VZCZCXRO7401
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHLO #1506/01 1511625
ZNR UUUUU ZZH
R 301625Z MAY 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 8797
INFO RUEHED/AMCONSUL EDINBURGH 0938
RUEHBL/AMCONSUL BELFAST 1068
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 LONDON 001506 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAGR UK
SUBJECT: HM TREASURY OFFICIALS ON TEC AND DOHA 
 
 
LONDON 00001506  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  HM Treasury officials worry the French may use 
their EU Presidency to slow Common Agricultural Policy (CAP) reform 
and may even try to use labor clauses in free trade agreements to 
impose some of their own labor market rigidities.    They are also 
concerned by signs of protectionist rhetoric on the U.S. campaign 
trail.   They see Germany as an important partner in delivering EU 
support for a Doha agreement.  They are preparing for an interagency 
discussion of the post-Doha trade agenda, and wonder whether a 
smaller group might achieve more and whether some of the 
Transatlantic Economic Council goals could be achieved in this 
format.   END SUMMARY. 
 
¶2.  (SBU) Acting Econ Minister and Counselors met with HM Treasury 
officials, Paul Devenish, Head of Global Trade Policy and Joanne 
Madders, EU External Openness, (please protect) May 23 to review UK 
views on food prices, the TEC, Doha, and related concerns. 
 
PM Wants Doha 
------------- 
 
¶3.  (SBU) Devenish said that Doha Development Agenda WTO trade 
negotiations (DDA), along with the Lisbon EU treaty, is a top 
priority for the Prime Minister.  Devenish said Foreign Secretary 
David Miliband's comments in a speech in Washington earlier that 
week warning U.S. political figures about protectionism reflected a 
"twinge of concern" in HMG about rhetoric coming from the U.S. 
Presidential campaign. 
 
¶4.  (SBU) Devenish asked about USG views on recent reports that 
China would be permitted extra time to adopt tariff reductions as 
part of the DDA agreement.  He noted that some developing countries, 
such as Argentina, had raised objections.   Politically, it is 
easier to change subsidies than tariffs, he argued, so getting the 
tariffs right was crucial. 
 
¶5.  (SBU) Devenish said he thought it unlikely that France would 
block a DDA trade agreement if one were reached in Geneva.  Although 
the French complain that EU Commissioner Mandelson is stepping 
beyond his mandate, Devenish said he did not think he was "by much". 
 Should the UK get the sense that the French would block a deal, 
however, the UK would work with Germany to prevent it from 
happening, even if the UK had to make some unspecified concession in 
another field to Germany to ensure its support.  Germany is a swing 
vote on the DDA, he said. 
 
France Inflexible, So Others Should Be Too 
------------------------------------------ 
 
¶6.  (SBU) Devenish saw growing EU interest in adding labor and 
environmental clauses to trade agreements, as the U.S. has done. 
Devenish said that France may try to use free trade agreements with 
third countries to add these clauses, if it is not successful in 
other approaches, such as adding a tariff on goods coming from 
countries without binding targets on greenhouse gas emissions. 
France might also seek to impose some of its own labor market 
rigidities on its trading partners, because it has not succeeded in 
making its own market more flexible. 
 
How to Preserve the TEC? 
------------------------ 
 
¶7.  (SBU) Madders judged the recently concluded meeting of the 
Transatlantic Economic Council (TEC) as positive overall. HMG was 
optimistic about maintaining momentum.  She worried how successful 
the next session in October will be, however, coming less than a 
month before the U.S. elections.  She asked if by then the U.S. will 
be hampered in offering contributions to move the TEC process 
forward. 
 
¶8.  (SBU) Madders agreed that solving poultry was a crucial test for 
the TEC, the "poster chicken" for the process.   HMG's position has 
always been purely based on science.  If and when the tests 
conclusively show the U.S. process is safe, the UK supports free 
entry.   Devenish conceded, however, that European protectionism is 
part of the problem.  EMIN stressed importance of solving poultry 
issue, both in its own right and as a demonstration that the TEC can 
resolve longstanding disputes. 
 
Solve TEC through an OECD Agreement? 
------------------------------------ 
 
¶9.  (SBU) Devenish also explained that the HMG is examining what the 
options are for furthering world trade and reducing trade barriers 
post-Doha.  Negotiations among all members of the WTO are 
burdensome; countries have varying degrees of interest in opening up 
their markets.  How can those who are willing to do more get 
together?  Is there a way for the U.S. and the EU, perhaps with the 
OECD, or just certain partners, like Canada, to set out some areas 
to reduce trade barriers which could then be expanded to include 
 
LONDON 00001506  002.2 OF 002 
 
 
others?  Is the TEC a way to make progress in this field?  He asked 
whether the USG is considering the next step beyond Doha, whether it 
succeeds or not, in terms of further trade liberalization. 
 
¶10.  (SBU) On food prices, Devenish pointed to the Chancellor's 
letter to the EU on the CAP, calling for substantial revisions. He 
said other EU members, mostly the northern Europeans, favored new 
numbers but wondered how even-handed a President France would be on 
this issue.   He noted that the UK does not participate in Pillar I 
of the EU Common Agricultural Policy (CAP) which pays subsidies to 
farmers, but must contribute to it all the same.  The UK does 
participate in Pillar II, which supports environmental projects.  As 
part of the EU global budget review this year, the UK has pushed for 
a review of CAP. 
 
TUTTLE