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UNCLAS SECTION 01 OF 04 BRUSSELS 001193 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/ERA - TRANSMIT TO CONGRESSMAN KANJORSKI CHIEF OF STAFF 
KAREN FEATHER 
 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958:  N/A 
TAGS: ECON PREL ETRD ENRG SENV KHGH KJUS KTFN EUN
SUBJECT: EU SCENESETTER FOR CODEL KANJORSKI 
 
For Chairman Kanjorski from Charge Christopher W. Murray 
 
¶1. (SBU) I would like to welcome you and the members of your 
Delegation to Brussels.  You are arriving at a time when the change 
in U.S. Administration and the press of global events have pushed 
U.S.-EU cooperation to new heights across a range of economic and 
political issues.  The EU and its Member States are our most 
valuable partners in meeting international challenges, whether in 
Afghanistan, Pakistan or the Middle East, on addressing climate 
change, or in responding to the global financial crisis.  We can 
leverage new European goodwill toward the U.S. to encourage European 
coordination with our financial regulatory and supervisory reform 
efforts, and avoid problematic regulatory divergences that could 
hamper ongoing U.S.-EU economic progress.  Your discussions will 
focus on financial regulation, but many of the issues discussed 
below may come up during the extensive conversations you will have, 
including with Commissioners Almunia and McCreevy and the members of 
the European Parliament. 
 
OVERVIEW OF U.S.-EU RELATIONS UNDER THE NEW 
ADMINISTRATION 
------------------------------------------- 
 
¶2. The European Union (EU) and its 27 Member States are America's 
most valuable international partners on matters vital to our 
national security and global economic and political stability.  The 
Iraq war and rejection of the Kyoto Protocol on climate change 
chilled relations with the EU during the first term of the Bush 
Administration, but relations began to improve during the second 
Bush term.  After the Obama Administration came into office, the 
President called at the April 2009 U.S.-EU Summit in Prague for a 
profound renewal in transatlantic relations.  EU leaders responded 
enthusiastically, and now actively seek U.S. partnership across the 
range of political, economic and law enforcement issues. 
Relationships between the Congress and the European Parliament are 
likewise strengthening, as the Parliament is likely to gain 
significant new powers, if the EU's Lisbon Treaty is adopted. 
 
EU INTERNAL POLITICAL DYNAMICS 
------------------------------ 
 
¶3. (SBU) After 50 years of U.S.-encouraged integration, the EU's 27 
member states, including major European powers the UK, France and 
Germany, must now work in concert on virtually all economic policy 
issues.  While individual member states can lead the EU, they are 
increasingly constrained from operating independently of it.  The EU 
works through three main institutions.  The European Commission, led 
by the Commission President, is composed of Commissioners from each 
Member State and over 30 directorates general charged with managing 
particular policy areas.  The Commission acts as the EU executive 
and proposes legislation.  The Council, led by a rotating national 
Presidency, is composed of Member State heads of State and Ministers 
and acts to uphold Member State interests in EU legislation and 
policy development.  The European Parliament, composed of 754 
members directly elected to it from all Member States, has 
co-decision authority with Council on the EU budget and on all EU 
legislation, and engages in oversight of other EU institutions. 
 
¶4. (SBU) The EU is in the midst of a year of transition, with a new 
Parliament having just begun its five-year term, the Commission 
aut to finishd Lisbom; strengthen EU capabilities in foreign policy defense and 
security spheres; and increasQ the powers of the European 
Parliament, especially with respect to law enforcement.  Irelandwill hold a referendum in October on adopting ty.  If the 
Irish referendum passes, the Czech and Polish Prsidents will face 
tremendous pressure to signthe Treaty.  The European Commission 
will likQly extend its term three months, until January Q010, to 
give the Lisbon Treaty time to take effect, so a new Commission 
would come in under the new treaty. 
 
¶5. (SBU) The new European Parliament has seen major changes in 
leadership at the top and in key committees.  Former Polish Prime 
Minister Jerzy Buzek is the first leader of a major EU institution 
to come from a new member state, and may put issues of concern to 
these countries-such as energy security-higher on the agenda.  The 
European Parliament continues to be dominated by the European 
Peoples Party (EPP, right of center, often Christian Democrats) and 
the Progressive Alliance of Socialists and Democrats (left of 
center, generally European socialist parties), although smaller 
 
BRUSSELS 00001193  002 OF 004 
 
 
groups such as the liberals and some parties seen as farther to the 
right increased their relative weight.  A major change in this 
Parliament was the withdrawal of the British Conservatives from the 
EPP in favor of a smaller, more conservative (and less pro-EU 
integration) political grouping, reducing the voice of British 
conservatives on many matters, including financial regulation. 
Sharon Bowles, the new chair of the ECON committee, with 
jurisdiction over financial supervisory and regulatory legislation, 
is a UK liberal with sympathies toward U.S. views on regulatory 
proposals.  Bowles has four heavyweight vice presidents, however, 
over whom she will need to establish her authority.  She will also 
need to avoid seeming too close to the UK position opposing stronger 
financial regulation, lest she risk losing credibility within the 
Parliament. 
 
