit all draft legislation to Working Party 
Members for comment prior to adoption. 
 
¶6. (SBU) Fulfilling the current legislative action plan is 
considered the highest priority task necessary to satisfy the 
Presidential Decree regarding draft WTO legislation and meet 
initial commitments made to WTO WP Members. Ministries and 
state bodies are concerned that they will be unable to meet 
 
BAKU 00000476  002 OF 003 
 
 
the June 30 deadline and uphold Azerbaijan's commitments to 
WTO WP Members.  In addition, the GOAJ is concerned that the 
initial drafts of proposed new legislation will not meet WTO 
requirements and Members' expectations due to the lack of 
technical capacity within the GOAJ and inadequate technical 
assistance to ensure drafts are fully in line with WTO 
agreements. 
 
¶7. (SBU) Various ministries and state bodies understand that 
the Legislative Action Plan is not comprehensive and that 
there is a need for additional reforms.  Government 
ministries and agencies do not have the technical expertise, 
however, to identify the missing reforms.  The GOAJ's 
commitment to replace old non-compliant laws with new, fully 
WTO compliant laws, is a positive sign.  Legal drafting is 
progressing slowly and only five drafts have been completed 
to date: the Draft Law on Technical Regulations, the Draft 
amending the Law on Copyrights and Related Rights, the Draft 
amending the Law on Patent, the Draft Amending the Tax Code, 
and Draft Cabinet of Ministers Resolution on Excise Taxes. 
 
¶8. (SBU) Two of the three drafts due to the Presidential 
Apparat no later than the end of March 2007 have been 
prepared but have not yt been submitted to  the Working 
Group on Legislaive Changes.  These are the drafts amending 
the Law on Copyrights and Related Rights and the Law on 
Patent.  The draft amending the Law on Currency Control has 
not been prepared.  The GOAJ expects to send the remaining 
drafts from ministries and state agencies over the next four 
weeks to the Working Group on Legislative Changes for review 
and approval.  A Draft Customs Code (to replace the existing 
code) is being finalized at the Customs Committee. 
 
¶9. (SBU) Only two WTO related laws were adopted in recent 
years: the Law on Phytosanitary Control (May 2006) and the 
Law on Veterinary Service (May 2005).  According to the WTO 
consultant, the quality and adequacy of recently adopted laws 
and drafts is questionable.  Preliminary reading and 
discussions with authorities indicate a lack of full 
compliance with the WTO agreements.  Many officials within 
the GOAJ have misunderstandings and misperceptions regarding 
compliance with WTO.  Many believe that there is no need to 
reflect all provisions of WTO agreements in national 
legislation given that the Constitution stipulates that 
international treaties supersede national legislation.  In 
certain cases, key rules and principles of WTO agreements 
appear to be deferred in the Legislative Action Plan for 
adoption in Cabinet resolutions rather than in laws.  This 
situation appears to apply to technical barriers to trade 
(TBT), Customs Valuation and Rules of Origin. 
 
¶10. (SBU) There is limited and insufficient WTO-related 
international technical assistance to the GOAJ.  In meetings 
with the WTO consultant, government ministries and state 
bodies expressed enthusiasm for immediate technical 
assistance to assist in reviewing and drafting legislation 
called for in the Legislative Action Plan.  There is a need 
for massive translation of many existing legislation and all 
draft ones (estimated at around 600 pages of legal text). 
The GOAJ is concerned that drafts may not be adequately 
translated into English and may lead to confusion and 
unnecessary questions by WP Members.  Embassy will insist 
that the GOAJ pay for all translation of documents; we will 
provide the GOAJ with any needed assistance in finding 
appropriate translation service companies.  Deputy Minister 
of Economic Development Jabbarov separately explained to us 
that this is not a question of funding; the GOAJ lacks WTO 
experts who can translate technical, WTO-specific legislative 
language into Azerbaijani. 
 
