US embassy cable - 05MADRID2876

UNCLAS SECTION 01 OF 02 MADRID 002876 
 
SIPDIS 
 
STATE FOR EB/TPP/ABT (BOBO); STATE PASS FAS (BSIMMONS) AND 
FAS/ITA (PSHEIK); STATE PASS USTR; STATE PASS USDOC/ITA 
(CALVERT) 
 
E.O. 12958: N/A 
TAGS: BEXP, EAGR, ECON, ETRD, KIPR, TBIO, SP, American - Spanish Relations 
SUBJECT: AMBASSADOR'S AUGUST 3 MEETING WITH MINISTER OF 
INDUSTRY, TOURISM AND TRADE JOSE MONTILLA AGUILERA 
 
1. Summary: Ambassador stressed the importance of a level 
playing field in government procurement/infrastructure 
projects and explained our trade policy interests, 
particularly in intellectual property rights and agricultural 
biotechnology.  Responding to the Ambassador, Montilla noted 
the importance of the GOS/Business/Labor "social dialogue" in 
reforming labor laws to make Spain more competitive. (Note: 
Ambassador and staff are coordinating to arrange a meeting 
with Secretary Gutierrez in connection with Minister 
Montilla's September 26-28 trip to the U.S.  Embassy has also 
notified USTR of Montilla's interest in meeting with USTR 
Portman.) End Summary 
 
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PARTICIPANTS 
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2. Ambassador Aguirre was accompanied by DCM Manzanares and 
Trade Policy Officer.  Minister Montilla was accompanied by 
Secretary of State for Tourism and Trade Alfredo Bonet Baiget 
 
SIPDIS 
and the minister's Chief of Staff. 
 
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IMPORTANCE OF LEVEL PLAYING FIELD 
--------------------------------- 
 
3. Bilateral trade is stable and few American exporters 
report market access problems.  However, Ambassador noted 
that the Spanish construction firm, CINTRA, had recently won 
a $29 billion to $36.7 billion 50 year bid to build and 
maintain roads in Texas.  Other Spanish construction 
companies have also won large U.S. contracts.  Meanwhile, 
American firms such as Boeing, Sikorsky, and Oshkosh have had 
difficulties winning major infrastructure bids in Spain. 
Recently, however, the Spanish government chose Lockheed 
Martin's S-80 submarine combat system, which was good. 
Minister Montilla explained that the American system offered 
greater complementarity to Spanish industry than the French 
competitor.  Ambassador noted he would like to see more of a 
level playing field in this area, i.e. more Lockheed 
Martin-style success stories.  The Minister did not comment 
on this issue in general terms, but his staff took notes. 
 
 
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TRADE POLICY 
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4. Ambassador stressed President Bush's commitment to free 
trade, opening markets, and the importance of the Doha Round. 
 He noted that recent congressional passage of the Central 
American Free Trade Agreement (CAFTA) demonstrated the 
President's ability to achieve important trade policy 
objectives.  With respect to bilateral trade relations, 
Ambassador emphasized the importance we place on good 
intellectual property rights protection and a "visionary" 
policy on agricultural biotechnology.  Bonet, who has 
personally worked with Embassy staff on both topics, agreed 
with the Ambassador on these topics, although he said 
Agriculture, Health, and Environment had the lead on 
biotechnology (Note: Technically Bonet is right even though 
he himself represents the Ministry on the Inter-Ministerial 
Committee for Genetically Mondified Organisms.  Embassy has 
tried to convince the GOS, arguably with a measure of 
success, that it needs to view biotech as a trade policy, as 
well as environmental and health,issue.) 
 
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LABOR REFORM 
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5. Ambassador recounted that recently in Andalusia, he had 
met with representatives from Ford, GM and Kodak.  All three 
have significant investments in Spain.  The representatives 
told the Ambassador that they faced increasing competition 
and mounting internal pressure to justify their continued 
presence in Spain given the existence of many other emerging 
economies with more flexible labor markets.  Minister 
Montilla was quite interested in what the Ambassador had to 
say and stressed the importance of the government's "Social 
Dialogue" with business and labor which, among other things, 
seeks to reach consensus on labor market reform.  The 
government released a communique on July 27 in which it lists 
a long list of achievements.  The communique states, however, 
that there are still things that need to be done, including 
"finding commitments that will provide security for workers 
and flexibility for companies".  (Comment: Therein lies the 
rub.  The Socialist government knows it needs to enhance 
companies'ability to hire and fire.  While the government 
says with some truth that it pursues economic policies more 
similar to the UK's than France's or Germany's, it is not yet 
ready to sign on to Thatcherite-style labor laws and is 
looking for a labor market reform formula that is acceptable 
to its union allies.) 
 
 
AGUIRRE