US embassy cable - 02ROME2706

C O N F I D E N T I A L ROME 002706 
 
SIPDIS 
 
PASS USTR FOR ALLGEIER, DEILY, DAVIDSON, NOVELLI, LISER 
EUR/WE, EB FOR A/S WAYNE, EB/TPP/BTA/DCT FOR WMOORE 
PASS DOC FOR ITA/GALDONIS/SCLAEYS/DDEFALCO 
E FOR CHASE, SECOR 
 
E.O. 12958: DECL: 06/04/2007 
TAGS: ETRD, IT, EUN 
SUBJECT: ITALY ON STEEL: GIVE US SOMETHING TO WORK WITH 
 
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REF: (A) ROME 2266 (B) ROME 1853 
 
CLASSIFIED BY: CLASSIFIED BY ECMIN MARGARET DEAN; REASON 1.5 B/D. 
 
1. (C) SUMMARY.  ARMED WITH AN EVIDENT PRESIDENT BUSH-PRIME 
MINISTER BERLUSCONI UNDERSTANDING THAT UNILATERAL TRADE 
ACTIONS SHOULD BE AVOIDED, ITALY IS LOOKING TO DAMPEN EC AND 
MEMBER STATE CALLS FOR STEEL RETALIATION.  ITALY'S ALTERNATE 
133 REPRESENTATIVE, HOWEVER, TOLD VISITING EB ASSISTAMT 
SECRETARY PRIOR TO THE 31 MAY 133 COMMITTEE MEETING THAT 
 
SIPDIS 
COOLING THE EC WOULD REQUIRE DEMONSTRABLE PROGRESS IN EC-USG 
TALKS.  ITALY'S 133 TITULAIRE TOLD ECOUNS ON 4 JUNE THAT 
"PROGRESS" MEANS REGULAR USG ANNOUNCEMENTS OF EXCLUSIONS, 
GOOD-FAITH NEGOTIATIONS ON COMPENSATION, AND A SHORTENING OF 
THE THREE-YEAR LIFE OF USG SAFEGUARDS.  HE CONFIRMED REPORTS 
THAT THE EU WOULD TECHNICALLY SUSPEND U.S. CONCESSIONS ON 17 
JUNE BUT DISMISSED THIS DEVELOPMENT AS A TECHNICAL MEASURE. 
POST RECOMMENDS THAT WASHINGTON AGENCIES BEAR IN MIND THAT 
THE PRESIDENT BUSH-PM BERLUSCONI UNDERSTANDING MAY PROVE 
USEFUL AS THE STEEL CASE MOVES ALONG.  END SUMMARY. 
 
2. (C) DURING 30 MAY MEETINGS WITH PRIME MINISTER DIPLOMATIC 
ADVISOR GIOVANNI CASTELLANETA AND MFA DIRECTOR GENERAL FOR EU 
AFFAIRS ROCCO CANGELOSI, VISITING EB ASSISTANT SECRETARY TONY 
WAYNE AND ECONOFF WELCOMED INDICATIONS THAT PRESIDENT BUSH 
AND PRIME MINISTER BERLUSCONI HAD AGREED DURING THEIR 27 MAY 
BILATERAL THAT UNILATERAL TRADE ACTIONS WERE INADVISABLE. 
CASTELLANETA AND CANGELOSI BOTH INDICATED THAT BERLUSCONI HAD 
ISSUED GUIDANCE THAT ITALY SHOULD WORK TO CALM THE DISPUTE 
OVER STEEL.  DURING A MEETING LATER ON 30 MAY, SANDRO 
FANELLA, GOI ALTERNATIVE REPRESENTATIVE TO THE EU'S 133 
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COMMITTEE, CONFIRMED THAT THE GOI PARTICULARLY WANTS TO AVOID 
UNILATERAL EU ACTION IN THE STEEL CASE.  DURING THAT 30 MAY 
MEETING AND A 4 JUNE CONVERSATION BETWEEN ECOUNS AND GOI 133 
COMMITTEE TITULAIRE MARIO GERBINO, SANDWICHED AROUND THE 31 
MAY 133 COMMITTEE MEETING, THE ITALIANS LAID OUT THEIR VIEW 
OF HOW EVENTS NEED TO PLAY OUT IN ORDER TO OBVIATE UNILATERAL 
EU RETALIATION. 
 
