The Embassy of the Republic of Kazakhstan in the UK

STATUS REPORT ON KAZAKHSTAN’S

WTO ACCESSION PROCESS

Ms. Zhanar Aitzhanova,
Deputy Minister of Industry and Trade, Kazakhstan’s
Special Representative for WTO Accession Negotiations
www.wto.kz

1. Status of multilateral and bilateral negotiations

          Kazakhstan submitted its official application for WTO membership in 1996. The Working Party on Kazakhstan’s accession to the WTO consists of 39 WTO member-states with 27 European Union member states as one party.
Negotiations are taking place around four key issues:
        - Multilateral negotiations on systemic issues, where Working Party members review the existing regulatory framework for Kazakhstan’s economic and trade policies, and make recommendations on how to bring them into conformity with WTO agreements.
         - Multilateral negotiations on agriculture, where Working Party members review the types and volumes of state support to the agricultural sector, and negotiate on the specific amount of the so-called “amber box” measures, which are considered as “trade distorting” and impacting on the price of agricultural products.
           The US, EU, Australian, Swiss and Canadian delegations are active participants in the above two forms of negotiations.
          - Bilateral negotiations on market access for goods, as a result of which Kazakhstan will bind its import duty rates for both agricultural and non-agricultural goods imported from WTO member-states.
         - Bilateral negotiations on market access for services, as a result of which Kazakhstan will undertake specific commitments in terms of market access for foreign suppliers of services, such as financial, construction, telecommunication, legal and other types of services.
            Kazakhstan has signed protocols concluding bilateral negotiations with 20 WTO member-states including Oman, Pakistan, Turkey, China, Georgia, Kyrgyzstan, South Korea, Cuba, Mexico, Japan, Norway, Honduras, the Dominican Republic, Bulgaria, Switzerland, Egypt, Israel, Brasilia, Malaysia and Canada .

2. Progress made in addressing systemic issues

              Within the framework of multilateral negotiations on systemic issues, the following steps were undertaken.
              a) In accordance with the new Law of the Republic of Kazakhstan “On Currency Regulation and Currency Control” of 13 June 2005, the currency regime has been significantly liberalized. Most notably, as of 1 January 2007, the licensing requirement for capital account transactions has been removed. It should be noted, however, that Kazakhstan has never applied any limitations with regard to capital inflow to the national economy.
As an alternative mechanism replacing the licensing requirement, as of 1 January 2007, Kazakhstan is applying registration and notification requirements for currency transactions with the sole purpose of maintaining accurate balance of payment, foreign investment, and foreign debt statistics. Hence, the registration and notification requirements will not be of a “permission requirement” nature.
              As for further liberalization of currency market Kazakhstan plans to remove licensing requirement for retail trade and rendering of services for cash transactions in foreign currency.
              b) In accordance with the WTO Agreement on Technical Barriers to Trade (TBT), the Technical Regulations Law of November 2005 introduced the mandatory nature of technical regulations and voluntary nature of standards, providing the legislative basis for developing an international system of technical regulations and standards. According to the Law, both technical regulations and standards are applied equally, regardless of the origin of a product or service. In December 2006 the Law adding amendments to the existing 33 laws on technical regulations in various sectors (fire safety, construction safety, and others) was signed by President Nazarbayev.
              In 2007, within the framework of further implementation of laws on technical regulations, laws on Food Safety, on the Safety of Machinery and Other Equipment, On the Safety of Chemical Products, and On Toy Safety were passed. The main purpose of implementing the laws is to provide production safety, people’s health and environmental protection safety as well as the establishment of technical requirements of safety.
              c) In accordance with the WTO Agreement on Sanitary and Phytosanitary Measures (SPS), amendments were made to national legislation on veterinary, plant quarantine and sanitary-epidemiological measures. For example, Kazakhstan ensured that its veterinary measures were based on an assessment of risks to human and animal life or health, taking into account available scientific evidence. Where relevant scientific evidence was insufficient, Kazakhstan could provisionally adopt sanitary or phytosanitary measures on the basis of the available information, including from relevant international organizations.
              d) It should be noted that Kazakhstan has brought its national legislation into compliance with the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS). In particular: Amendments have been made to the Criminal and Administrative Codes of the Republic of Kazakhstan to increase responsibility for violation of the intellectual property rights through stricter penalty sanctions.
              In April 2004, Kazakhstan acceded to the World Intellectual Property Organization’s (WIPO) Copyright Treaty and the Performances and Phonograms Treaty (so-called “internet treaties”). Amendments were made to several national laws in June2004 to ensure retroactive protection of intellectual property rights (IPRs) in accordance with the Berne Convention for the Protection of Literary and Artistic Works. To prevent the import of counterfeit products to and from Kazakhstan and to enforce domestic trade regulation measures, the Government of Kazakhstan has adopted Rules on Trade of Audio, Audiovisual and Software Products and Data Bases.
             In November 2005, amendments were made to 11 laws regulating intellectual property rights protection. In accordance with Article 61 of the TRIPS agreement, the amendments introduced into Kazakhstan’s Criminal and Administrative Procedural Codes are called to increase responsibility for violation of intellectual property rights through strengthening the penalty sanctions. The Criminal Procedural Code was amended to ensure the ability to launch criminal proceedings for infringement of intellectual property rights without a formal complaint. Unlawful purchase, storage and transportation has been criminalized. In order to protect proprietarily information, Kazakhstan has amended the relevant regulations for registering pharmaceuticals and agrochemical products. It should be noted that we fully recognize that having the proper legislation and IPR policy in place is only a first step and the challenge for Kazakhstan as for many other WTO member-states, is on the enforcement side. I want to assure you that the Government is making every effort to strengthen enforcement, and to raise public awareness of IPR issues.
             e) In accordance with the General Agreement on Tariffs and Trade (GATT) provision of the WTO to gradually eliminate quantitative restrictions and other measures:
             A quota on imported ethyl spirit and alcoholic beverages products was eliminated in June 2004; Export bans on aluminum and nickel waste and scrap was abolished in December 2004;
and As of March 2006, export prohibitions on mazut and diesel during the agriculture season in support of local farmers was discontinued.
              f) In accordance with WTO Agreements on Rules of Origin and Customs Valuation, in June 2005, the Government introduced changes to the Customs Code ensuring that the country of origin may only designate a country, group of countries or a custom unions (not parts of a country).
              To address concerns raised by some WP members in January 2007, the Customs Code of Kazakhstan was amended and signed by President Nazarbayev. This law will: Eliminate use of the double MFN rate of Duty applied to goods of unknown origin; Introduce an amendment to Article 42 of the Customs Code to ensure full compliance with Article 2 (h) and Annex II, paragraph 3 (d) of the WTO Agreement on Rules of Origin. This Amendment will also clearly stipulate that the preliminary decision will be applicable to both preferential and non-preferential trade; Introduce Interpretative Notes to the WTO Customs Valuation Agreement as integral part of the Article 307 of Kazakhstan’s Customs Code.
              g) In order to comply with WTO Agreements on safeguards, anti-dumping, subsidies, and countervailing measures, the necessary amendments to national legislation on trade remedy measures have been introduced. In particular, the definitions of “subsidy” and “domestic industry” have been modified, and the meaning of normal value in conducting anti-dumping investigations has been introduced. Investigation procedures have been brought into conformity with WTO norms to ensure transparency and mechanisms for consultations with the concerned parties.
              h) Changes have been made to the Tax Code to align government policy to develop priority sectors of the economy with WTO norms. In addition, current excise tax regime for alcoholic beverages and tobacco products will be unified to conform to WTO non-discrimination and national regime principles.
             The laws establishing special economic zones in Kazakhstan are being scrutinized by WTO member-states for compliance with WTO norms regarding subsidies to non-agricultural industries. It should be stressed that preferences in these zones will be available to both domestic and foreign investors.
              i) Lastly, in accordance with a key WTO principle - transparency in developing and implementing economic and trade policies, Kazakhstan has adopted a new methodology for calculating fees for services applied to customs escort, import licensing and registration of legal entities. The new methodology will ensure that these fees reflect the real cost of services rendered.