FOREIGN POLICY AGENDA 
--------------------- 
 
¶6. (SBU) The European Union and its Member States are our most 
capable and influential international partners on foreign policy 
issues.  EU leaders have welcomed the new Administration's many 
initiatives and shown a renewed willingness to work with us on 
global challenges, despite some differences over how to reach some 
shared goals.  The U.S.-EU agenda now focuses on bringing stability 
not only in Europe (such as in the Balkans and the Caucasus), but 
also in regions such as Afghanistan, the Middle East, Iran, and 
Africa.  The U.S. encourages EU accession for Turkey and appropriate 
Balkan countries; although accession talks with Turkey continue to 
stagnate.  We work together to promote stability in Bosnia and 
Herzegovina and assist Kosovo's transition to a politically stable 
and economically viable country.  The U.S. welcomed the EU's new 
Eastern Partnership Initiative as part of our mutual efforts to 
promote democracy, stability and prosperity, especially in Ukraine, 
Georgia and Belarus.  We consult on how to encourage Russia to play 
a constructive role in the region. 
 
¶7. (SBU) The U.S. works increasingly in tandem with the EU as it 
plays a greater role in promoting global security.  In response to 
Vice President Biden's March request, the EU stood up a sizeable 
election observer mission in Afghanistan.  Despite skeptical public 
opinion, the EU's commitment to Afghanistan and Pakistan includes 
billions of dollars in aid, a police training program in 
Afghanistan, and increasing political and economic engagement with 
Pakistan.  We count on the EU and several member states to support 
efforts at peace in the Middle East, where the EU is the largest 
donor of assistance to the Palestinians.  The EU has 
enthusiastically welcomed Senator Mitchell's efforts to restart 
Israel-Palestinian negotiations, and the Administration's firm 
stance on settlements.  The EU retains the lead in "P-5 plus one" 
negotiations with Tehran regarding its uranium enrichment 
activities, and European support is essential to the effectiveness 
of the UN Security Council Resolutions directed at Iran. 
Differences over the effectiveness of sanctions continue to be part 
of the debate.  The EU launched its first naval mission late last 
year to combat piracy off the coast of Somalia and is the largest 
contributor to the African peace-keeping force in Darfur and to 
international humanitarian operations. 
 
LAW ENFORCEMENT AND COUNTERTERRORISM COOPERATION 
--------------------------------------------- --- 
 
¶8. (SBU) The U.S. and EU recognize that transnational crime and 
terrorism pose a threat to our shared values of democracy, rule of 
law, and respect for fundamental rights and freedoms.  Our progress 
is reflected in our agreements on extradition and mutual legal 
assistance, information on flight passengers, customs cooperation, 
collaboration in tracking terrorist financing, and EU assistance in 
facilitating the closure of the Guantanamo Bay detention facility. 
We have also forged a close operational partnership leading to 
international agreements and working arrangements with respect to 
major EU institutions such as Europol, Eurojust, and Frontex.  As 
the EU is currently reviewing its policy and should adopt a new 
5-year plan addressing these issues by the end of the Swedish 
Presidency in December 2009, the USG is working to identify new 
opportunities to further enhance our daily engagement across the 
spectrum of law enforcement and counter-terrorism challenges: 
facilitating mobility in a secure environment, strengthening law 
enforcement and judicial cooperation, safeguarding fundamental 
rights and civil liberties, and working together internationally to 
foster shared principles around the world.   Some of these issue, 
especially with respect to law-enforcement and data privacy, may 
come up, especially in your meetings with Parliamentarians. 
 
BROAD BILATERAL ECONOMIC AGENDA 
------------------------------- 
 
BRUSSELS 00001193  003 OF 004 
 
 
 
¶9. (SBU) The United States and EU remain the drivers of the global 
economy, despite media focus on the rise of Asia.  We have led the 
creation of the global rules-based trading system, generate over 
half of global GDP and have nearly $3 trillion invested in each 
other's economies.  Transatlantic trade in goods and services - much 
intra-firm - is near one trillion dollars per year.  The stock of 
U.S. FDI in Ireland alone of $146 billion was more than double the 
total U.S. investment stake in Russia, India and China combined ($71 
billion) in 2008.  The EU has more invested in California alone than 
in China.  Given these links, the U.S. works with Europe on every 
conceivable economic issue, in most cases cooperatively rather than 
in conflict.  Transatlantic economic cooperation is most active in 
the areas of capital markets, trade and combating protectionism, and 
energy and climate. 
 
