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Cablegate: Minister of Trade: Italy Rethinking Approach To

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PP RUEHAG RUEHAP RUEHDE RUEHDF RUEHGI RUEHHM RUEHLZ RUEHMA RUEHMR
RUEHPA RUEHPB RUEHRN
DE RUEHRO #2877/01 2890529
ZNR UUUUU ZZH
P 160529Z OCT 06
FM AMEMBASSY ROME
TO RUEHC/SECSTATE WASHDC PRIORITY 6252
INFO RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE PRIORITY
RUEHFL/AMCONSUL FLORENCE PRIORITY 1806
RUEHMIL/AMCONSUL MILAN PRIORITY 7766
RUEHNP/AMCONSUL NAPLES PRIORITY 1922
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

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

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