US embassy cable - 05ROME3609

C O N F I D E N T I A L SECTION 01 OF 02 ROME 003609 
 
SIPDIS 
 
DEPARTMENT PASS TO DEPARTMENT OF AGRICULTURE 
DEPARTMENT PASS TO USTR 
GENEVA PASS TO USTR/GENEVA 
 
E.O. 12958: DECL: 10/27/2010 
TAGS: EAGR, ETRD, IT, EU, WTO 
SUBJECT: ITALY SEEKS "PARALLELISM" TO BREAK DOHA TALKS 
IMPASSE ON AGRICULTURAL MARKET ACCESS 
 
REF: A. 10/21/05 USTR-EMBASSY CONFERENCE CALL 
     B. SECSTATE 190748 
 
Classified By: Econ MinCouns Scott Kilner for reasons 1.5 (b) and (d) 
 
1.  (SBU)  Summary:  Embassy Rome has met with senior 
officials in the Vice Ministry of Trade and Ministries of 
Agriculture and Foreign Affairs to urge the GOI to support EU 
Trade Commissioner Mandelson on a new EU proposal on 
agricultural market access within the "negotiating zone" of 
the USG and G-20 proposals.  Officials made clear that April 
parliamentary elections mean Italy's position will be 
dictated by political, as well as, economic considerations. 
All officials pressed for "parallelism" in the negotiations 
and were concerned over lack of progress in negotiations for 
improved market access, both for manufactured goods and 
services.  Our interlocutors also pressed for 
institutionalization of geographical indicators (GIs) and 
flexibility on "sensitive (certain agricultural) goods." 
Progress on GIs and sensitive goods, they argued, would help 
the GOI justify concessions on agricultural access before 
elections.  Mission will continue to press for Italy to act 
in its own self-interest to re-invigorate the Doha talks and 
open foreign markets to Italian manufactured goods and 
services, now 82% of Italy's exports.  End summary. 
 
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Vice Ministry of Trade: Making the Case for "Parallelism" 
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2.  (SBU)  On October 24, Econ MinCouns, Econ Counselor, and 
EconOff met with Amadeo Teti, Director General for Commercial 
Agreements; Mario Cospito, Diplomatic Advisor to the Vice 
Minister; and their staff.  Econ MinCouns outlined our 
concern over the state of agricultural talks before the Hong 
Kong Ministerial and the need to break the agricultural 
negotiations deadlock.  He noted that about 82 percent of 
Italy's exports are manufactured goods and services, and that 
it was in Italy's interest to press for further market 
opening both in non-agricultural goods and services.  The 
first step to doing so and to getting the Doha talks 
revitalized was to lobby for an improved EU Commission 
position on agricultural market access. 
 
3.  (SBU)  Teti responded by noting candidly that the Trade 
Vice Ministry shares our concern about the state of the 
talks, while the Agriculture Ministry supports the French 
position. He said the Trade Vice Minister has had difficulty 
influencing the Italian position because Italy has not seen 
"gains" on "vital" issues like geographical indicators, 
non-agricultural market access (NAMA), services, or 
"increased protection for GIs and intellectual property." 
Teti expressed optimism that progress on GIs and NAMA and 
services market access might enable the Trade Vice Ministry 
to persuade the Agriculture Ministry to give EU Trade 
Commissioner Mandelson more space in the agriculture 
negotiations. 
 
4.  (SBU)  Teti also questioned the "sequencing" of the 
talks, saying that the current approach of insisting on 
agricultural market access concessions first has produced a 
pay-as-you-go situation in which each set of discussions (on 
agriculture, NAMA, services) must stand on its own.  He 
argued for a parallel negotiating approach in which 
quid-pro-quos among agricultural/NAMA/services market access 
could more easily be negotiated.  The problem with the 
current arrangement, he said, is that it gives agricultural 
interests disproportionate influence over subsequent talks by 
allowing agricultural interests to bring the agricultural 
talks to a standstill, thus jeopardizing the entire Round. 
 