¶10. (SBU) The global financial crisis tested U.S.-EU cooperation in 
several respects.  Many in Europe tended to blame the U.S. for the 
crisis, and initial U.S. and EU responses were out of sync, due 
primarily to differences in legal authorities and political 
timelines.  The new U.S. Administration initially focused on 
stemming our economic threats, including through the $787 billion 
stimulus package.  The EU, on the other hand, without authority over 
fiscal policy, promoted a small stimulus, leaving larger efforts to 
individual Member States.  The EU emphasized reform of financial 
regulation and supervision, because it has competence over 
legislation in this area and due to the need to act quickly to pass 
measures before the impending transitions in the European Parliament 
and Commission.  The EU has since implemented a number of measures, 
including on insurance regulation (Solvency II), deposit guarantees, 
capital requirements and regulation of credit rating agencies.  The 
EU has proposed legislation on a new supervisory architecture for 
the EU financial sector, including the creation of a macroprudential 
Systemic Risk Board, and at microprudential level, three supervisory 
authorities for banking, securities and insurance.  In addition, the 
EU has also proposed legislation to regulate alternative investment 
fund managers (AIFM), covering both hedge funds and private equity 
firms, and have recently proposed additional changes to capital 
requirements.  All of these proposals still need Parliament and 
Council approval, not likely before the end of 2010. 
 
¶11. (SBU) Recognizing that a better functioning transatlantic market 
will promote growth at home as well as globally, U.S. and EU leaders 
in April 2007 signed a Framework to Promote Transatlantic Economic 
Integration that in turn established a cabinet-level Transatlantic 
Economic Council (TEC). The TEC aims to identify specific steps to 
promote regulatory cooperation, capital markets integration, open 
investment, innovation, intellectual property rights (IPR) 
protection, and secure trade on a transatlantic basis, even as we 
work to open markets in third countries.  The Transatlantic 
Legislators', Business and Cotivednda items and push for 
met thrtandards, 
toy anQef.  Further, both officials have publicly stated a 
desire to find solutions for other bilateral trade disagreements. 
The administration is also working closely with the EU to reach an 
agreement on a multilateral trade agreement among the 153 members of 
the World Trade Organization (the so-called "Doha Round").  Despite 
this positive trade relationship, there are certain persistent trade 
disagreements that remain:  each of us has brought the other to the 
WTO alleging WTO-inconsistent aircraft subsidies, a case that is 
on-going; the United States remains concerned over EU restrictions 
on imports of various food products, including U.S. biotech products 
and poultry, based on specious food-safety grounds; and the EU is 
concerned about - and generally raises in meetings with U.S. 
officials - provisions of the U.S. stimulus package that require 
government purchases of products of U.S. origin (the so-called "Buy 
American" provisions).  On this latter issue, we have noted to the 
EU that the provisions are consistent with U.S. international 
obligations. 
 
¶13. (SBU) Transatlantic cooperation on climate change currently is 
focused on the UN negotiations, both how the United States and the 
 
BRUSSELS 00001193  004 OF 004 
 
 
EU coordinate positions, but also how to bring along major emerging 
economies, notably China and India.  Relations generally are good, 
and though there are differences in approach, we share common goals 
to move toward low-carbon economies.  The Department of Energy leads 
a cooperative effort under the U.S.-EU Science and Technology 
Cooperation Agreement to research low-carbon technologies, including 
biofuels, carbon capture and storage, and solar power.  As the EU 
passed its climate and energy legislative package at the end of last 
year, designed to fulfill its "20-20-20 in 2020" climate goals (20 
percent emissions reduction from 1990, 20 percent use of renewable 
energy, and 20 percent improvement in energy efficiency in 2020), 
there is strong interest in the Waxman-Markey bill and the current 
discussions in the Senate.  U.S. Special Envoy for Eurasian Energy 
Ambassador Morningstar recently proposed the creation of a U.S.-EU 
Energy Council with the intent of bringing high-level attention to 
our energy cooperation, notably energy security, energy policy, and 
renewable energy. 
 
¶14. (SBU) We look forward to your visit and the extensive 
discussions you will have. 
 
MURRAY