VZCZCXRO8444
RR RUEHIK
DE RUEHMD #0086/01 0261810
ZNR UUUUU ZZH
R 261810Z JAN 10
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 1762
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHLA/AMCONSUL BARCELONA 4322
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC

UNCLAS SECTION 01 OF 04 MADRID 000086

SENSITIVE
SIPDIS

STATE FOR EUR/WE, EEB/TPP/IPE, EEB/IFD/OIA, EEB/TRA/AN
STATE PASS USTR FOR D.WEINER
COMMERCE FOR 4212/DON CALVERT
ENERGY FOR PIA/K.BALLOU AND EERE/D.BIRNS
TREASURY FOR OIA/OEE/R.JOHNSTON AND OTP/M.CORWIN

E.O. 12958: N/A
TAGS: BEXP ECON EINV ENRG KIPR SP
SUBJECT: AMBASSADOR SOLOMONT'S JANUARY 25 CALL ON
INDUSTRY/TOURISM/COMMERCE MINISTER SEBASTIAN

REF: A. MADRID 80
¶B. MADRID 67

MADRID 00000086 001.3 OF 004


Summary
-------
1.(SBU) On January 25, Minister Sebastian and the Ambassador
emphasized their desire to work together to strengthen
bilateral business and economic ties. State Secretary Ros
reviewed his January 20-21 Washington meetings on
intellectual property rights and the status of proposed
legislation to combat internet piracy. The Minister
encouraged the Ambassador to engage the Madrid regional
government president on internet piracy. The Ambassador
emphasized the importance he placed on favorable GOS
consideration of two proposed solar electricity investments;
Sebastian and State Secretary Marin explained that it would
be difficult for the GOS to approve the SolarReserve project,
but the Minister promised to take another look. The
Ambassador suggested considering how to integrate President
Zapatero's goal of a bilateral economic and investment forum
into the existing U.S.-Spain Forum. A Foreign Trade
Institute official agreed to check on the status of the
Spanish treasury's response to a U.S. Treasury letter on
renegotiating our bilateral income tax treaty. Minister
Sebastian also asked for help getting information from
General Motors on the company's plans for Opel. He noted the
GOS, strong interest in hosting a U.S.-EU summit during
Spain,s EU presidency, cited concerns by Spanish
infrastructure companies over Buy American restrictions, and
raised the Iberia/One World Alliance application for
antitrust immunity for the Iberia-BA merger. End Summary.

2.(U) The Ambassador paid an introductory call on Spanish
Minister of Industry, Tourism, and Commerce Miguel Sebastian
on January 25. Sebastian was accompanied by Secretary of
State (deputy minister) for Telecommunications and the
Information Society Francisco Ros, Secretary of State for
energy Pedro Marin, Foreign Trade Institute (ICEX) CEO Angel
Martin-Acebes, and two staffers. The Ambassador was
accompanied by the economic and commercial counselors. The
Ambassador opened by referring to his January 22 meeting with
President Zapatero (ref A) and the importance he placed on
strengthening business ties between the two countries.
Internet Piracy
---------------
3.(SBU) The Ambassador highlighted the difficulties faced by
the U.S. movie and recording industry in Spain as a result of
internet piracy. He acknowledged that some thought the
Special 301 process was unfair but stressed that the issue
needed to be addressed. He emphasized the USG,s desire to
help address the problem (though he did not want to take a
position on details of the legislation) and said that he had
met the previous week with the head of the opposition Popular
Party (PP) (ref B) to encourage a constructive approach.
State Secretary Ros indicated that it would be helpful for
the Ambassador to continue to encourage the PP.

4.(SBU) Minister Sebastian noted that immediately upon taking
office in 2008 he had met with the Ambassador's predecessor,
who had told him Spain had been placed on the Watch List.
Since that time, the GOS had made considerable progress on
two of the issues that had been cited at the time, illegal
software and street sales of counterfeit products.

