US embassy cable - 03ROME2501

C O N F I D E N T I A L  ROME 002501 
 
SIPDIS 
 
 
STATE PASS USTR 
STATE PASS TO USDA FAS 
GENEVA FOR USTR 
COMMERCE FOR 4212/ITA/OEURA/CPD/DDEFALCO 
E.O. 12958: DECL: 06/03/2013 
TAGS: EAGR, EAIR, ELTN, ETRD, IT, SENV, TBIO, TSPA, EUN 
SUBJECT: USEU VISIT: ITALY'S MANAGEMENT OF ECONOMIC ISSUES 
DURING ITS EU PRESIDENCY 
 
 
Classified By: Economic Minister Counselor Scott Kilner for Reasons 1.5 
 (B,D) 
 
1. (C) Summary. In the interest of repairing U.S.-EU 
relations during its upcoming EU presidency, the GOI plans to 
manage existing U.S.-EU trade disputes as well as the ongoing 
WTO trade talks in a way that will emphasize the positive. 
Pro-biotech elements within the GOI express hope that EU 
Parliamentary approval of traceability and labeling rules 
will dampen anti-biotech Agricultural Minister Alemanno's 
influence on the issue; some GOI officials speculate the U.S. 
request for WTO consultations over the EU moratorium on 
approvals may finally push the GOI to adopt a unified biotech 
policy. 
 
2. (SBU)  The GOI is cautiously optimistic on prospects for 
the Doha trade round, especially if CAP reform spurs forward 
movement on the agricultural side of the talks. A solution to 
the TRIPS/Access to Medicine issue is seen as essential for 
the Cancun ministerial to avoid being termed a failure. 
Italy will use its EU presidency to push greater protection 
under the WTO for geographic indications.  However, the GOI 
appears inclined to defer extensively to the European 
Commission on most other aspects of the Doha agenda, 
including preparations for the September WTO Ministerial 
Conference in Cancun.  FSC, steel, and the EU chemical policy 
will all require particular attention.  The GOI supports a 
greater industry role in the formulation of the chemicals 
policy. 
 
3. (SBU)  Italy plans to hold a joint meeting of EU 
Environment and Energy Ministers, as part of its strategy to 
"introduce more economics into EU environmental policy." 
Carbon sequestration and the hydrogen economy are also high 
on the Italian agenda.  Key transport priorities are 
financing infrastructure and Galileo.  While responsibility 
for Galileo within the EU is divided among the telecoms, 
transport and research councils, the GOI expects the M-code 
decision to go to the European Council.  In Italy, the 
Ministry of Research has the lead, but final decisions on 
Galileo are expected to be made by the Prime Minister.  End 
summary. 
 
4. (U) USEU Economic Minister Counselor Anne Derse and Trade 
Policy Attache Christopher Wilson visited Rome May 27-28 to 
preview with the GOI and Embassy staff trade, economic and 
environmental issues that will be active during Italy's 
upcoming EU presidency.  Derse and Wilson, accompanied by 
Embassy econ officers, met with officials at the Foreign 
Trade Office of the Ministry of Productive Activities, as 
well as the Ministries of Environment, Finance, Foreign 
Affairs, and Transport.  A session with Ambassador Nicholson 
and his staff at the U.S. Embassy to the Holy See was a 
useful exchange on further engaging the Vatican to play a 
constructive role in the continuing debate over the use of 
agricultural biotech, particularly in the developing world. 
Agricultural Biotech 
-------------------- 
 
5. (C) Federico Eichberg, senior advisor to Foreign Trade 
Vice Minister Adolfo Urso, openly lamented the continued lack 
of a coherent GOI position on agricultural biotech. The 
Foreign Trade/Ministry of Productive Activities, along with 
the Ministries of Health and Environment, generally shared 
U.S. views on biotech products, but anti-biotech Agriculture 
Minister Alemanno continued to exert significant influence 
within the GOI.  Eichberg expressed the hope that the 
pro-biotech ministries will gain influence once new 
traceability and labeling rules are approved by the European 
Parliament, perhaps by November.  While noting that the EU 
moratorium on biotech approvals (and the GOI,s Amato decree 
that banned four varieties of U.S. corn in 2000) is a 
separate issue from the implementation of new traceability 
and labeling rules, Eichberg was hopeful a mutual resolution 
could be realized.  Wilson responded that continuing movement 
towards resuming the EU approvals process will be helpful as 
the WTO process moves forward in the next few months, but he 
cautioned against the imposition of additional conditions by 
some member states in exchange for lifting the moratorium. 
 
