VZCZCXRO8318
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DE RUEHUM #0267/01 1280555
ZNR UUUUU ZZH
R 080555Z MAY 07
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 1071
INFO RUEHMO/AMEMBASSY MOSCOW 1759
RUEHBJ/AMEMBASSY BEIJING 5538
RUEHUL/AMEMBASSY SEOUL 2731
RUEHKO/AMEMBASSY TOKYO 2466
RUEHBK/AMEMBASSY BANGKOK 1454
RUEHOT/AMEMBASSY OTTAWA 0432
RUEHML/AMEMBASSY MANILA 1361
RUEHLO/AMEMBASSY LONDON 0125
RUEHBY/AMEMBASSY CANBERRA 0124
RUEHVC/AMCONSUL VANCOUVER 0072
RUEHGV/USMISSION GENEVA 0292
RUEATRS/DEPT OF TREASURY WASHDC
RUCPODC/USDOC WASHDC 1258
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0563
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC UNCLAS SECTION 01 OF 02 ULAANBAATAR 000267 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
GENEVA FOR USTR 
STATE PASS USTR, USTDA, OPIC, AND EXIMBANK 
STATE FOR EAP/CM AND EB/IFD/OIA 
USAID FOR ANE FOR D. WINSTON 
MANILA AND LONDON FOR ADB, EBRD USEDS 
TREASURY FOR USEDS TO IMF, WORLD BANK;TTYANG 
USDOC FOR ZGCROSS 
 
E.O. 12958: N/A 
TAGS:                  
SUBJECT: New Minister of Industry and Trade Seeks U.S. Help on 
Cashmere, Leans Toward U.S. Coal and Uranium Firms 
 
Ref: A) Ulaanbaatar 0265, B) Ulaanbaatar 0238 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. 
CAUTION:  CONTAINS PROPRIETARY INFORMATION. 
 
 1. (U) This an action cable for USTR.  See action requested in para 
 5. 
 
 2. (SBU) SUMMARY: Newly appointed Minister of Industry and Trade Ts. 
Davaadorj invited Charge over to press for a favorable reply to 
Mongolia's request for a five-year extension of its export tariffs 
on cashmere.  He also encouraged Peabody Energy's involvement with 
developing the important Tavan Tolgoi coal mine and suggested that 
U.S. firms should participate in the extraction of the country's 
uranium reserves.  Davaadorj pushed for a Free Trade Agreement, 
asserting it would help Mongolia balance trade with its giant 
neighbors, China and Russia. The two also exchanged views on the 
Generalized System of Preferences (GSP) and tourism development. END 
SUMMARY. 
 
 3. (SBU) On May 2, Charge, accompanied by Economic/Commercial 
Officer and FSN interpreter, paid an introductory courtesy call on 
recently elevated Minister of Industry and Trade Davaadorj (Note: 
Ref A provides background on Davaadorj's  appointment, local 
assessments, and bio information).  Other attendees from MOIT 
included Director General for Trade Enkhbold, MOIT Americas Desk 
Officer Munkhjargal and B. Zoltuya, Senior Officer of the Trade and 
Economic Cooperation Department at MOIT.  Except for brief 
interludes with his staff, the Minister spoke entirely, if sometimes 
haltingly, in English during the hour-plus meeting. 
 
Minister Seeks Favorable USTR Reply 
to Cashmere Extension Request 
------------------------------------ 
 
 4. (SBU)  Minister Davaadorj said he had accelerated the timing for 
the meeting because the USG had not yet responded to the Ministry's 
request for support on its WTO application to allow Mongolia to 
extend its export tax on cashmere for another 5 years. He said the 
waiver would help keep cashmere -- which he called his country's 
only major "brand" product  -- from being destroyed by China's 
predatory import practices at the expense of Mongolia's nomadic 
herder community.  (Note: Davaadorj may be playing the nationalist 
card here perhaps to justify a WTO exception.  It should be noted 
that Mongolian herders sell to Chinese traders primarily because: a) 
the Chinese pay on the spot in cash; and b) often the Chinese 
traders are the only ones in a local market buying cashmere. Prices 
for cashmere are widely available largely due to USAID programs that 
have been operating for years to broadcast market information via FM 
Radio. Over the past few years some in the domestic industry have 
actually complained that Chinese traders are actually driving up the 
market price of raw cashmere to the benefit of Mongolian herders but 
at the expense of Mongolian traders and processors.) 
 