5.(SBU) On the third (comment: and most important) issue,
unauthorized internet downloads of movies and music,
Sebastian said that many Spaniards thought the "digital
canon" private copy levy on recording instruments and media
gave them the right to download whatever they wanted. In
addition, going after individual users was difficult for the
GOS, which did not want to jeopardize families, access to
the internet just because one member downloaded unauthorized
items. He said the GOS had gotten the ISP association to
negotiate with the Coalition of content providers. He
described the political tension around the issue, saying the
GOS considered unfair both the MPAA's claim that it was
overly permissive and the PP's and the internet users groups'
claim that it was almost as repressive on internet issues as
Iran or China or Cuba. The Minister called "very worrisome"

MADRID 00000086 002.3 OF 004


the PP's initial reaction to the government's first
legislative proposal. He was particularly concerned that the
Madrid regional government had been organizing meetings with
internet users. He understood the national party seeking
political advantage, but he was concerned about the
institutional aspects of the regional government getting
involved, and he said it would be helpful if the Ambassador
could encourage the regional president to stop. The
Ambassador agreed to raise the issue when he meets with the
regional president.

6.(SBU) Secretary Ros said that in his meetings in Washington
the previous week, Spain's efforts had been generally very
well received. The software companies were "fine," and the
movie industry was also "happy." However, the music industry
still had problems, acted as if the GOS had done nothing, and
was not patient enough to wait for implementation of the law
as would be necessary. (Comment: The U.S. music industry
says the draft legislation's emphasis on closing websites
will do very little to address direct peer-to-peer (P2P)
filesharing, which is more of a problem for music than for
movies. The GOS says the legislation will have some impact
on P2P filesharing as well.) Ros said everyone was waiting
to see what happened with the draft law, which was now in a
consultation stage that could last a month or a month and a
half. Afterwards it would go to the Congress, where the
government is just short of a majority. If the PP supported
it, it could move quickly. If the PP opposed it and proposed
language changes, it could take longer. Ros also said that
Spain,s problem was like those in other countries and that
fundamentally the industries' business models needed to
change. He and Minister Sebastian both cited the importance
of promoting legal downloads, which the Ministry is seeking
to do.

7.(U) Ros also said his telecoms-related meetings had gone
well and that his interlocutors had agreed to set up working
groups to address issues such as cybersecurity, net
neutrality, and next generation networks.

8.(SBU) Comment: Ros had emphasized in his Washington IPR
meetings the importance of USG engagement with the PP, and
this meeting confirmed the GOS' interest. Post will continue
our efforts to encourage national PP figures to take a
constructive approach toward the GOS' proposed legislation.
We will also engage with the regional government.

Double Taxation Treaty
----------------------
9.(SBU) The Ambassador noted that both he and the Minister
wanted to promote business and jobs in our two countries and
said that one issue companies raised was the need to revise
the bilateral double taxation treaty. The USG was awaiting a
response to a letter that had been sent from Treasury's tax
negotiating office to its Spanish counterparts. Minister
Sebastian said his ministry often pushed the issue with
Spain,s treasury. Martin-Acebes said the treasury was
working on a response, and he agreed to the Ambassador's
request that he look into the issue and let us know when a
response might be ready.

Strengthening Business Ties
---------------------------
10.(U) The Ambassador and the Minister emphasized their joint
interest in strengthening U.S.-Spain business ties.
Sebastian had traveled to the U.S. four times in 2009, and he
described his involvement in the launch of the "Made in
Spain, Made by Spain" awareness campaign in the U.S. The
Ambassador noted President Zapatero's interest in a US-Spain
investment and economic forum he had proposed during his
October visit to the White House. Martin-Acebes said the
presidency was working on the idea. The Ambassador
recommended considering how to integrate Zapatero's goals
into the existing U.S.-Spain Council and U.S.-Spain Forum,
which benefited from the commitment of Senator Menendez and
others. The Minister expressed concern about the
multiplication of different business groups that did not talk
to each other, citing the U.S. Chamber of Commerce in Spain
(AmCham) and the American Business Council. He said that

MADRID 00000086 003.3 OF 004


adding a new forum/council would be difficult.

U.S. Companies' Solar Power Projects
------------------------------------
11.(U) In emphasizing the importance he places on
strengthening the bilateral economic relationship in order to
create jobs, the Ambassador noted that Spanish companies were
the largest recipients in the U.S. of stimulus funding for
renewable energy projects. He said the USG was glad to
promote these investments, which resulted in U.S. jobs. He
also wanted favorable consideration of U.S. companies,
proposed investments in Spain. He mentioned two planned
solar thermal electricity investments by U.S. companies,
saying that both were important symbolically as well as for
the direct amounts of investment and jobs they would bring.
The investment by Florida Power and Light subsidiary NextEra
now appeared to be in good shape and would be the largest new
U.S. investment in Spain in several years. It would be an
example of the two governments' shared confidence in
renewable energy.

