TRADE VICE MINISTER PLANS "COURAGEOUS" TRADE OFFER

C O N F I D E N T I A L SECTION 01 OF 02 ROME 001083

SIPDIS

SIPDIS

STATE PLEASE PASS TO USTR FOR DONNELLY AND DWORSKIN

E.O. 12958: DECL: 04/06/2016
TAGS: PGOV ECON ETRD IT ITALY NATIONAL ELECTIONS ITALIAN POLITICS
SUBJECT: TRADE VICE MINISTER PLANS "COURAGEOUS" TRADE OFFER
IF CENTER-RIGHT WINS

REF: ROME 996

Classified By: Ambassador Ronald Spogli for Reasons 1.4 b and d


1. (C) Summary. During an April 3 courtesy call by
Ambassador Spogli, Trade Vice Minister Adolfo Urso was
cautiously optimistic of a narrow center-right victory in
this week's elections. He admitted that GOI positions on
trade and the WTO have been driven by politics until now, but
said a center-right victory would put the GOI in a position
from which it could make "courageous" proposals at the WTO.
End summary.

Urso Cautiously Optimistic on Elections
--------------


2. (U) Urso, a political ally and confidant of Vice Prime
Minister Fini, told Ambassador Spogli the outcome of the
April 9-10 elections will depend on what happens during the
final days of the campaign. He predicts a narrow victory for
the center-right coalition. He noted cell phone text
messages received by his National Alliance Party showed the
electorate "is confused" about the issues. According to
Urso, Prodi's proposed tax on capital and property would "put
the middle class in shackles," and would devastate the dream
of home ownership. According to Urso, high voter turnout,
facilitated by the addition of a second day of voting, aids
the center-right because the second day will make it easier
for the center-right's core constituents to vote. He said
some center-right voters had difficulty voting on Sunday due
to family or religious commitments. He expects that seventy
percent of the voters will go to the polls on Sunday, with
the remainder, including the critical mass of center-right
voters, casting their ballots on Monday.

Launching the Italian Economy - Trade is Key
--------------


3. (U) Responding to a question from the Ambassador, Urso
said he had enjoyed his five years as Vice Minister of Trade
tremendously. He likes the job's mix of politics and policy
and has made over 100 visits to promote Italian businesses,
including three trips to Brazil, and eight trips each to
China and Russia. Urso said that there is no one policy that
will "re-launch" the Italian economy. The solution to
Italy's economic problems requires "a recipe" of policies of
which improving infrastructure, encouraging innovation, and
free trade are essential parts. Pointing to the Renaissance
and the 1970's, both periods of Italian economic prosperity,
Urso noted that "Italy grows when it is open." In Urso's
opinion, Italy has an advantage over other European countries
in dealing with economic problems because it is socially
stable. Unlike France, "Italian youth are not in the streets
because they have strong ties to their families and small-
and medium-sized businesses," he said.

A Center-Right Victory Will Bring Courageous GOI Trade
Proposals
-------------- --------------


4. (C) Turning to the issue of free trade and the WTO, Urso
noted political and economic considerations have limited GOI
flexibility in the Doha Round. Initially, the economic
downturn which followed the September 11 attacks caused the
GOI to be conservative in its approach to the Doha Round.
More recently, GOI positions on agricultural market access
and geographic indicators have been dictated by the political
need to appeal to agricultural interests in this week's
general elections. Urso said that a center-right victory in
the April 9-10 elections would put the government in a
position to make a "courageous" proposal on trade, especially
in agriculture and geographic indicators. He noted that
agriculture is a small part of the Italian economy, and that
if the Italian economy is to grow, the interests of industry
need to be given more weight. He also noted that much
processed food produced by Italian companies uses imported
raw materials, e.g., pork from Eastern Europe, and that
reduced trade barriers will make Italian food companies more
competitive worldwide.


5. (C) Comment. Urso's recognition that Italy needs to
engage in the WTO process for reasons other than protecting
its agricultural interests is a breath of fresh air coming
from a government beholden to agricultural interests until
now. If the center-right wins the elections, the political
calculus that has driven GOI trade policy and given excessive
weight to agricultural interests will change, and allow Urso
to make the "courageous" offer he discussed with the
Ambassador. Although the Agriculture Ministry will still
play an important role in formulating GOI trade policy, Urso
clearly believes a center-right victory will shift the
bureaucratic momentum to the Trade Vice Ministry.


6. (C) Comment continued. Urso, 48, is a young Vice
Minister of Trade and has handled his portfolio well for five
years. It is likely that if the center-right wins the April
9-10 elections, Urso will stay in his current job. There is
also speculation that, if Urso's National Alliance party does
well at the polls, the Trade Vice Ministry could be spun off
to form a Ministry of Foreign Trade, giving Urso full
ministerial rank. If the center-left wins the elections,
Urso would logically become the opposition's ranking expert
on foreign trade. Given the degree to which his views on the
benefits to Italy of free trade mirror our own, we will
continue to seek opportunities to engage Urso on these issues.

7. (C) Comment continued. Embassy also notes that the
turn-around in Urso's thinking may be partially due to our
pressing the GOI to rethink its real national interest in the
trade round (i.e., moving from protecting Italy's small
agricultural market to the real national interest -- opening
industrial markets abroad for Italy's manufactured goods) and
to the Ambassador's powerful op-ed just before the Hong Kong
Ministerial urging Italy to act on its national interest.
End comment.
SPOGLI