SPECIAL REPRESENTATIVE MERMOUD'S DISCUSSIONS WITH

1. (SBU) Special Representative for Commercial and Business
Affairs Frank Mermoud met with Austrian Government officials
and U.S. business representatives in Austria on February 23
to discuss market access concerns, GoA views on the Doha
Round, the EU's Services Directive, and U.S.-EU economic
cooperation. Martin Eichtinger, the Minister of Economy's
Chief of Staff, highlighted the GoA's hope that WTO
negotiators could make progress on NAMA and services.
However, Eichtinger cautioned that the current EU offer on
agricultural market access represented a red line, beyond
which the EU would not venture. Eichtinger characterized the
amended Services Directive as a good compromise, which
fostered liberalization and protected Member States against
social dumping. Melitta Schubert, the MFA's Transatlantic
Coordinator for the EU Presidency, praised USG-EU cooperation
on regulatory reform. Schubert listed regulatory reform, IPR
cooperation, innovation, and energy security as possible
economic deliverables for a U.S.-EU Summit. Christoph Leitl,
President of the of the Austrian Chamber of Commerce,
stressed the need for a stronger entrepreneurial spirit
throughout Europe. Representatives of U.S. pharmaceutical
companies outlined difficulties in obtaining reimbursement
approvals for innovative drugs. Microsoft Austria pointed
out how the high cost of patents in Europe hindered
innovation. End Summary.


Ministry of Economy Views on WTO and the Services Directive


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2. (SBU) Martin Eichtinger, the Minister of Economy's Chief
of Staff, told Special Representative for Commercial and
Business Affairs Frank Mermoud that commercial relations
between the U.S. and Austria remain strong. According to
Eichtinger, there are 450 Austrian companies in the U.S.,
employing 8,000 workers. The 600 U.S. firms in Austria
provide 30,000 jobs for the Austrian economy. Eichtinger
noted that Informal Commercial Exchange talks continue to
provide an excellent forum to discuss bilateral trade issues.



3. (SBU) On WTO negotiations, Eichtinger said the GoA is
pleased that the WTO is dealing with agriculture, services,
and NAMA as one package. Eichtinger noted that Austria is
especially eager to see tangible progress on NAMA and
services, because 40% of Austria's GDP comes from exports of
goods and another 15% of GDP from exports of services.
Eichtinger cautioned that, on agricultural market access, the
current EU offer reflects a red line, beyond which Member
States are not willing to allow the Commission to venture.
Eichtinger argued that the EU had already registered
impressive reforms of the Common Agriculture Policy in recent
years, which the current WTO negotiations should acknowledge.



4. (SBU) On the Services Directive, Eichtinger characterized
the European Parliament's (EP) recently amended Services
Directive as a "good compromise between liberalization and
protection against social dumping." The EP, in Eichtinger's
opinion, is beginning to assert its views and meaningfully
affect policy debates. Eichtinger predicted that the
Commission will present a new proposal, based on the EP's
version, to the Competitiveness Council at the end of May.
Eichtinger stressed that Minister of Economy Martin
Bartenstein wanted to finish work on the directive during the
Austrian Presidency.


Ministry of Foreign Affairs on U.S.-EU Economic Cooperation


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5. (SBU) Melitta Schubert, Head of the MFA's Economic
Relations Department and the MFA's Transatlantic Coordinator
for the EU Presidency, briefed Mermoud on the MFA's
preliminary views concerning economic issues that might arise
during a possible U.S.-EU Summit during the Austrian EU
Presidency. Schubert highlighted cooperation on regulatory
reform as a possible deliverable for a summit. Schubert
praised the work of the OMB in this area, but acknowledged
that there is still much work to do. Schubert added that the
U.S. and European business communities are interested in
promoting this issue, because they are both suffering from
administrative burdens. Schubert underlined that it would be
very important to consult with the business community on this
and other U.S.-EU economic deliverables. She suggested that
the Transatlantic Business Dialogue would be a good vehicle
to ensure business input into summit preparations.



6. (SBU) Schubert listed several other economic issues that
might warrant inclusion in a summit, including IPR
cooperation, an air services agreement, and energy security.
On IPR, Schubert opined that recent signals from the
Commission indicate it is willing to intensify cooperation
with the USG, especially in the context of third countries.
On energy security, Schubert confided that there is an
internal debate within the EU, with some arguing for a
"common energy policy." The Commission's Green Paper would
most likely provide more direction on energy issues.


Austrian Chamber of Commerce on Entrepreneurial Spirit


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7. (SBU) Christoph Leitl, President of the influential
Austrian Chamber of Commerce (WKO), told Mermoud that the
WKO's main priority during the Austrian Presidency is to
stimulate economic growth and reduce unemployment. Leitl
said that, across Europe, it is necessary to restore consumer
and investor confidence as a prerequisite to higher GDP
growth. Leitl noted that Europe needed more entrepreneurial
spirit, with "less employees and more employers." At the
same time, governments need to invest more in workers and
physical and technological infrastructure. In Leitl's
opinion, innovation is the nexus for all of these issues.


U.S. Business Community Concerns


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8. (SBU) During a roundtable with Mermoud, U.S. company
representatives of the Research Based Pharmaceutical Forum
(FOPI) outlined market access concerns. FOPI members
complained that the GoA process to grant reimbursement status
for innovative drugs is unduly burdensome and discriminatory.
The process to obtain reimbursement status, which FOPI
claims is the third longest in the EU, takes an average of
400 days. This long process naturally cuts into the patent
life of the drugs, which FOPI implied might be the GoA's
intention in dragging out reimbursement approvals. Moreover,
FOPI lamented that, because the entity responsible for
reimbursement policy is independent from the Ministry of
Health, there is little political incentive to reform the
system. Mermoud urged FOPI to focus on the "big picture,"
not the details, and to engage the GoA as a "health care
partner."



9. (SBU) Thomas Lutz, Spokesman for Microsoft Austria, told
Mermoud that Microsoft had three priorities in Austria:
advocating for minimal IT regulation; promoting innovation;
and broadening the information society to all demographic
segments. Lutz noted that about 25% of the Austrian
population is over 60 years old, and most of this group is
not particularly proficient with computers. Microsoft hopes
to integrate these groups into the information society. On
promoting innovation, Lutz lamented that patents in Europe
cost an average of $30,000, while the average U.S. patent
costs $2,400. On Internet governance, Lutz said the IT
sector appreciated the USG's efforts to fight back
supranational control of the Internet at the November 2005
WSIS. However, he warned that the idea of creating a
supranational organization to control the Internet may only
be dormant.



10. (U) EB/CBA Special Representative Mermoud has cleared on
this message.
McCaw