WTO -- DEMARCHES TO AUSTRIA ON EUROPEAN

UNCLAS SECTION 01 OF 02 VIENNA 003586

SIPDIS

SENSITIVE

STATE FOR EUR/ERA - CHASE AND EUR/AGS - VIKMANIS-KELLER

COMMERCE FOR STEVE JACOBS

TREASURY FOR BILL SCHALL

USDA/FAS FOR ROBERTS AND YOUNG

E.O. 12958: N/A

TAGS: ETRD ECON EAGR EU AU
SUBJECT: WTO -- DEMARCHES TO AUSTRIA ON EUROPEAN


COMMISSION'S OCTOBER 28 AGRICULTURE PROPOSAL

REF: A. (A) STATE 199861


B. (B) VIENNA 3442 AND PREVIOUS

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1. (U) Charge d'Affaires presented ref (a) demarche on November 3 to Josef Mayer, the Under Secretary-level Chief of the Austrian Economics Ministry's Trade Section. Charge and Agriculture Counselor delivered ref (a) demarche on November 4 to Werner Wutscher, Secretary General (Deputy Minister) of the Austrian Agriculture Ministry.

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Progress Across the Board

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2. (SBU) Mayer and Wutscher both stressed Austria's desire for what Wutscher called a "good result" from the discussions in Hong Kong. They argued the need for an agreement in all sectors, not just agriculture. We pointed out the realities of negotiating among all the members of the World Trade Organization, and said it had not been possible to move beyond agriculture without some basic agreement among WTO members. Both took the point, but asked that the U.S. provide signals in all areas, in order to promote progress in agriculture. Mayer said it would be important for trade ministries to point to evidence of progress in non-agricultural market access (NAMA) and services in order to induce agriculture ministries to show flexibility.

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Sensitive Products, Domestic Support

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3. (SBU) Concerning sensitive products lines, Wutscher argued that a cut of an average of 46 percent without a broad allowance for sensitive products would represent a cut beyond what was cut in the Uruguay Round. This would be very difficult to achieve. Therefore, the EU was seeking signals from other sides. We said the U.S. had already gone a long way in offering cuts, and we encouraged the EU to take that seriously as well.


3. (SBU) Wutscher said the EU's position on domestic support and on food aid was part of a broader package on agriculture, which we should consider in its totality. A package would also include discussions of export subsidies, he said.

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"Bottom Line?"

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4. (SBU) Mayer and Wutscher both argued that we had misread the statement that the EU proposal was the "bottom line." They said this did not mean that the EU was offering a "take it or leave it" position. Instead, they said the EU meant that the Commission could only negotiate within the parameters of the Common Agricultural Policy (CAP),as reformed in 2003. Mayer argued that there is maneuvering room "within the framework" of the 2003 CAP. The internal problem for the EU, he said, was "whether or not we've reached the bottom line." Wutscher said at calling the EU's proposal a "bottom line" "doesn't mean it's fixed." The 2003 CAP reform provided maneuvering space, he said.

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Commission Mandate

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5. (SBU) Mayer expressed some concern that EU countries could block agreement on the basis of the latest EU proposal. He said that the "only way to give positive impetus" from the U.S. side was for the President to engage with French President Chirac on the issue. France was the key country, he said, along with Poland and Spain.


6. (SBU) However, Wutscher said that the Commission already had the mandate to negotiate an agreement at Hong Kong. The commission had found a way to involve the Agriculture Miniters by having the Agriculture Council present in Hong Kong during the discussions.

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Next Steps

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7. (SBU) Mayer and Wutscher said, as Mayer put it, that they "don't see any chance the Commission will come forward with a more far reaching proposal on agriculture before Hong Kong." Mayer said the last commission had included a strong team, in Trade Commissioner Lamy and Agriculture Commissioner Fischler, and Lamy had enjoyed the confidence of the United States Trade Representative. The new team was "not as heavy politically," Mayer lamented.


8. (SBU) Mayer urged an approach, which would lower the emotional level and bring the discussions to a more technical level. Similarly, Wutscher asked that U.S. experts review the EU proposals carefully, and continue discussions on what the EU proposals mean. In addition, Wutscher called for the U.S. and EU both to use the time remaining before Hong Kong to carry on discussions with the developing countries.

Phillips