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Cablegate: Ambassador's August 3 Meeting with Minister Of

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 MADRID 002876

SIPDIS

STATE FOR EB/TPP/ABT (BOBO); STATE PASS FAS (BSIMMONS) AND
FAS/ITA (PSHEIK); STATE PASS USTR; STATE PASS USDOC/ITA
(CALVERT)

E.O. 12958: N/A
TAGS: BEXP EAGR ECON ETRD KIPR TBIO SP
SUBJECT: AMBASSADOR'S AUGUST 3 MEETING WITH MINISTER OF
INDUSTRY, TOURISM AND TRADE JOSE MONTILLA AGUILERA

1. Summary: Ambassador stressed the importance of a level
playing field in government procurement/infrastructure
projects and explained our trade policy interests,
particularly in intellectual property rights and agricultural
biotechnology. Responding to the Ambassador, Montilla noted
the importance of the GOS/Business/Labor "social dialogue" in
reforming labor laws to make Spain more competitive. (Note:
Ambassador and staff are coordinating to arrange a meeting
with Secretary Gutierrez in connection with Minister
Montilla's September 26-28 trip to the U.S. Embassy has also
notified USTR of Montilla's interest in meeting with USTR
Portman.) End Summary

------------
PARTICIPANTS
------------

2. Ambassador Aguirre was accompanied by DCM Manzanares and
Trade Policy Officer. Minister Montilla was accompanied by
Secretary of State for Tourism and Trade Alfredo Bonet Baiget

SIPDIS
and the minister's Chief of Staff.

---------------------------------
IMPORTANCE OF LEVEL PLAYING FIELD
---------------------------------

3. Bilateral trade is stable and few American exporters
report market access problems. However, Ambassador noted
that the Spanish construction firm, CINTRA, had recently won
a $29 billion to $36.7 billion 50 year bid to build and
maintain roads in Texas. Other Spanish construction
companies have also won large U.S. contracts. Meanwhile,
American firms such as Boeing, Sikorsky, and Oshkosh have had
difficulties winning major infrastructure bids in Spain.
Recently, however, the Spanish government chose Lockheed
Martin's S-80 submarine combat system, which was good.
Minister Montilla explained that the American system offered
greater complementarity to Spanish industry than the French
competitor. Ambassador noted he would like to see more of a
level playing field in this area, i.e. more Lockheed
Martin-style success stories. The Minister did not comment
on this issue in general terms, but his staff took notes.


------------
TRADE POLICY
------------

4. Ambassador stressed President Bush's commitment to free
trade, opening markets, and the importance of the Doha Round.
He noted that recent congressional passage of the Central
American Free Trade Agreement (CAFTA) demonstrated the
President's ability to achieve important trade policy
objectives. With respect to bilateral trade relations,
Ambassador emphasized the importance we place on good
intellectual property rights protection and a "visionary"
policy on agricultural biotechnology. Bonet, who has
personally worked with Embassy staff on both topics, agreed
with the Ambassador on these topics, although he said
Agriculture, Health, and Environment had the lead on
biotechnology (Note: Technically Bonet is right even though
he himself represents the Ministry on the Inter-Ministerial
Committee for Genetically Mondified Organisms. Embassy has
tried to convince the GOS, arguably with a measure of
success, that it needs to view biotech as a trade policy, as
well as environmental and health,issue.)

------------
LABOR REFORM
------------

5. Ambassador recounted that recently in Andalusia, he had
met with representatives from Ford, GM and Kodak. All three
have significant investments in Spain. The representatives
told the Ambassador that they faced increasing competition
and mounting internal pressure to justify their continued
presence in Spain given the existence of many other emerging
economies with more flexible labor markets. Minister
Montilla was quite interested in what the Ambassador had to
say and stressed the importance of the government's "Social
Dialogue" with business and labor which, among other things,
seeks to reach consensus on labor market reform. The
government released a communique on July 27 in which it lists
a long list of achievements. The communique states, however,
that there are still things that need to be done, including
"finding commitments that will provide security for workers
and flexibility for companies". (Comment: Therein lies the
rub. The Socialist government knows it needs to enhance
companies'ability to hire and fire. While the government
says with some truth that it pursues economic policies more
similar to the UK's than France's or Germany's, it is not yet
ready to sign on to Thatcherite-style labor laws and is
looking for a labor market reform formula that is acceptable
to its union allies.)


AGUIRRE

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