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UNCLAS SECTION 01 OF 03 ISLAMABAD 001859 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAGR PGOV PREL AF PK
SUBJECT: FITFUL PROGRESS: ROUND THREE OF THE AF-PAK TRANSIT 
TRADE AGREEMENT NEGOTIATIONS 
 
REF: KABUL 1802 
 
ISLAMABAD 00001859  001.2 OF 003 
 
 
¶1. (U) This is a joint Embassy Kabul/Embassy Islamabad cable. 
¶2. (SBU) Summary: The third round of negotiations for the 
Afghan-Pakistan Transit Trade Agreement (APTTA) yielded 
progress on some outstanding issues such as arbitration, but 
the atmosphere frayed over interim arrangements to expedite 
Afghan fruit exports to India.  Despite efforts by both sides 
to continue to address issues with a workmanlike spirit, it 
became evident as the talks progressed that enthusiasm has 
dimmed as the remaining issues have become thornier.  While 
negotiating sessions were limited to the two delegations, 
both sides spoke openly with U.S. and World Bank reps 
throughout the two-day session, often seeking U.S. assistance 
in promoting their views.  Round Four is scheduled for Kabul 
in mid-October.  End Summary. 
¶3. (U) Afghan and Pakistani delegations met August 4 and 5 in 
Islamabad for the third round of negotiations of the 
Afghan-Pakistan Transit Trade Agreement (APTTA).  Coming into 
the negotiations, both delegations characterized the text as 
"80 percent completed," remained upbeat on the progress as 
they addressed outstanding issues and appear to be building a 
more cooperative relationship.  While excluded from the 
negotiating sessions, U.S. representatives, Senior Economic 
Advisor (Pakistan), Embassy Kabul Deputy Econ Counselor and 
Embassy Islamabad Econ Counselor, met repeatedly on the 
margins with both delegations to offer support, advice and 
press for progress.  The next round will be held in October 
in Kabul, after Ramadan and before a potential second round 
of Afghan elections. 
 
----------------------- 
More Underbrush Cleared 
----------------------- 
 
¶4.  (SBU) The two sides narrowed differences on several key 
areas in dispute. 
 
-- Arbitration: The two sides came to consensus on a dispute 
settlement mechanism to include third-party participation in 
arbitration.  In a compromise responding to the Afghans, 
Pakistan agreed, in principle, to submitting any dispute to a 
WTO-inspired process.  If consultations fail to produce 
consensus, a panel with three members will consider the 
issues for arbitration.  One panel member will be designated 
by each country and those two members will select a chair by 
consensus.  If the two members cannot agree on a chairperson, 
an independent organization, to be set in the agreement, will 
select the chair. 
 
-- Smuggling: Pakistan insists the agreement must include 
measures to combat smuggling into Pakistan.  In the previous 
round (reftel) the Afghans agreed to a study of the problem 
and potential responses.  The two sides are finalizing joint 
terms of reference for the study, for which they will then 
seek international support to carry out.  Embassies have 
already indicated to both parties USG readiness to assist. 
 
-- Both parties have agreed to address transits via a 
combination of transport means which had previously not been 
included in the agreement (e.g. air; air-land; and 
air-land-sea).  The absence of Ministry of Transport reps on 
the Afghan delegation limited the ability to address this 
development. 
 
-------------------------- 
But Sticking Points Remain 
-------------------------- 
 
¶5. (SBU) Despite intense Afghan interest to expand the 
discussion to include transit of Afghan goods up to and 
across the Indian border, the GOP maintained its position 
that transit to India be addressed at the political level. 
Afghan Head of Delegation Farhadi told U.S. observers that, 
 
ISLAMABAD 00001859  002 OF 003 
 
 
given the difficulties in creating a special regime for 
Afghan fruit (details below), he believed the Pakistani 
position has hardened on the question of transit to India. 
 
-- Smuggling: The Afghans still prefer to conclude the new 
APTTA while the study is ongoing while the Pakistanis regard 
the conclusions of the study as necessary for reaching a 
satisfactory arrangement. 
 
-- Independent annual evaluation of the agreement's 
implementation is important to the Afghans, who want to 
ensure a more open logistics arrangement is not undermined. 
While approaches were discussed, Pakistan continues to resist 
taking implementation outside of a strict bilateral context 
they feel they can control. 
 
