ITALY REGARDING U.S. ACTIONS TO TERMINATE LARGE

UNCLAS ROME 003998

SIPDIS


SENSITIVE

STATE PASS USTR
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: ETRD IT EUN
SUBJECT: ITALY REGARDING U.S. ACTIONS TO TERMINATE LARGE
COMMERCIAL AIRCRAFT (LCA) SUBSIDIES

REF: A. SECSTATE 213973

B. ROME 3530

SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET DISTRIBUTION


1. (U) Post delivered ref A demarche on October 6 to senior
Italian government trade officials Amedeo Teti, Director
General for Commercial Agreements, Ministry of Productive
Activities (MPA); Federico Eichberg, Senior Advisor to
Foreign Trade Vice Minister Adolfo Urso; and Sandro Fanella,
Director of the MPA's WTO Office. We also delivered demarche
to Giandomenico Magliano, Director General for Multilateral
Economic and Financial Cooperation at the MFA.


2. (SBU) In a subsequent discussion with econoff, Fanella
underscored the delicate position in which Italy finds itself
regarding aircraft subsidies. He noted that Italian firm
Alenia Aeronautica, part of the giant defense industrial
conglomerate Finmeccanica, is a major subcontractor on the
Boeing 7E7 project (it also is a subcontractor, though to a
smaller extent, on the Airbus A380 project). The GOI thus had
hoped for a positive outcome to recent U.S.-EU discussions on
revising the LCA agreement, keeping both sides from
initiating a trade war that could have potentially adverse
consequences for both Airbus and Boeing. Fanella acknowledged
U.S. rationale for abrogating the 1992 LCA subsidies
agreement now, given Airbus' indications that it would soon
request launch aid for an aircraft to compete with the 7E7.
However, with a new commission about to take office in
Brussels, as well as the upcoming U.S. presidential
elections, Fanella was pessimistic that both sides would be
able to make progress under the rather tight schedule
dictated by the WTO consultations process.


3. (SBU) Comment: Despite Italian government support for
Alenia Aeronautica's large stake in the 7E7 program, it is
unclear how forcefully the GOI may push within the Commission
for a negotiated settlement with the U.S. Italy tends to play
a relatively passive role in setting EU trade policy, and the
GOI is likely to let the four EU member states most involved
with Airbus drive the Commission's actions. Nevertheless post
will continue to press our concerns with key Italian
officials, emphasizing the U.S. goal of negotiating a new
agreement with the EU to eliminate new subsidies for LCA. End
comment.


SEMBLER


NNNN
2004ROME03998 - Classification: UNCLASSIFIED