¶11. (SBU) The GOAJ is aware that WTO membership may likely 
have negative impact in certain sectors.  There is a need for 
additional education and economic and sectoral analysis to 
assess impact and identify actions for adjusting to mitigate 
any negative impact.  Throughout the GOAJ, there is a lack of 
experience, skills and understanding of methodology to 
undertake negotiations, particularly bilateral negotiations 
on market access for goods and services.  There is a lack of 
experience in classification of agricultural subsidies and 
negotiating multilateral agreements.  Coordination among 
ministries appears adequate while government coordination and 
cooperation with the private sector is poor.  The WTO 
Accession Division at the Ministry of Economic Development is 
understaffed.  Currently there are only four employees, 
including a legal expert, SPS/TBT specialist, and service 
specialist, although the GOAJ has pledged to increase this 
number and is requesting funding for up to 90 new 
 
BAKU 00000476  003 OF 003 
 
 
WTO-specific positions in its new budget. 
 
U.S. WTO ASSISTANCE GOALS 
------------------------- 
 
¶12. (SBU) The WTO consultant's initial conclusions highlight 
that the GOAJ lacks the technical capacity to effectively 
organize and finalize the complex range of legislative and 
regulatory reform documents which will be required to achieve 
this goal.  The scope of remaining WTO work combined with the 
tremendous lack of capacity within the GOAJ strongly argues 
against a selective or partial engagement approach and 
underscores the importance of an intensive near-term 
engagement across a broad-range of legislative and regulatory 
reform areas to take advantage of the new political will to 
accelerate the accession process. Embassy believes that the 
most effective approach is to provide intensive expert 
on-the-ground support to review and facilitate effective 
revision of draft laws developed by local experts and to 
train local technical teams which will be required to carry 
out this work.  For these purposes, we propose a major 
USAID-supported and field-based technical support and 
training effort to be closely coordinated with interagency 
representatives in Washington and Geneva. 
 
¶13. (SBU) The breadth of the necessary reform measures and 
the extraordinary limitations on the GOAJ's technical and 
organizational capacity to meet this challenge, underscores 
the importance of providing intensive immediate local 
technical and training support.  This effort is required in 
order to help the GOAJ respond effectively to what may be its 
last effective chance to get working group discussions back 
on track.  In the absence of intense technical assistance the 
legislative and regulatory reform package which GOAJ will 
likely submit to Geneva this summer will almost undoubtedly 
be deficient in relation to core WTO compliance requirements. 
 This would lengthen the working party negotiation period and 
gradually sap working party focus and interest in the 
Azerbaijan's accession process. 
 
¶14. (SBU) The core goal of the technical assistance and 
training support program will be to systematically build 
understanding of, and buy-in for, WTO accession-related 
legal, regulatory, and institutional reform requirements 
along with support for reform in the range of working party 
review areas.  It is important to note that original drafting 
will be done by Azerbaijani experts, and of course no 
technical support will be provided for the development of 
GOAJ negotiating positions.  These areas will be the 
exclusive provenance of the GOAJ. 
 
¶15. (SBU) Local USG support efforts will be coordinated with 
those of other major donors, including the European Union, 
World Bank, and the Asian Development Bank.  Our initial 
review has indicated that no cohesive or focused efforts are 
being provided by other donors in a manner that 
comprehensively covers support needs in any major accession 
area. At a broader level, we are committed to rapidly 
establishing an operational on-the-ground coordinating 
process which will both ensure non-duplication of efforts and 
maximize our capacity to generate and report back on the 
WTO-related support programs of other donors.  This is 
particularly important in areas such as sanitary and 
phytosanitary control (SPS) where the advice and support 
provided by other donors may not be consistent with that 
provided by USG-financed experts. 
 
¶16. (SBU) Embassy proposes to implement the envisaged WTO 
support program through a USAID-funded task order by June 
¶2007. Embassy will continue the ongoing interagency 
discussion and coordination of efforts to ensure effective 
review of the results of the current limited support program, 
scheduled to end in late May.  This support program will 
provide long-term technical assistance in several areas 
including agriculture, trade and investment, legal and 
regulatory reform, and customs administration. In addition, 
short-term assistance may include SPS support and 
macroeconomics.  Assistance to Parliament either directly or 
through ongoing USAID technical assistance programs is also 
considered due to the central role Parliament plays in the 
legislative process. 
DERSE