3. Liberalization of key service sectors

             The gradual liberalization of key sectors of the economy is proceeding together with Kazakhstan’s bilateral negotiations on access to the services market. For example: Amendments made to Kazakhstan’s legislation on licensing and consolidated supervision of financial services envisage eliminating existing requirements that:
               (i) the total paid-up capital of banks with foreign participation not exceed 50 percent of the aggregate paid-up capital of all banks in Kazakhstan;
               (ii) the total paid-up capital of insurance companies with foreign participation, providing general and life insurance services shall not exceed 25 and 50 percent of the aggregate paid-up capital of general and life insurance companies respectively;
                (iii) at least seventy percent of employees of a bank shall be residents of Kazakhstan; and at least one member of the Board of Directors of a bank with foreign participation shall be a resident of Kazakhstan.
                The Program to develop the telecommunications sector provides for creation of a competitive framework for the telecommunications market. The exclusive license for a national operator was eliminated on January 1, 2006. The 49% foreign-capital restriction for joint ventures supplying architectural, urban-planning, construction and engineering services has been eliminated. Legal entities of Kazakhstan with 100% foreign ownership will be allowed to provide those services.
                 Steps taken by the Government to liberalize the energy and transport sectors have also contributed to Kazakhstan’s negotiations on access to the services market.

4. Conclusion

               The process of Kazakhstan’s accession to WTO represents a set of comprehensive reforms aimed at building sustainable market economy policies and institutions in the country. One of the major challenges still being addressed by the Government within the framework of the multilateral negotiations with WTO member-states is how to balance effective implementation of Kazakhstan’s key economic priorities, economic diversification and development of processing industries with the country’s commitments arising from WTO accession. We are carefully reviewing the policies and mechanisms applied by WTO member-states to facilitate development of “infant” industries, which supply new types of services and produce high value-added goods, in a WTO-consistent way.
                 Enhancement of customs administration and support to agricultural development are also among our key priorities. We fully recognize that we need to pursue further liberalization reforms in a systematic stage-by-stage manner in order to promote national economic interests. However, we also need to ensure that Kazakhstan’s economic and trade policy and regulatory changes are backed by strong institutional and human capacity.
                 Kazakhstan has completed accession negotiations with 20 WTO members. Negotiations with the key WTO member-states are at the final stage. We plan to conclude bilateral talks with the USA by the end of 2008, with the EU in September 2008. Kazakhstan also hopes to make a “tangible progress” in separate multilateral WTO accession negotiations in the course of next year.