3. (C) FANELLA AND GERBINO HAVE BEEN CONVINCED BY EC LAWYERS 
THAT THE EU MUST TAKE SOME AFFIRMATIVE ACTION BY 17 JUNE TO 
AVOID WAIVING ARTICLE 8.2 RIGHTS.  GERBINO SAID THIS DECISION 
HAS BEEN TAKEN AND WOULD BE ANNOUNCED AT THE 17 JUNE GENERAL 
AFFAIRS COUNCIL MEETING.  BUT HE QUICKLY ADDED THAT THE 
EFFECT WOULD BE MINIMAL: CONCESSIONS WOULD BE SUSPENDED, BUT 
THERE WOULD FOLLOW AN IMMEDIATE SUSPENSION OF THE SUSPENSION. 
 GERBINO'S SENSE OF THE 31 MAY MEETING WAS THAT MOST MEMBER 
STATES WOULD BE HAPPY TO FOREGO UNILATERAL RETALIATION, 
ASSUMING EU RIGHTS WERE PRESERVED TO THEIR SATISFACTION, 
PROVIDED EU-USG SETTLEMENT TALKS WERE PROGRESSING. 
 
4. (C) GOING INTO THE 31 MAY MEETING FANELLA STILL HOPED THAT 
EU-USG PROGRESS WOULD TAKE THE FORM OF COMPENSATION OR 
REBALANCING.  A/S WAYNE DID NOT DISABUSE HIM BUT PUSHED THE 
DISCUSSION TOWARDS THE EXCLUSION PROCESS AND NOTED THAT THERE 
WAS NO WTO PRECEDENCE FOR COMPENSATION.  COMING OUT OF THE 
133 COMMITTEE MEETING, GERBINO HAD MORE DEFINITIVE BENCHMARKS 
FOR MEASURING NEGOTIATION PROGRESS.  HE SAID THAT THE EC 
REPRESENTATIVES SAID THEY HAD BEEN ASSURED BY THE USG THAT 
WEEKLY EXCLUSION ANNOUNCEMENTS WOULD BE INSTITUTED IN THE 
NEAR FUTURE.  HE STILL EXPECTS USG MOVEMENTS ON COMPENSATION. 
 WHEN ECOUNS REITERATED THAT THERE IS NO PRECEDENT FOR 
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COMPENSATION IN A SAFEGUARDS CASE, GERBINO REPLIED, "THERE'S 
ALWAYS A FIRST TIME."  FINALLY, HE SAID THE EC WILL BE 
LOOKING FOR THE USG TO SHORTEN THE THREE-YEAR LIFE OF OUR 
SAFEGUARDS.  WITHOUT HANDICAPPING HOW MUCH PROGRESS ON EACH 
BENCHMARK WOULD SUFFICE TO ALLOW THE EU TO CONTINUE TO STAND 
DOWN FROM IMPLEMENTATION OF RETALIATION, GERBINO SAID HE IS 
CONFIDENT THAT IMPLEMENTATION COULD BE DELAYED UNTIL AT LEAST 
OCTOBER. 
 
5. (C) COMMENT. THE ITALIANS CLEARLY ARE LOOKING FOR A FIG 
LEAF THAT WOULD ALLOW THEM TO CONTINUE TO ADVOCATE WITHIN THE 
EU FOR MODERATION (REFS A AND B) PER PM BERLUSCONI'S WISHES. 
WE SHOULD CONTINUE TO WORK ON THE IMPORTANT OPENING CREATED 
BY PRESIDENT BUSH'S DISCUSSIONS WITH THE PM, WHICH MAY MEAN 
GETTING THE PM'S OFFICE AND MFA TO KEEP PRESSURE ON THE 
DEPUTY MINISTRY OF FOREIGN TRADE.  IF, AS GERBINO BELIEVES, A 
USG DECISION HAS BEEN TAKEN TO ANNOUNCE EXCLUSIONS ON A 
WEEKLY BASIS, THIS SHOULD SUFFICE FOR ITALY'S PURPOSES FOR 
THE TIME BEING.  ON THE OTHER HAND, IF 
COMPENSATION/REBALANCING TALKS BECOME STUCK, THE ITALIANS 
WILL BEGIN TO LOOK FOR USG MOVEMENT ON THE REMAINING 
BENCHMARK -- THE DURATION OF OUR SAFEGUARDS. 
 
6. (U)  A/S WAYNE CLEARED ON THIS MESSAGE. 
POPE 
 
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 2002ROME02706 - Classification: CONFIDENTIAL