-- References to Border: The two sides are struggling with 
how to characterize the point at which goods cross from 
Pakistan into Afghanistan and back, since there is a 
difference concerning the definition of the border: Afghans 
insist on using the term "legal crossing point" (Note: 
because they do not recognize the Durand line of control as 
the final word on the Af-Pak border.  End Note), while the 
Pakistanis (who do recognize the Durand line as the 
legitimate border) insist on "border crossing."  The two 
sides will continue to seek appropriate language, but have 
privately confided that this issue, too, will likely need to 
be resolved at the political level. 
 
--------------------------------------------- -- 
Special Arrangement for the 2009 Afghan Harvest 
--------------------------------------------- -- 
 
¶6. (SBU) The Afghan delegation continued to press for a 
special arrangement to get its expected bumper harvest of 
fruit and vegetables to India expeditiously this year.  At 
the Kabul round in June, the Afghans requested - and the 
Pakistanis seemed inclined to consider favorably - the 
transit of Afghan fruit up to the Indian border in Afghan 
trucks.  Despite several weeks of work by the Pakistani 
Ministry of Commerce to coordinate GOP approval of the Afghan 
request, Secretary Commerce Suleiman Ghani told Econ 
Counselor and visiting SCA/Pakistan Senior Economic Advisor 
August 3 that he has not yet secured all the interagency 
clearances necessary to bring the issue to the Economic 
Affairs Division of the Cabinet for a decision.  He mentioned 
MFA and the Interior Ministry as the two holdouts; the 
Ministry of Agriculture, Ghani said, would not object. 
 
¶7. (SBU) To break the deadlock, Commerce officials offered an 
interim measure that did not require Cabinet approval: to 
make Torkham a "one-stop shop" for the inspection and 
transfer of Afghan goods from Afghan to Pakistani trucks 
(Note: Currently, two inspections are required: one at 
Torkham, and a second at Peshawar where Afghan goods are also 
off-loaded onto Pakistani trucks. End Note).  While the 
Afghans understood the Pakistani offer to be a second option 
for truckers and happily accepted the deal, when details of 
the arrangement were presented in writing, it became clear 
that the GOP had instead replaced the old system with the 
new, eliminating any option for Afghan truckers to choose 
between Torkham and Peshawar.  Citing the limited facilities 
at Torkham, the Afghans asked that the new arrangement be 
withdrawn in favor of the existing, 
transfer-goods-at-Peshawar system.  Although the Pakistanis 
eventually agreed to revert to the original system, the 
contentious back and forth caused by the misunderstanding 
generated significant ill will. 
 
----------------------------- 
World Bank Concerns and Plans 
----------------------------- 
 
¶8. (SBU) World Bank trade and transportation expert Amer 
 
ISLAMABAD 00001859  003 OF 003 
 
 
Durrani expressed concern with elements of the text, such as 
a trucking permit quota arrangement that he asserted would 
keep the transport sector non-competitive or the definition 
of the word "vessel," on which the two sides had already 
agreed.  In a side meeting with U.S. observers, Durrani 
stressed the need for legal expertise to assist the two sides 
in interpreting some of the legal concepts with which they 
are wrestling.  The absence of observers to highlight trouble 
spots in the talks themselves, Durrani said, could result in 
a less than optimal agreement.  To help address the issue, 
Durrani solicited USG support to convene a conference 
involving academics, businesses and industry stakeholders to 
better inform the negotiators of the needs of the sector. 
Both the Afghans and Pakistanis have tentatively agreed to 
this concept, though no definite plans have been formalized. 
 
¶9. (SBU) Comment: While continuing to make progress on 
technical language, it became evident as the talks progressed 
that enthusiasm has dimmed as the remaining issues have 
become thornier.  Furthermore, the advent of Afghan elections 
and Ramadan have dashed hopes the negotiations would conclude 
in September.  Most importantly, it will be necessary to 
ensure as the process continues that any agreement the two 
sides reach does in fact result in more expedited, 
competitive transit.  Despite Ghani's confidence that the GOP 
is "likely to agree" to allow Afghan trucks to carry Afghan 
goods in Pakistan as a part of any agreement, the Afghans 
remain skeptical that the GOP will indeed open up the 
transport sector sufficiently to allow for opportunities for 
Afghan logistics companies.  Secretary General to the 
President Salman Farooqi told Islamabad Deputy Econ Counselor 
and visiting Senior Economic Advisor (Pakistan) August 7 that 
President Zardari had agreed to sign the MOU on transit trade 
in May despite intense criticism from opposition parties who 
see the agreement as benefiting India.  End Comment. 
FEIERSTEIN