VZCZCXRO2079
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHFR #3179/01 2061416
ZNY CCCCC ZZH
O 251416Z JUL 07
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9132
RUEATRS/DEPARTMENT OF TREASURY WASHDC IMMEDIATE
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 003179 
 
SIPDIS 
 
STATE PASS USTR, FAS 
 
SIPDIS 
 
E.O. 12958: DECL: 07/09/2017 
TAGS: ECON ETRD ELAB EUN PREL SENV UNO FR
 
SUBJECT: U/S REUBEN JEFFERY MEETS WITH FRENCH ECONOMIC 
OFFICIALS, AMCHAM 
 
REF: A/ PARIS 3046 B/ PARIS 2643 
 
¶1.  (SBU) Summary: Under Secretary of State for Economic, Energy 
and Agricultural Affairs Reuben Jeffery, in his first official 
visit to France July 18-21, underscored the breadth of U.S. 
economic ties with France and reaffirmed U.S. support for OECD 
and IEA (septel).  In Jeffery's bilateral meetings in Paris with 
the President's office; Prime Minister's office; Ministry of 
Finance, Economy and Employment; Ministry of Foreign Affairs; 
and the American Chamber of Commerce, U/S Jeffery articulated 
his interest in working closely with the new French government 
on the array of issues that come under his purview.  End 
summary. 
 
Elysee 
-------- 
¶2.  (C) U/S Jeffery, in a very positive introductory meeting 
with Francois Perol, Deputy Secretary General (Economic Issues) 
of the Elysee Palace and Ramon Fernandez, Counselor for Economic 
Affairs, thanked France for its close cooperation with the 
United States, particularly regarding Lebanon and Iran.  Perol 
noted that while France and the United States were very closely 
aligned on Iran, France had nuanced differences with the United 
States on the issue of export credit policy.  Perol commented 
that in his personal view the United States should focus on 
Iran's dependency on refined oil product imports as a possible 
leverage point, and should coordinate with Saudi Arabia on this 
issue. 
 
¶3.  (C) Perol raised the candidature of Dominique Strauss-Kahn 
to head the International Monetary Fund (IMF) and requested U.S. 
support for his nomination.  Perol noted that Strauss-Kahn will 
be in the United States the week of July 23 and would travel to 
Latin America afterwards. 
 
Matignon 
-------- 
¶4.  (C) Jacques Lapouge, the Prime Minister's diplomatic 
advisor, explained that the PM's office was responsible under 
the new government for implementing policy.  Lapouge explained 
that the current legislative priorities for the new French 
administration (reduction of payroll, inheritance and corporate 
taxes, university reform, and the introduction of minimum 
services during transport strikes) were intended to create "an 
economic shock" to prod economic growth, which has lagged in 
France.  Lapouge noted that the government is also focusing on 
institutional reform (Sarkozy has recently appointed a new body 
to review reforming the French state), and that the PM's office 
is tasked with reducing the size of France's government. 
Lapouge observed that the cover of a recent edition of the 
French economic magazine Nouvelle Economie was titled, "A 
Sarkozian Revolution," which was in his view an appropriate term 
for what is taking place in France.  In response to questioning 
from the Under Secretary on the pace of reform, Lapouge noted 
there had been little resistance thus far (largely because the 
opposition Socialist party was in turmoil), but that he expected 
the first major test for the government to come from the trade 
unions in the autumn. 
 
¶5.  (C) Lapouge, in a tour de horizon covering key economic 
issues, stressed that despite Sarkozy's recent attacks on the 
European Central Bank (ECB) and his request for greater 
understanding from his EU partners regarding France's budget 
deficit, France remained committed to eurozone-wide targets on 
government spending and deficits.  But it may require a little 
extra time to achieve a balanced budget (2012, rather than 2010 
as previously agreed).  Lapouge stressed that on trade, 
Sarkozy's government would be different from Chirac's and show 
"pragmatism," concentrating on achieving balance and real 
benefits for Europe.  Regarding the draft texts of the WTO 
Agriculture and NAMA negotiating groups, Lapouge said France 
felt the NAMA paper was better than expected but that the 
agricultural paper had been disappointing and had crossed not 
just French but also EU red lines. 
 
