VZCZCXRO3340
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3134 2721151
ZNR UUUUU ZZH
R 281151Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9679
INFO RUCNRAQ/IRAQ COLLECTIVE
RUEHGV/USMISSION GENEVA 0263

UNCLAS BAGHDAD 003134 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN EINV IZ
SUBJECT: IRAQ WTO ACCESSION: BETTER NEWS ON CUSTOMS LEGISLATION 
 
REF: A.  Baghdad 2898 
 ¶B.  Baghdad 2830 
¶C. Baghdad 2014 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) SUMMARY: According to Iraqi officials, political 
differences over the stalled draft Law on Customs and Tariffs appear 
to have been resolved, and it could be enacted as early as January. 
Passing a WTO-compatible customs law would mark a significant step 
forward on Iraq's WTO Legislative Action Plan.  However, the 
accompanying tariff schedule promises to be daunting.  END SUMMARY. 
 
A Stalled Bill Slowly Moves Forward 
----------------------------------- 
¶2. (U) Contacts at the Ministries of Finance and Trade informed us 
over the past several days that the draft Law on Customs and Tariffs 
-- a key item on Iraq's "Legislative Action Plan (LAP) for 
Implementation of WTO Agreements" -- may move forward sooner than 
expected.  The bill had emerged as the subject of philosophical 
differences within the Cabinet, which culminated in August when 
Finance Minister Bayan Jabr announced publicly that he intended to 
significantly revise the WTO-compatible draft put forward by the 
MOT.  Some cabinet ministers were concerned that WTO requirements 
would jeopardize Iraqi producers by allowing "cheap imports" into 
the country against which they could not compete, our contacts 
reported.  MOF officials were also concerned about a potential loss 
of customs revenue.  (See Refs A and B.)  This contrasts with the 
MOT, where most officials recognize the free trade benefits that 
lower tariffs are likely to yield. 
 
¶3. (SBU) These disagreements appear now to be headed toward 
resolution.  In a Sept. 10 meeting with Econ and Treasury 
Counselors, MOF Director General for Customs Ahmed Jassim al-Itiya 
indicated that the MOF, MOT and Ministry of Industry have agreed on 
a new MOF-drafted bill that "took into account the requirements of 
the WTO."  The MOF presented the draft to the Shura Council in early 
September, Jassim said.  Once the Shura ensures its 
constitutionality, it should move through the Council of Ministers 
(COM) and on to the Council of Representatives (COR) fairly quickly, 
he predicted.  "We hope for passage by the end of the year." 
 
¶4. (SBU) Jassim acknowledged that the bill had indeed been the 
subject of some controversy.  Referring to Jabr's public call for 
major revisions, Jassim said that he had received a directive asking 
his office to review the Saddam era customs law (Law 23 of 1984) to 
see if it could be re-enacted to "replace the Bremer Law" (i.e., the 
CPA Directive) currently in effect.  After studying Law 23, the 
Customs Directorate determined that it would be "unfair" to Iraqi 
merchants and would apply restrictions on too many products.  "It 
just wouldn't work," Jassim determined, and the new draft was 
subsequently produced.  He added that the GOI is fully committed to 
WTO membership, and that the new draft incorporates many of the 
suggestions that USAID-funded contractors have offered, as well as 
aspects of the legislation that regional governments that have 
attained WTO membership -- such as Jordan and Saudi Arabia -- have 
enacted. 
 
Tariff Concerns 
--------------- 
¶5. (SBU) While this step forward on the customs law is encouraging, 
Jassim suggested that the tariff schedule that accompanies it will 
likely be extremely complex.  When we repeated the USG view that a 
"low and flat" tariff structure both encourages trade and is the 
easiest to enforce (see Ref A), Jassim smiled and admitted that his 
directorate is currently considering a schedule that runs to more 
than 700 pages.  This tome is based on a previous schedule that 
dates back to 1955 and was revised when Law 23 was enacted in 1984, 
he explained.  However, the "revision of 2008" will reflect "the 
reality of today" and demonstrate that "we have a goal of being a 
WTO member as soon as possible." 
 
¶6. (SBU) COMMENT AND NEXT STEPS: Fears still linger within the MOF 
that low tariff rates could result in import substitution and lost 
customs revenue, and we expect that a tariff schedule as complex as 
the one Jassim describes is intended to provide protection to Iraqi 
industries.  That said, his indication that the long-stalled Customs 
and Tariff draft may be moving forward soon is welcome news.  Jassim 
emphasized more than once the Customs Directorate's full commitment 
to moving Iraq toward WTO membership, and he even committed to 
showing us a draft of the bill (which we will share with our 
USAID-funded experts) for comment before it goes to the COR.  END 
COMMENT. 
 
CROCKER