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