 5. (U)  ACTION REQUESTED:  Post understands this issue will be taken 
up at this month's WTO meeting (May 21 or 22) and would appreciate a 
prompt response to enable the Charge to answer the Minister's 
request. The issue was raised in early March during the Trade and 
Investment Framework Agreement (TIFA) discussions in Ulaanbaatar and 
there were subsequent email exchanges, but the GOM awaits a reply 
from USTR. 
 
Encourages U.S. Participation in Coal, Uranium Mining 
--------------------------------------------- -------- 
 
 
ULAANBAATA 00000267  002 OF 002 
 
 
 6.  (SBU)  Turning to mining, Minister Davaadorj expressed general 
support for the involvement of U.S. based Peabody Energy in 
developing Mongolia's world class Tavan Tolgoi coal mine.  He said 
Peabody would be asked to play a "key role" in the project, 
including participating in a newly created "experts group" to advise 
the GOM as well as a "working group" that would set the terms of 
reference for the project itself.  In addition, Davaadorj said 
rising uranium prices had raised interest in Mongolia's uranium 
deposits (see ref B), which seem significant but remain largely 
unexplored.  The Russians had recently sent a delegation (see ref B) 
in an attempt re-assert their command of the sector and a general, 
non-specific memorandum had been signed, but he believed U.S. firms 
have extensive experience in handling and developing this important 
and sensitive commodity as well as meeting USG regulations and in 
dealing with the Russians. 
 
 7. (SBU) On a side note, Davaadorj told the Charge that [Speaker of 
the Mongolian Parliament] Nyamdorj's recent trip to Australian mines 
had helped alleviate the influential politician's suspicions of 
increased mining sector FDI while spotlighting the benefits derived 
from taxing mining industry profits. 
 
TIFA and FTA to Help Balance China, Russia Trade 
--------------------------------------------- --- 
 
 8. (SBU) The Minister also shared his thoughts on the recent TIFA 
talks, saying Mongolia's relationship with the U.S. helped his 
country maintain its economic independence while "synching" trade 
with its massive neighbors China and Russia.  In this regard, he 
also sought forward movement on a Free Trade Agreement (FTA). 
 
Developing Tourism and Using GSP 
-------------------------------- 
 
 9. (SBU)  The Charge said we would seek a reply to the Minister's 
WTO cashmere request, and he thanked MoIT for its support of Embassy 
and USTR GSP outreach efforts that followed TIFA in March. He 
encouraged the Minister to promote GSP opportunities more heavily in 
outlying aimag (province) areas.  (Note: The Charge's trip a week 
earlier to the country's western most aimags revealed that few there 
had any inkling of the tariff-free export possibilities offered 
under GSP, and especially for handicrafts, which hold promise for 
increasing incomes in Mongolia's poorest areas.) The Charge noted 
the Asia Society's Williamsburg Conference to be held in Ulaanbaatar 
in mid-June presented an excellent opportunity for Mongolians in 
both the public and private sectors to rub elbows with some senior 
influential Asian and American corporate and political figures.  He 
said he would broach the idea with the organizers of allowing the 
display and sale at an appropriate venue and time of the very same 
handicrafts that might be exported to the U.S. tariff-free under the 
GSP Handicrafts agreement. 
 
 10. (SBU) Charge also encouraged Mongolia to do more to work with 
U.S. tour operators and investors in developing Mongolia's tourism 
industry, especially in preparation for the 2008 Beijing Olympics, 
which promises to bring thousands of potential tourists to 
Mongolia's doorstep, a quick two hour flight from Beijing.  The 
Minister said he would refer this to the Ministry of Roads, 
Transportation, and Tourism, but noted he himself owns a tourism 
company. 
 
Goldbeck