MINISTER OF TRADE: ITALY RETHINKING APPROACH TO

UNCLAS SECTION 01 OF 03 ROME 002877 SIPDIS SIPDIS DEPARTMENT PASS TO USTR E.O. 12958: N/A TAGS: ECON ETRD ETTC AF CH IT SUBJECT: MINISTER OF TRADE: ITALY RETHINKING APPROACH TO CHINA; COMMITTED TO WTO REF: 2004 ROME 2829 ROME 00002877 001.2 OF 003 ¶1. (U) This is an action request. See paragraphs 9 and 12. ¶2. (U) Summary: In a courtesy call by Ambassador Spogli October 3, Trade Minister Anna Bonino outlined her views on Italy's trade relationship with China and the need for Italian firms to be more aggressive in promoting their brands internationally. She expressed enthusiasm for the Ambassador's Partnership for Growth Program, and said the GOI is committed to the success of the current round of WTO negotiations but predicted continued European inflexibility in the run-up to elections in France. Bonino noted cooperation between the GOI and USG in export control regimes and expressed strong interest in bilateral consultations on export controls in the coming year. Bonino expressed interest in a proposal by the Ambassador to bring Afghan women to Italy to "tell their story" and to make clear the need for continued coalition efforts to prevent a resurgence of Taliban influence in Afghanistan. End summary. The China Challenge -------------- ¶3. (U) Bonino, who recently returned from a six-day (September 13-18) trade mission to China, said that for Italy, the key issues with respect to China are respect for intellectual property rights (IPR) and helping Italian businesses take advantage of the opportunities that the Chinese market presents. Bonino raised the issue of Chinese respect for IPR, including the problem of counterfeit goods, during her meetings with Chinese officials in Beijing and Guangzhou. She believed they were sensitized to the issues and aware of the need to improve China's track record on IPR. She was especially struck by the fact that local officials "are beginning to realize they have to do something about IPR violations" and "are uneasy" about IPR norms in China. Bonino said European Commission Vice President Gunter Verheugen will travel to China in the near future and that IPR issues are high on his agenda. Verheugen is especially concerned about the manufacture of counterfeit Bosch car parts in China. ¶4. (U) Bonino said the greatest challenge is to change the way Italian businesses think about China. "The outcome of the mission depends on whether Italians can stop viewing China as a threat and start to take advantage of the opportunities that China presents." Bonino cited as an example the Italian machine-tool industry, which has been very proactive in establishing itself in the Chinese market. She said that infrastructure (construction) businesses need to be more aggressive in entering the Chinese market, and noted the huge potential of the Chinese infrastructure sector, mentioning specifically the construction of the port of Tianjin. ¶5. (U) Bonino observed that Italian companies need to make a determined effort to establish their brands in China, and that Chinese patronize Starbucks ("the McDonald's of coffee") and Pizza Hut instead of purchasing Italian products, such as Illy coffee or "real Italian pizza." "When Chinese think of well-designed furniture, they should think of Italy, not Ikea." Using China and the United States as examples, she said that "there is the opportunity for a greater Italian presence, but Italian companies need to go there and assert themselves." WTO And The Doha Round -------------- ¶6. (U) Bonino said the GOI is committed to the success of the Doha round and to "giving the WTO relevance." "Failure is not to our advantage, and we have no interest in weakening the WTO," she said. She noted progress in the current round is hampered by the timing of various elections, including U.S. elections in November and French elections early next year. She said the EU's ability to move on trade issues will be limited in the run-up to the French elections and predicted a hardening of EU positions until after elections and the ensuing French political reshuffling. ¶7. (U) Bonino told the Ambassador that Italy will host trade meetings with Brazil on October 23, at which time WTO Director General Lamy will also be in Rome. These talks will be followed by meetings on November 6 with Indian Trade Minister Kamal Nath, also in Rome. Bonino said NAMA and ROME 00002877 002.2 OF 003 "definition of origin" (geographical indications) are the key issues in the current round for Italy, but also noted that the Italian economy is an industrialized one and that Italian trade policy should reflect this. ¶8. (U) Within the WTO, Bonino said there is a need to be tough on anti-dumping. She specifically said that "China has to learn to play by the rules," adding that China should be a "responsible player" within the WTO system. She noted Italy's shoe manufacturers have been especially hard hit by cheap Chinese imports, and that it is difficult to get other EU countries to act because much of the dumping is being done by European companies (she named Adidas as an example) which have factories in China. Export Controls -------------- ¶9. (U) The Ambassador raised the issue of cooperation between the United States and Italy on export controls, noting that we have not had bilateral consultations on this issue since 2004, reported reftel. Bonino agreed "it is important to keep the dialogue on export controls between the U.S. and Italy open," and expressed in resuming the biennial export control meeting between U.S. and Italian experts. Action Request: Post requests Washington guidance on the availability of USG export control officials to participate in bilateral consultations. End action requested. Afghanistan -------------- ¶10. (U) Turning to the issue of Afghanistan, the Ambassador told Bonino the Embassy hopes to bring a group of Afghan women to Italy before the end of the year to tell their stories, to illustrate why the international community must remain engaged in Afghanistan, and why the Taliban cannot be allowed to have a role in Afghan politics. Bonino, who was briefly kidnapped by the Taliban during a 1997 trip to Afghanistan when she was EU Commissioner for Humanitarian Affairs, expressed interest in the project and asked to be kept informed. Bonino said the GOI is "determined" not to leave Afghanistan, and to deny the Taliban a role in the government there. ¶11. (U) Bonino told the Ambassador that it is her personal belief that stabilization and security in Afghanistan need to occur "from outside and inside." Her view is that stability within Afghanistan will impossible to achieve unless Afghanistan's relations with Pakistan and Iran stabilize. She expressed concern over the influence that Pakistan and Iran have in Afghanistan's border regions and noted the strong Iranian political influence in Herat. ¶12. (U) Returning to a personal opinion, Bonino said that "we are totally wrong on the issue of drugs," and that current opium poppy eradication policies do not work. She argued that "in some areas of Afghanistan, opium is the only thing that can be grown," and that "telling Afghans not to harvest opium is like telling the Saudis not to pump oil." Bonino has long advocated what she terms a "more pragmatic" approach on the drug trade in Afghanistan, including legalized cultivation of opium for use in morphine manufacture. She proposed that Afghanistan, along with other licit producers of opium, could participate in a quota system administered by the International Red Cross. In Bonino's view, the drug trade in Afghanistan, because it cannot be eradicated, should be controlled. This, she said, would help fight corruption, augment the Afghan government's budget, and help deprive the Taliban of an important source of funding. Comment -------------- ¶13. (SBU) Bonino is a spirited interlocutor, in comfortable command of her brief after six months as Trade Minister. In a meeting conducted entirely in fluent English, she did not hesitate to plunge into the issues and talk business, eschewing diplomatic formalities. While we will continue to have differences with the GOI and the Ministry of Trade on issues such as geographical indications, Bonino is a forward-thinking Trade Minister, committed to the success of the Doha Round, who may be more flexible than her predecessor in finding ways to re-start the stalled WTO Round. She sees her views on opium production as "pragmatic," though they are not in synch with our own. Post will follow up to provide ROME 00002877 003.2 OF 003 briefing materials to Bonino's office on USG views on counter-narcotics efforts in Afghanistan. SA A/S Boucher is also visiting October 17-18 and will be able to engage Bonino and others on Afghan issues. Finally, we note that her portrayal of Chinese officialdom's relatively positive attitude toward the neuralgic issue of the counterfeiting issue seemed unrealistic. End comment. SPOGLI