6. (C) Environment Ministry International Affairs Director 
General Corrado Clini viewed the U.S. request for 
 
 
consultations as a positive step in that it will pressure the 
EU towards resolution. He also believed the GOI might finally 
be pushed towards a unified policy, implying that Alemanno 
would no longer dominate the issue within the government.  He 
views France and Austria as the most intransigent foes of 
biotech, and that French opposition is a purely protectionist 
policy to keep U.S. imports from harming French agricultural 
interests (unlike Italy, where significant public opposition 
to GMOs drove the policy of officials like Alemanno). Clini 
believed the prospective conciliation process for the 
implementation of new traceability and labeling rules has 
been made more difficult by the U.S. consultations request. 
Massimo Gaiani, of the MFA,s European Integration Bureau, 
told us that the GOI awaited the results of the EU 
Parliament,s second reading on new traceability and labeling 
rules, and is concerned that amendments to the legislation 
are extremist and not in line with the EC common position. 
He also noted concern that lack of progress in WTO 
consultations this summer could encourage the adoption of 
such amendments, further complicating the (potential) 
conciliation process.  Gaiani added that he believes the 
European Commission will continue to defend the common 
position. Derse responded that the U.S. continued to have 
concerns about the EC common position itself, not to mention 
some of the more extremist amendments that have been put 
forward by the EU Parliament. Gaiani echoed Clini and 
Eichberg in noting that pressure on the EU to resolve the 
biotech issue, particularly during the course of the Italian 
presidency, could spur creation of a common GOI position. 
 
7. (C) Ambassador to the Holy See James Nicholson told Derse 
and Wilson that the Vatican was moving closer to U.S. views 
on biotech, though he noted that opinions varied among 
Vatican officials and local bishops.  There is widespread 
belief that the EU,s concerns are largely politically based, 
rather than motivated by health or environmental concerns. 
The Vatican's Pontifical Council had found no reason not to 
use biotech foods and, though calling for adequate 
precautions, they do appear to be on the right side of the 
issue from a scientific standpoint.  Ambassador Nicholson 
noted an upcoming visit of an African cardinal that could 
usefully link economic development in Africa with greater 
acceptance of agricultural biotech products. 
 
WTO/Doha Round and Cancun Ministerial 
------------------------------------- 
 
8. (SBU) Eichberg conveyed GOI concern that the September 
Cancun ministerial not be overloaded with issues to resolve. 
He said the recent positive movements toward CAP reform were 
welcomed by the GOI (including Alemanno) and there was hope 
that subsequent agricultural market access talks would be 
more fruitful.  He also thought positive movement on 
non-agricultural market access (NAMA) might help the 
agricultural talks. Wilson noted that the U.S. viewed CAP 
reform as a positive step, though there were significant 
market access issues remaining to be resolved.  We would miss 
the end-May deadline on a modalities paper for NAMA, but the 
U.S. was not pessimistic about making further progress in 
those talks.  Eichberg noted that the GOI was not overly 
concerned about deadlines. He was optimistic the 2005 
deadline for concluding the round was possible, but we should 
not be concerned if it slips some. 
 
9. (SBU) On TRIPS/Medicine (an issue of particular concern to 
Vice Minister Urso) Eichberg expressed some confidence that 
resolution was attainable, he hoped before Cancun.  He 
suggested that announcement of such a resolution during the 
Cancun meeting would generate positive coverage and dampen 
"no-global" sentiment.  Wilson agreed that resolution of the 
issue before Cancun would be necessary to keep it from 
dominating the meeting, and he was hopeful that the G-8 
summit would create an environment that would facilitate 
resolution. 
 
10. (SBU) Increased protection of geographic indications 
within the WTO remains a key GOI concern, and Eichberg said 
that the issue will be prominent on the trade agenda during 
Italy,s presidency. Eichberg noted that such concern is 
based on the notion of providing consumers with greater 
knowledge about, and access to, quality products, and on 
protecting the many small producers of such products through 
a system that would not entail the burdensome costs of 
 
 
registering and enforcing trademarks.  Eichberg told us the 
GOI has discussed with the EC a possible strategy of imposing 
a limit on the number of GIs for wines and spirits in 
exchange for full market access and reciprocity for other 
GIs.  He also suggested linking GI protection with different 
forms of protection, such as trademarks. Italy would also 
provide technical assistance to developing countries to 
enable them to provide greater protection of GIs.  Wilson 
cautioned that the U.S. and EU positions on GIs remained far 
apart (and Cairns Group members were perhaps even further 
from the EU position). 
 
U.S.-EU Bilateral Trade Issues 
------------------------------ 
 
11. (SBU) In the interest of bringing Transatlantic relations 
back on track, the Foreign Ministry,s Gaiani told us the GOI 
will work to prevent both the creation of new trade disputes 
and the worsening of existing disputes.  In addition to 
biotech, he pointed to steel and FSC as two areas of 
particular concern. Wilson noted that a decision by the WTO 
on the U.S. appeal to the earlier WTO decision on the U.S. 
steel safeguards, along with the U.S. mid-term review of the 
safeguards, would both take place in the fall. He did not 
want to assume the outcome in either case, and added that the 
U.S. was pleased at the progress on steel capacity talks at 
the OECD.  On FSC, Gaiani suggested that we keep in close 
touch on the progress of remedial legislation in Congress. He 
cautioned the EU may have little maneuvering room in the 
implementation of retaliatory measures absent clear progress 
in Congress. 
 