12.(SBU) A greater concern was the difficulties faced by a
large project by SolarReserve that was important both in
terms of economic activity and technology development.
Minister Sebastian responded by explaining how the GOS had
seen a bubble develop in solar photovoltaic electricity
projects in 2008 and was seeing one in solar thermal projects
in 2009. In both cases, far more companies had applied to
build projects and receive the generous guaranteed feed-in
tariffs than the GOS had expected, and the result was going
to be very expensive to consumers for many years. He noted
that the GOS had changed its registration process to burst
these bubbles, and that many Spanish companies were very
upset with the GOS for doing so.

13.(SBU) Secretary of State Marin said Solar Reserve had
presented its application in December, several months after
the May 6 deadline, and that the original GOS target had been
500 MW of projects but that the GOS had allowed 2,500 MW to
be scheduled between now and 2013. The GOS could not predict
now what the guaranteed feed-in tariff would be after 2013
because it would have to see how the technology evolved,
though the tariff certainly would be lower. It would be
difficult for the GOS to allow Solar Reserve to "jump the
queue" ahead of all the other companies (Sebastian said
"thousands of megawatts") that had applied between May and
December. Marin also noted that the company was seeking
authorization for a larger project than the 50 MW allowed by
the GOS decree-law. He added that the company's interest in
using an alternative provision of the existing royal decree
could not be accommodated because of overall capacity limits.
He commented that the GOS had authorized much new renewables
capacity at a time when overall electricity demand was
falling, and there might not be demand for new capacity for a
while.

14.(SBU) The Ambassador acknowledged Sebastian's and Marin's
comments. He noted that the company was willing to accept a
tariff that was significantly lower than the tariff other
companies were receiving (note: this is a condition of the
alternate legal route) and urged the Minister and the
Secretary to look at the company's arguments again and see if
anything could be done. He said the USG interest was partly
in business terms and partly because of the symbolic
importance. Marin noted that his team had met with company
officials recently and that he was familiar with their
arguments.

Other Issues
------------
15.(SBU) Minister Sebastian asked for help getting
information from General Motors about the company's plans for
Opel (which has a factory in Zaragoza province). He said the
company was keeping the British government informed, but that
the GOS had to learn about developments in the press.
Sebastian had been pleased with GM's decision to keep Opel
but wanted more information, or at least as much as the
British were getting.


MADRID 00000086 004.3 OF 004


16.(SBU) Minister Sebastian said Spanish infrastructure
companies were concerned about Buy America legislative
provisions. Upon being questioned by the Ambassador,
Martin-Acebes could not come up with an example of a Spanish
investment that had been prevented because of national
government restrictions. He instead cited a Texas state
action and general concern by construction companies about
state and local actions, adding that the perception could
become a deterrent to investment. Commercial counselor noted
that Spanish infrastructure companies were doing very well in
the U.S. and that the CAF railroad car manufacturer had
recently reached an agreement; the company would do more
manufacturing in the U.S. than it had originally envisioned,
but it appeared to be satisfied. The Ambassador noted that
the Embassy could address a perception of barriers by
highlighting the success Spanish companies were having in the
U.S.

17.(SBU) Minister Sebastian noted GOS concern about the One
World Alliance's application for anti-trust immunity for the
BA-Iberia airline merger. He also noted the GOS' strong
interest in having a U.S.-EU summit in Madrid during Spain's
EU presidency. He added that he expected the Defense
Minister (whom the Ambassador saw the next day) to raise the
interest of the Spanish company EADS-Casa (Airbus Military)
in the revised DOD tender for new refueling tanker aircraft.

Comment
-------
18.(SBU) Minister Sebastian was clearly interested in
establishing a productive relationship with the Ambassador.
Sebastian made a point of assuring the Ambassador as the
meeting broke up that his ministry "would try" on Solar
Reserve but that it would be very difficult. Another sign of
the importance he placed on the relationship was the presence
in the meeting of two deputy ministers, an agency head, and
two other staffers, many more than usually attend such
meetings.
SOLOMONT