¶6.  (C) In response to U/S Jeffery's review of the G8 summit in 
Germany, Lapouge commented that the meeting had produced 
positive results in the end.  Lapouge stressed that there were 
still many question marks in Europe about American intentions 
regarding climate change.  U.S. reluctance to accept a 
compulsory approach to emissions reductions remained a serious 
problem, he said.  Lapouge asked whether the United States had 
accepted the UN (Bali) framework and was not out to kill the 
post-Kyoto process.  He noted that France could live with 
different but concurrent systems for reducing emissions, but 
reiterated that any U.S. approach would need to have mandatory 
emission limits.  The meeting concluded with both sides noting a 
shared interest in work on bio-fuels and other areas that could 
 
PARIS 00003179  002 OF 003 
 
 
have a significant positive impact for developing nations.  This 
was particularly important given budget constraints that will 
make it very difficult, particularly for France, to increase 
official development assistance (ODA).  In that context Lapouge 
encouraged acceptance of France's approach to innovative 
financing of development, including UNITAID. 
 
Ministry of Finance, Economy and Employment 
------------------------------------------- 
¶7.  (C) Xavier Musca, Director General of the Treasury and 
Chairman of the Paris Club (PC), met with Jeffery hours after 
chairing a contentious meeting of the Paris Club.  He asked the 
U/S for clarification of the U.S. position regarding a debt 
buy-back proposal for Gabon that had been championed by France. 
(Note: President Sarkozy will be visiting Gabon in late July.) 
The United States was the only PC member not to have signed the 
Agreed Minute allowing for a discounted debt buy-back.  Musca 
said he was "shocked" that the United States had refused to sign 
the Gabon minute, as solidarity was one of the key elements of 
the Paris Club.  Musca noted Japan and Canada also said they 
would not participate in the proposed buy-back, but had joined 
consensus.  Musca signaled that the upcoming fall review of 
Jordan's debt may now be much more difficult due to the U.S. 
stance regarding Gabon. (Note: septel will report on discussion 
in the Paris Club.) 
 
¶8.  (C) Turning to other issues, Musca highlighted the challenge 
of non-cooperative lenders, specifically China, and stated that 
the West's strategy (moving from grants to loans and tying 
assistance and lending to better governance, accountability and 
transparency) is pushing developing countries into the hands of 
the Chinese.  Integrating China is not proving an easy task, 
according to Musca, who noted that China has made significant 
inroads in African lending due to the tightening of loan 
requirements demanded by traditional "responsible" lenders. 
Musca also noted that the ability of the Paris Club and 
international financial institutions to influence nations such 
as Argentina is hampered by pressure from the private sector, 
which has significant exposure in such emerging markets.  More 
positively, Musca commented that securing Brazilian membership 
in the Paris Club, a first for a developing economy, would be a 
very positive development.  Musca concluded that the role of 
"vulture funds" (private entities that buy up distressed 
sovereign debt with the intent to litigate) is likely to become 
an increasingly contentious issue in international debt 
negotiations. 
 
Quai d'Orsay 
------------ 
¶9.  (C) At the Ministry of Foreign Affairs (MFA), U/S Jeffery 
held a brief meeting with Jacques Maillard, Acting Director for 
Economic and Financial Affairs and with Sebastien Hua, Assistant 
to the past Sous-Sherpa.  Both officials were transitioning to 
new positions (Maillard is to be the next French Ambassador to 
Mauritius and Hua is moving to the French Mission to the UN). 
Discussion focused on Jeffery's role as the new Sous-Sherpa for 
the United States in the G8 process and next steps following the 
Heiligendamm G8 Summit.  The MFA is particularly interested in 
U.S. confirmation of the date for the proposed emitters meeting 
in the United States to discuss the President's May 31 climate 
proposal.  Maillard welcomed the U.S. proposal but underscored 
the concern expressed by Jacques Lapouge that the U.S. 
initiative not be used to undermine the UN process.  Maillard 
also echoed Xavier Musca's concerns regarding Chinese lending in 
Africa and the constraints on French official development 
assistance.  Budget constraints, according to Maillard, also 
explain in part France's interest in "innovative financing" 
(such as air line taxes or similar levies) to fund new 
development priorities.  Hua noted that the issue of 
intellectual property rights (IPR) was reviewed at the G8 and is 
a French priority.  Hua asked that the U.S. consult with France 
as it develops more detailed plans for a new IPR "gold 
standard"" protection regime. 
 
AmCham France 
-------------- 
¶10. (SBU) AmCham France hosted an off-the-record informal 
luncheon for U/S Jeffery with the key leadership of the American 
Chamber of Commerce in France.  Representatives from GE, Morgan 
Stanley, Cisco, Cadillac, KKR, and other major U.S. corporations 
briefed the U/S on the business climate in France.  Business 
representatives were unanimous that trade and investment (in 
both directions) is likely to continue to increase and that 
concerns over labor regulations are likely to ease under the new 
Sarkozy government. 
 
¶11. (U) This cable has been cleared by E staff. 
 
 
PARIS 00003179  003 OF 003 
 
 
STAPLETON