12. (U) Derse mentioned to Gaiani and Eichberg the U.S. 
interest in revitalizing the Transatlantic Business Dialogue. 
One impediment was finding leading EU companies willing to 
play an active role in the TABD. Gaiani said he has been in 
touch with the Italian business confederation Confindustria 
about this problem, and the Italian Embassy in Washington was 
also working on identifying and encouraging potential 
companies. 
 
Environmental Issues 
-------------------- 
 
13. (SBU) Clini noted that the Italian Presidency hopes to 
introduce "more economics into EU environmental policy".  He 
added that Italy plans to hold a joint meeting of EU 
environment and energy ministers during its presidency.  He 
also told us a successful COP-9 meeting in Milan is a key GOI 
environmental priority during its EU presidency.  He noted 
the GOI was also very interested in the upcoming Carbon 
Sequestration Leadership Forum (he will not attend, but hopes 
a deputy from his ministry will be able to do so). He 
expressed some doubts about the benefits of carbon 
sequestration in Italy, given the dominance of small and 
medium enterprises.  Derse suggested hydrogen economy as 
another area where EU-U.S. cooperation could yield useful 
results much faster than if either worked alone.  Clini noted 
that a debate was reopening within the EU regarding the 
extent to which the EU should rely internally on flexible 
mechanisms or solely domestic actions.  In his view, the 
Germans and Swedes favored mainly domestic action, while 
others are advocating more flexible mechanisms. 
 
14. (SBU) Clini said the ongoing EU effort on formulating a 
new chemicals policy should be jointly managed by the EU 
Competitiveness Council and the EU Environmental Council. 
Derse said the U.S. would welcome such a development, given 
the Competitiveness Council,s attention to economic 
concerns.  She noted the U.S. was carefully considering the 
current EU chemicals proposal and would be submitting 
comments to the EU.  Clini suggested that the U.S. consider a 
strategy to manage the chemicals regulation through the 
Italian Presidency.  In his view, the Commission should not 
only be seeking comments from stakeholders, as it is now 
doing, but should also factor them into the final regulation. 
 
Transport Issues 
---------------- 
 
15. (SBU) Emilio Maraini, Senior Advisor to the Minister of 
Transport, explained that Italy's top transport priority is 
financing infrastructure investment.  Much transport 
 
 
infrastructure in existing EU member states, he said, is 
"near collapse". The situation in the new entrants is even 
worse. 
 
16. (SBU) There are six key transport areas in which Italy 
would like to make progress during its presidency: 
 
(1) Unimpeded circulation of goods and people within the EU. 
The primary concerns here are limits imposed by Italy's 
neighboring countries (including Austria, Switzerland, 
France) which are hurting northern Italy's economic growth. 
 
(2) Sustainable development of transport, including balancing 
modes to emphasize cheaper, less polluting transport. 
 
(3) Financing necessary infrastructure investment.  Maraini 
noted that the Van Miert report on the Trans European Network 
concluded that this would require E 500 billion over the next 
20 years from the 15 countries of the existing EU, and an 
additional E 100 billion to E 200 billion from the new 
entrants.  Under Growth and Stability Pact constraints, this 
can't be done.  Options would include:  Increasing the EU 
share of the payment; introducing user fees; private 
participation and cross funding.  The GOI is looking at user 
fees, combined with interoperable EU toll payment systems. 
 
(4) Transport liberalization, primarily railway and port 
services. 
 
(5) Transport safety and security, including air, train, 
road, tunnel and maritime safety. Negotiating EU agreements 
with the U.S. on a container security initiative and an open 
skies aviation agreement are key. 
 
(6) Galileo. Maraini said there are several issues to be 
worked out with the U.S. on Galileo, most crucially the 
M-code issue.  Maraini stressed that this must be resolved 
before tenders are issued for the industrial part of Galileo. 
 "I think a solution will be found.  There is no other 
option," he offered.  Within the EU, Galileo responsibilities 
are divided into among different councils - telecom, 
transport and research.  Thus, he expects that final 
decisions on M-Code will have to go to the European Council. 
Within Italy, Prime Minister Berlusconi will make the final 
call on the Italian position on M-Code.  While there are 
several ministries involved in Galileo issues within the GOI, 
the M-Code falls into the competency of the Italian Space 
Agency, which comes under the Ministry of Research.  The 
Transport ministry is interested in Transport aspects, and in 
the jobs created. The ministries of Communications, 
Productive Activities and Foreign Affairs also all have roles. 
 
17 (U)  This message has been cleared with USEU. 
SKODON 
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 2003ROME02501 - Classification: CONFIDENTIAL