ITALIAN VIEWS ON OECD ENLARGEMENT AND FINANCIAL

UNCLAS ROME 000992 SIPDIS SIPDIS PARIS FOR USOECD E.O. 12958: N/A TAGS: ECON OECD EUN IT SUBJECT: ITALIAN VIEWS ON OECD ENLARGEMENT AND FINANCIAL REFORM REF: STATE 62464 Sensitive but unclassified. Not for internet distribution. ¶1. (U) Summary. According to the MFA's Director General for Multilateral Economic Affairs, the GOI is already heavily engaged in discussion at the OECD Council on OECD enlargement and financing reform. Regarding OECD enlargement, the GOI is especially concerned that enlargement proceed in such a way that two European states are included in the list of countries with which the OECD begins accession negotiations following next week's OECD Ministerial. On the issue of OECD financing reform, the GOI agrees in principle that the current system needs to be reformed to include an annual minimum base fee covering recurring costs. However, the GOI does not believe OECD financing reform should be a precondition for OECD expansion. The Director General was not optimistic the OECD Council will be able to agree on a text on enlargement and financing reform in time for the Ministerial meetings next week. End summary. ¶2. (U) Embassy Rome Minister Counselor for Economic Affairs met May 10 with Giandomenico Magliano, the MFA's Director General for Multilateral Economic Affairs, to deliver reftel demarche on OECD enlargement and financing reform. Magliano, the MFA's equivalent to the Under Secretary for Economic, Energy, and Agricultural Affairs, made himself available for the meeting on short notice, and spoke with the Italian OECD delegation in Paris immediately prior to meeting with the EcMin. According to Magliano, the Italian delegation is heavily involved in discussions at the ongoing OECD Council meeting concerning OECD expansion and financing reform. ¶3. (SBU) Magliano agreed that there needs to be an assessment of the OECD's enlargement and of OECD financing. However, he made clear the GOI's position that the two should not be linked, and that OECD enlargement should continue notwithstanding disagreements among member states on the issue of OECD financing. With respect to enlargement, Magliano was adamant that two European states should be included in the list of countries with which the OECD begins accession negotiations, naming Slovenia and Estonia as the most likely candidates. Magliano said the GOI supports enhanced engagement with China to establish a dialogue on OECD issues. Turning to the question of Israeli membership in the OECD, Magliano said that if the OECD enters into accession negotiations with Israel, it must also increase its outreach to Arab countries. ¶4. (SBU) On the issue of Russian OECD membership, Magliano noted that the OECD accession process is multi-phased, and that entering into negotiations did not guarantee Russian membership in the immediate future. Magliano seized on what he saw as USG linkage of Russian WTO accession and OECD accession. He said the two should be kept separate in order to avoid a situation in which a member of the WTO could essentially veto a state's OECD accession by derailing their WTO candidacy. In this regard, he cited the potential of Georgia taking such an action to block Russia's OECD membership. ¶5. (U) Moving on to the issue of OECD financing, Magliano concurred with our observation that smaller OECD members are getting a free ride at the expense of larger members such as the United States. He agreed there should be an annual minimum base fee, and noted that if countries are reluctant to pay an increased, minimum, annual fee, it is a sign that they do not fully appreciate the value of the work done by the OECD. Magliano suggested that the OECD Ministerial meeting adopt language that commits member states to "fully finance the OECD on a sustainable basis." ¶6. (SBU) Comment. While Magliano was receptive to our points, it was clear the GOI had concluded its internal discussions on OECD enlargement and financing reform, and that, with working-level discussions already started in Paris, the train had left the station. Magliano will be in Paris for next week's OECD meetings. For the developmental portion of the ministerial, the Italian delegation will be led by Finance Minister Tomasso Padoa-Schioppa. Although Undersecretary Vittorio "Bobo" Craxi will lead the Italian delegation on the issues of OECD enlargement and financing reform, U.S. delegation members should seek out Magliano for substantive discussion of these issues. End comment. Spogli