5.  (C)  Subsequently, on October 25, Cospito briefed EconOff 
on an October 24 meeting between Vice Minister Urso and WTO 
Director-General Lamy.  According to Cospito, who attended 
the meeting, Lamy was pessimistic about a successful Hong 
Kong Ministerial, while EU Trade Commissioner Mandelson was 
"worried."  During the meeting, Urso reportedly pressed Lamy 
for a "positive sign" on parallelism.  Cospito stated that 
the GOI will work within the EU to "push ahead" on the 
agricultural negotiations, if Italy has reason to believe 
there would be progress on GIs and NAMA and services market 
access.  Without a positive sign, the GOI's "hands are tied;" 
and Italy would continue to support the EU position. 
 
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Agriculture Ministry: Italy and the EU Have Given Enough 
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6.  (SBU)  On October 26, MinCouns for Agricultural Affairs 
met with Ambassador Francesco Camillo Peano, Diplomatic 
Advisor to Minister of Agriculture Giovanni Alemanno.  While 
Peano understood our concern over the state of the Round, the 
Agriculture Ministry feels that between the Common 
Agricultural Policy (CAP) reforms begun in 2003 and the 
current EU proposal on agricultural market access, the EU has 
given enough.  Echoing the points made at the Trade Vice 
Ministry, Peano complained about lack of progress on GIs and 
sanitary and phytosanitary standards (SPS). 
 
7.  (SBU)  Comment:  Agriculture Minister Alemanno was one of 
fourteen EU Agriculture Ministers to sign the October 14 
letter to EU Trade Commissioner Mandelson, which resulted in 
last week's meeting of the European Commission and subsequent 
"technical oversight" of Mandelson's negotiating position. 
Alemanno is a member of the National Alliance (AN) party, 
which relies considerably on farmer support.  It is not 
surprising that he and the Agriculture Ministry have 
consistently taken a hard line on the agriculture 
negotiations.  End comment. 
 
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Ministry of Foreign Affairs: In Synch with Agriculture and 
Toeing the Line 
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8.  (SBU)  Also on October 26, Econ MinCouns, Econ Counselor, 
and EconOff met with Ambassador Francesco Olivieri, recently 
returned from the OECD and now MFA official in charge of WTO 
and Doha Round issues, and Paola Amadei, MFA Counselor for EU 
Integration and the WTO.  Olivieri stated that the GOI is 
committed to a successful Round, but must see movement on 
GIs, sensitive product lists, and NAMA- and services- market 
access before making concessions on agriculture. 
 
9.  (SBU)  Olivieri, a veteran of the Uruguay Round, noted 
that April elections "make things difficult" and that 
negotiations cannot result in a situation which "obliterates" 
one sector (agriculture) for progress in other sectors.  He 
repeated the case for "parallelism," by arguing that the 
current negotiating approach means there can be no 
contemporaneous "gains" in goods and services (specifically 
on GIs, sensitive goods, and NAMA/services-market access) to 
offset "losses" in agriculture.  Amadei stated there had been 
no progress in NAMA and services negotiations, including on 
GIs, which are Italy's highest priority.  "In four years of 
negotiations, what has Brazil given up?" she asked. 
 
10.  (SBU)  Olivieri concluded saying that the GOI could 
"give up protection to gain access."  He also made the case 
for GIs at some length, by arguing that GIs are necessary for 
small Italian farmers to remain competitive against "vastly 
efficient" farmers from "Argentina and Brazil."  The bottom 
line, according to Olivieri, is that while the GOI does not 
want to bear responsibility for the failure of the Round, 
Italy will push the issues of GIs, protection for "sensitive 
(certain agricultural) products," and increased access for 
manufactured goods and services as far as it can.  Lack of 
progress on these issues is a "deal-breaker for the GOI," he 
said. 
 
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Comment 
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11.  (SBU)  Despite Italy's obvious national economic 
interest in breathing life back into the Doha Round -- the 
NAMA and services negotiations in particular -- the GOI 
continues to be stymied by the political costs of 
agricultural concessions, especially with national elections 
in full view.  For this reason, we are not convinced by Trade 
Ministry assertions that "positive signs" on 
institutionalizing GIs and NAMA- and services-market access 
will be sufficient for the Berlusconi government as a whole 
to agree to further agricultural concessions.  Our experience 
has been that on this issue, the political and institutional 
weight of making trade policy rests with the Ministry of 
Agriculture, not with the more forward-looking Vice-Ministry 
of Trade.  End comment. 
SPOGLI